There’s a growing sense of alarm lately about how much US manufacturing is going to Asia. No doubt this is contributing to the current sluggish economy. I’ve done a lot of work in the loudspeaker manufacturing industry and I’ve watched companies slowly disappear or move offshore.
That industry has almost completely moved to China. In June I toured MISCO, a holdout in Minneapolis, a company that’s resolved to stay healthy and have their manufacturing in the U.S.
They’ve been intimately involved in the speaker industry since the 1950’s and most interesting part of our discussion was the stories of their fallen competitors. Most of MISCO’s equipment has been purchased at their competitors’ bankruptcy auctions.
Dan Digre, the president of MISCO, explained to me that foreign competition was never really the deciding factor in their competitors’ undoing. He said that his own US labor only accounts for a small part of the cost of the speaker anyway, and the small increase in cost by having it done here instead of China is more than offset by the advantages in quality control and the tremendous increase in the speed of fulfilling orders.
No, the real reasons his competitors went under were:
1) Being acquired for too-much-money by larger companies who did not understand the
speaker business, then having a huge debt load
2) Mis-management when ownership changed hands; i.e. kids take over dad’s business,
buy new cars and remodel the office, and run the business into the ground
3) Being unwilling to invest in new technology, new equipment and capabilities
The Asian manufacturing bubble has created a situation where companies are willing to invest all kinds of capital in Guangzhou, but none here. Not logical when you consider all the factors, but the easy decision when you decide to compete only on price. Why is nobody talking about this? Nobody wants to admit that they can’t come up with a competitive advantage, and the grass is always greener on the other side of the world.
