Can the U.S. Bring Jobs Back from China?

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Delattre, who heads Accenture's (ACN) global supply chain practice. "Now logistics costs are an overarching priority." Richard Sinkin, a San Diego consultant who scouts manufacturing sites in the U.S., Mexico, and China for multinationals, also senses a major strategic shift. "A lot of clients who were thinking about going to China are now saying, Not at these prices,'" says Sinkin. "The high cost of fuel is going to radically transform the way people look at the geography of their manufacturing."

Examples of production shifts abound. Chinese steel exports to America are down 20% in the past year, notes CIBC, while U.S. steel output has jumped 10% despite the slowdown in construction. Big electronics manufacturers are expanding assembly of high-end telecommunications, computer, and medical equipment in Mexico and some parts of the U.S. for greater proximity to corporate buyers. Tesla Motors, which has just begun production of its $109,000, electric-powered sports car, transferred assembly of battery packs from Thailand to a plant next to its San Carlos (Calif.) headquarters. Thailand's low factory wages were more than offset by the costs of shipping thousand-pound battery packs across the Pacific. "We were seeing tens of millions of dollars of value sitting on the water for months," says Darryl Siry, Tesla's vice-president for marketing. "It was one of those things that became obvious all of a sudden, and you said, Why are we doing this?'"

Look behind these examples, though, and obstacles to a broad manufacturing migration become clear. Iron castings maker Donsco, on the banks of the Susquehanna River in eastern Pennsylvania, illustrates the dilemma. In recent years, Donsco has laid off hundreds of workers as customers shifted production of gear boxes, oil rig parts, and much more to Chinese competitors. Now, Donsco says it's flooded with order inquiries from U.S.-based clients. "All of a sudden our customers are saying, Whoops, it's cheaper to buy in our backyard,'" says Donsco Chairman Art Mann Sr. While Donsco managed to keep its doors open, many of its U.S. rivals shut down, so there's now a shortage of capacity.

STAYING PUT, FOR NOW

Despite growing demand, Mann says Donsco will be "real cautious" about spending the $30 million and two years needed to build a new foundry. The impact of this reluctance is being felt in Belen, N.M., where CEMCO, a maker of rock-crushing and farming equipment, is looking to cut costs and logistical headaches. The company today imports many metal parts from Asia but would prefer to buy domestically because of rising shipping rates and the weak dollar. "American foundries now can compete head-to-head on cost, but there aren't many foundries, welders, machinists, and quality-control engineers," says James B. Turk, CEMCO's chief financial officer. "What we had 10 years ago is gone." Where did all the capacity go? Mainly to China, where modern foundries are proliferating.

The furniture industry has undergone a similar transformation. Hundreds of factories have shut their doors across the U.S. South, while giant plants churning out beds, armoires, and coffee tables have sprung up in industrial estates that sprawl for miles and miles outside Chinese cities such as Dongguan, just north of Hong Kong. It's true that wages are up, the Chinese plants import much of their wood from North America, and bulky bed frames and mattresses consume a lot of space in shipping containers. Yet Stylution Group's 1,600-worker complex in Dongguan isn't going anywhere. Stylution churns out 1 million mattresses and 300,000 bedroom sets every year, exporting about half of them. "It's not easy to pick up and move," says Stylution's marketing manager, Frank Masiello. Besides, he says, most of the supply base has gone to China, down to the paint and tiniest screws, and the mainland market is growing fast. "High Point [N.C.] used to be the center," Masiello says. "But over the last eight years, pretty much everything moved here."