Head offices head to China

If Dave Westphal doesn’t qualify as a lean manufacturing champion, I don’t know who would. The executive is director of global lean manufacturing for Nexteer Automotive, a $2 billion automotive supplier specializing in steering and front-axle components. Last year The FABRICATOR covered his lean accomplishments, including his use of video to streamline worker movements. It turns out worker ergonomics leads to greater efficiency and greater overall throughput.  It’s a progressive place, one that shows how competitive manufacturing in the U.S. can be.

Oh yeah, did I mention that Nexteer is now a Chinese-owned company?



The organization has had its share of owners. Nexteer’s history goes back to General Motors, which spun the group off to become part of Delphi in the 1990s. Then in 2009 the company became a direct subsidiary of GM, which subsequently sold it to China’s Pacific Century Motors, a joint entity between an investing arm of the Beijing municipal government and Tempo, a Chinese automotive components supplier.

That throws a few wrinkles of complexity into the old “Made in America” slogan. Nexteer is a Chinese company operating on U.S. soil, employing thousands of American manufacturing workers.

According to recent reports, Pacific Century Motors is part of a new crowd of Chinese companies buying or opening U.S. plants to get closer to American customers. After all, many expect shipping costs will rise as the economic recovery continues. Today cheap labor an ocean away from the customer isn’t so cheap, and corporate managers around the globe know this.

General Motors has opened plants in China to serve Chinese customers, and now Chinese companies are moving onto our home turf. As recently reported in BusinessWeek, Chinese-owned Wanxiang, an auto parts supplier, set up shop in Elgin, Ill., outside Chicago. The Chinese-state-owned Tianjin Pipe plans to open a $1 billion steel pipe mill and employ between 500 and 600 people.

All this sounds a little scary. Not only is China our government’s largest foreign creditor, it’s also becoming a significant employer.

Still, I don’t view China as some kind of monster ready to take over the world, nor do I think the U.S. will decline into utter economic irrelevance. The U.S. certainly has its problems: high unemployment; out-of-control government spending; systemic problems with health care; the list goes on. But China has its list too. So much of the nation remains impoverished, and so much money is in the hands of so few. How can a government flush with cash govern the countless who are wondering where their next meal will come from?

The idealist in me wishes that we could cut off China, which doesn’t have the best record when it comes to human rights. It doesn’t feel right doing business in a country of citizens without the personal freedoms we enjoy. It’s also a shame our government owes China billions, and the pragmatist in me knows that such protectionist measures aren’t practical in the global economy.

The U.S. may be amid a decades-long transition from being a consumption-driven economy to one more balanced between both consumption and production, and that means manufacturing will be even more important than it is today. If we look at it this way, Chinese companies setting up U.S. plants that employ thousands of Americans may not be a bad thing.

Besides, the very fact that Chinese companies are producing here--rather than in rural China or another Southeast Asia country--may mean that customer proximity is becoming more important, while cheap labor is becoming a smaller part of the equation.