Outsourcing and offshoring



Bridge Comes to San Francisco With a Made-in-China Label
New York Times, 2011-06-26

SHANGHAI — Talk about outsourcing.

At a sprawling manufacturing complex here, hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.

Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.

The project is part of China’s continual move up the global economic value chain — from cheap toys to Apple iPads to commercial jetliners — as it aims to become the world’s civil engineer.

The assembly work in California, and the pouring of the concrete road surface, will be done by Americans. But construction of the bridge decks and the materials that went into them are a Made in China affair. California officials say the state saved hundreds of millions of dollars by turning to China.

“They’ve produced a pretty impressive bridge for us,” Tony Anziano, a program manager at the California Department of Transportation, said a few weeks ago. He was touring the 1.2-square-mile manufacturing site that the Chinese company created to do the bridge work. “Four years ago, there were just steel plates here and lots of orange groves.”

On the reputation of showcase projects like Beijing’s Olympic-size airport terminal and the mammoth hydroelectric Three Gorges Dam, Chinese companies have been hired to build copper mines in the Congo, high-speed rail lines in Brazil and huge apartment complexes in Saudi Arabia.

In New York City alone, Chinese companies have won contracts to help renovate the subway system, refurbish the Alexander Hamilton Bridge over the Harlem River and build a new Metro-North train platform near Yankee Stadium. As with the Bay Bridge, American union labor would carry out most of the work done on United States soil.

American steelworker unions have disparaged the Bay Bridge contract by accusing the state of California of sending good jobs overseas and settling for what they deride as poor-quality Chinese steel. Industry groups in the United States and other countries have raised questions about the safety and quality of Chinese workmanship on such projects. Indeed, China has had quality control problems ranging from tainted milk to poorly built schools.

But executives and officials who have awarded the various Chinese contracts
say their audits have convinced them of the projects’ engineering integrity.
And they note that

with the full financial force of the Chinese government
behind its infrastructure companies,
the monumental scale of the work, and the prices bid,
are hard for private industry elsewhere to beat.

The new Bay Bridge, expected to open to traffic in 2013, will replace a structure that has never been quite the same since the 1989 Bay Area earthquake. At $7.2 billion, it will be one of the most expensive structures ever built. But California officials estimate that they will save at least $400 million by having so much of the work done in China. (California issued bonds to finance the project, and will look to recoup the cost through tolls.)


Corporations pushing for job-creation tax breaks shield U.S.-vs.-abroad hiring data
By Jia Lynn Yang
Washington Post, 2011-08-22

Some of the country’s best-known multi­national corporations closely guard a number they don’t want anyone to know: the breakdown between their jobs here and abroad.

So secretive are these companies that they hand the figure over to government statisticians on the condition that officials will release only an aggregate number. The latest data show that multinationals cut 2.9 million jobs in the United States and added 2.4 million overseas between 2000 and 2009.

Some of the same companies that do not report their jobs breakdown, including Apple and Pfizer, are pushing lawmakers to cut their tax bills in the name of job creation in the United States.

But experts say that without details on which companies are contributing to job growth and which are not, policymakers risk flying blind as they try to jump-start the hiring of American workers.

“It’s an important piece of information that the American people should have,” said Ron Hira, an associate professor of public policy at the Rochester Institute of Technology. “Should you listen to the kind of advice these companies have about how to grow the economy when their record and their model indicates they’ve cut jobs? . . . Or should we talk to people who actually do create jobs in the United States?”

As the country faces an unemployment crisis, President Obama, lawmakers and business lobbyists have all touted the country’s biggest companies as critical to creating jobs.

The head of Obama’s jobs council, General Electric chief executive Jeff Immelt, said during a tour of a company plant in Greensboro, S.C., that firms should be ready to answer questions from the public.

“If you want to be an admired company, you better know, you better have accountability, and you better think through where the jobs are,” he said.

GE breaks out its employment numbers in company filings to
the Securities and Exchange Commission. In 2010, about 46 percent of GE’s 287,000 employees worked in the United States, compared with 54 percent in 2000.

But many firms, including some whose executives have counseled Obama on the economy, do not put their number of U.S. workers in their annual reports.

IBM chief executive Sam Palmisano has met a number of times with the president, most recently in July at a lunch with other executives to talk about jobs and the economy. IBM stopped giving its U.S. head count in 2009.

“We just made a policy that we would only break out global head count,” said company spokesman Doug Shelton.

Data from before 2009 showed IBM rapidly shifting workers to India. Dave Finegold, dean of the Rutgers School of Management and Labor Relations, estimates that 2009, when the company stopped sharing its U.S. employment figure, also marked the first time the company had more employees in India than the United States. Finegold based his number on reports from the media, third-party groups and former employees who have tried to track the number.

“IBM can do as it wishes, and the rest of us have to guess,” said Lee Conrad, national coordinator for Alliance@IBM, a group trying to unionize IBM workers.

You won’t find Procter & Gamble’s U.S. head count in its filings, either. When initially asked for the number, company spokesman Paul Fox wrote in an e-mail: “We do not track nor report U.S.-specific jobs numbers vs. jobs overseas.” After it was pointed out that P&G’s chief executive, Bob McDonald, had cited such figures in a Cincinnati Enquirer op-ed piece, Fox acknowledged the company did track that data. The number of U.S. employees is 35,000 out of 127,000 total, or 28 percent.

Other companies that do not reveal their job breakdowns include Hewlett-Packard, AT&T, Apple and Pfizer, which stopped reporting the number in its SEC filings in 2000.

The latter two are part of a coalition of companies pushing for Congress to give them a tax break on money they have parked overseas, saying that any money brought back to this country would spur hiring.

There is no law requiring companies to reveal publicly where their employees are based. Companies can choose to include the breakdown of jobs here and abroad in their SEC filings for the benefit of shareholders. But they are required by law to report the numbers to the Commerce Department, which compiles a yearly report on total employment by U.S. multinationals.

Ray Mataloni, a staff researcher at the U.S. Bureau of Economic Analysis, said the government gets the numbers only with the agreement that it will not disclose firm-level data. “I don’t think it’s a question of companies feeling like they’re hiding dirty laundry by not giving this information out,” Mataloni said. “I don’t think they really have anything to hide, but I don’t really know the logic of why that’s something they don’t just put in their annual report.”

A few companies expressed worry about their competitors knowing too much about their operations.

Scott N. Paul, executive director of the Alliance for American Manufacturing, said it’s because of the politics. “Outsourcing has become a lightning rod, and the media coverage they’re likely to get is unfavorable,” Paul said.

For chief executives of multinational companies who are used to answering only to their shareholders, the country’s jobs crisis has uncomfortably switched the political spotlight onto their decisions about who they employ and where. It has also thrown into relief the fact that when U.S. multinationals chase profits and hire workers anywhere in the world, they become less tied to any one country, including this one.

Immelt acknowledged last month that the health of a company such as GE is now less connected to the U.S. economy, but he added that companies including GE “got carried away” with outsourcing. “I’m a GE leader first and foremost,” he said. “At the same time . . . I work for an American company.”


How the U.S. Lost Out on iPhone Work
New York Times, 2012-01-22

[This is an important and large (two full print pages) article.
Here is a sample:]

Apple’s executives believe the vast scale of overseas factories
as well as the flexibility, diligence and industrial skills of foreign workers
have so outpaced their American counterparts that
“Made in the U.S.A.” is no longer a viable option for most Apple products.

Middle-class Mexicans snap up more products ‘Made in USA’
Burgeoning middle class drives a roaring trade across the border
By Nick Miroff and William Booth
Washington Post, 2012-09-10


This year,
Mexico became the No. 1 investment destination for the aerospace industry.

[What a terrible development for the United States!

The aerospace industry has long been
a leading part of the U.S. high-tech community,
and has provided almost all of the high-tech exports
the U.S. has managed to maintain.
That large parts of this industry have been offshored,
to Japan, China, and Mexico,
is a shame.
It hurts the American balance of trade and the income of the American workforce.

What is to blame for this development?
At the grossest level, the culpable parties seem to be
the aerospace unions for driving up workers compensation,
the general American political and business climate which has imposed
so many taxes and mandates on American workers and corporations,
and of course the corporations themselves which may have placed over-emphasis on dividends and compensation for the executives,
and, possibly, Wall Street buccaneering which places baneful emphasis on short term financial gains
versus long term building of the company, the workforce, and the American technology base.]


Boeing Goes to Pieces
Aerospace execs sell their industry to Japan­—one part at a time.
By Eamonn Fingleton
theamericanconservative.com, 2014-01-08


Toys ‘R’ Us Brings Temporary Foreign Workers to U.S. to Move Jobs Overseas
New York Times, 2015-09-30

WAYNE, N.J. — When Congress designed temporary work visa programs, the idea was to bring in foreigners with specialized, hard-to-find skills who would help American companies grow, creating jobs to expand the economy. Now, though, some companies are bringing in workers on those visas to help move jobs out of the country.

For four weeks this spring, a young woman from India on a temporary visa sat elbow to elbow with an American accountant in a snug cubicle at the headquarters of Toys “R” Us here. The woman, an employee of a giant outsourcing company in India hired by Toys “R” Us, studied and recorded the accountant’s every keystroke, taking screen shots of her computer and detailed notes on how she issued payments for toys sold in the company’s megastores.

“She just pulled up a chair in front of my computer,” said the accountant, 49, who had worked for the company for more than 15 years. “She shadowed me everywhere, even to the ladies’ room.”

By late June, eight workers from the outsourcing company, Tata Consultancy Services, or TCS, had produced intricate manuals for the jobs of 67 people, mainly in accounting. They then returned to India to train TCS workers to take over and perform those jobs there. The Toys “R” Us employees in New Jersey, many of whom had been at the company more than a decade, were laid off.

A temporary visa program known as H-1B allows American employers to hire foreign professionals with college degrees and “highly specialized knowledge,” mainly in science and technology, to meet their needs for particular skills. Employers, according to the federal guidelines, must sign a declaration that the foreign workers “will not adversely affect the working conditions” of Americans or lower their wages.

In recent years, however, global outsourcing and consulting firms have obtained thousands of temporary visas to bring in foreign workers who have taken over jobs that had been held by American workers. The Labor Department has opened an investigation of possible visa violations by contractors at the Walt Disney Company and at Southern California Edison, where immigrants replaced Americans in jobs they were doing in this country. Four former workers at Disney have filed discrimination complaints against the company. The companies say they have complied with all applicable laws.

But the Toys “R” Us layoffs — and others underway now at the New York Life Insurance Company and other businesses — go further. They are examples of how global outsourcing companies are using temporary visas to bring in foreign workers who do not appear to have exceptional skills — according to interviews with a dozen current or former employees of Toys “R” Us and New York Life — to help ship out jobs, mainly to India.

These former employees described their experience training foreigners to do their work so it could be moved to India. They would speak only on the condition that their names not be published, saying they feared losing severance payments or hurting their chances of finding new jobs.

In most cases when American workers lost jobs, the positions have been in technology, with employers arguing there are shortages of Americans with the most advanced skills. But in recent years, many jobs that American workers lost have been in accounting and back-office administration — although there is no shortage of Americans qualified to do that kind of work.

The core purpose of the temporary work visas is to help American companies compete in the global economy. “If employers are able to hire the key people, they can keep jobs in the U.S. and create new jobs here,” said Lynn Shotwell, executive director of the Council for Global Immigration, which lobbies Congress for more visas for highly skilled foreign workers.

Outsourcing firms, and the companies hiring them, say they are careful not to violate any laws. But some experts argue the intent of the visas is being thwarted.

“At the very least, those are violations of the spirit of the law,” said Christine Brigagliano, a lawyer in San Francisco with extensive experience advising American companies on obtaining visas. “Those contractors are signing on the bottom line, saying we will not undercut the wages and working conditions of Americans. But, in fact, they are.”


At the Toys “R” Us headquarters on a leafy campus by a reservoir here in New Jersey, someone dressed as Geoffrey the Giraffe, the retailer’s mascot, often wanders around greeting employees to bolster company spirit. But the mood was hardly playful on the morning of March 3, when a company vice president summoned nearly 70 employees to a conference room and told them their positions would be transferred by the end of June to workers from TCS.

“We were asked to cooperate and show them respect and train them to do our individual job functions,” said another former accountant, 36, who had worked for the toy seller for almost 12 years. But, she recalled, “If you didn’t cooperate, you would be asked to leave.”

A few days later, TCS workers arrived to begin the training called “knowledge transfer.” Most had flown in days before from India and were staying at a La Quinta Inn nearby.

The 36-year-old accountant said the young Indian assigned to shadow her appeared to have no extraordinary knowledge of accounting. His expertise was in observing and mapping what she did.

“He was watching me like a hawk,” she said, remembering long hours at close quarters at her desk under the fluorescent lights of the accounting floor. “It took him a while to learn what I did.”

She had a hard time maintaining her composure. “I felt like, ‘Why am I sitting here showing this man how to do my job when they are taking it away from me and sending it to India?’ ”


In July, about 100 New York Life technology workers were informed their jobs would be taken over by TCS, to be moved to India. At the insurer’s verdant campus in Sleepy Hollow, N.Y., and at offices in New York City, New Jersey and Georgia, tech employees began receiving individual layoff notices last week.

“After 30 years, it is very, very disappointing being told you are going to lose your job to a foreign country,” said one technology team member who is 49, and started with New York Life when he was 18.

Many tech workers facing layoffs are older, with years at the insurer. They were galled by executives’ statements that they were less qualified to learn the new systems than the foreign workers replacing them. “There are a lot of new technologies coming in all the time,” said an applications engineer in New York, who is 58 with 18 years at the company. “There is no reason at all we can’t do training for that.”



Lawsuits Claim Disney Colluded to Replace U.S. Workers With Immigrants
New York Times, 2016-01-26

Even after Leo Perrero was laid off a year ago from his technology job at Walt Disney World in Orlando, Fla. — and spent his final months there training a temporary immigrant from India to do his work — he still hoped to find a new position in the vast entertainment company.

But Mr. Perrero discovered that despite his high performance ratings, he and most of the other 250 tech workers Disney dismissed would not be rehired for at least a year, and probably never.

Now he and Dena Moore, another American laid off by Disney at that time, have filed lawsuits in federal court in Tampa, Fla., against Disney and two global consulting companies, HCL and Cognizant, which brought in foreign workers who replaced them. They claim the companies colluded to break the law by using temporary H-1B visas to bring in immigrant workers, knowing that Americans would be displaced.
Ms. Moore had also trained her replacement.
The lawsuits by Mr. Perrero and Ms. Moore, who each filed a separate but similar complaint on Monday seeking class-action status, represent the first time Americans have gone to federal court to sue both outsourcing companies that imported immigrants and the American company that contracted with those businesses, claiming that they collaborated intentionally to supplant Americans with H-1B workers.

A furor over the layoffs in Orlando last January brought to light many other episodes in which American workers, mainly in technology but also in accounting and administration, said they had lost jobs to foreigners on H-1B visas, and had to train replacements as a condition of their severance. The foreign workers, mostly from India, were provided by outsourcing companies, including the two named in the lawsuits, which have dominated the H-1B visa system, packing the application process to win an outsize share of the quota set by Congress of 85,000 visas each year.

The Labor Department opened investigations of the outsourcing companies — the direct employers of the temporary immigrants — at Disney and at Southern California Edison, a utility that laid off hundreds of American workers in 2014. The investigations are continuing. At least 30 former Disney workers also filed complaints with the federal Equal Employment Opportunity Commission, claiming that they faced discrimination as American citizens.

The lawsuits by Mr. Perrero and Ms. Moore are based on the rules for H-1B visas, which Congress designed to bring foreign workers with special skills into the country. Employers are required to declare to the Department of Labor that hiring foreigners on the visas “will not adversely affect the working conditions of U.S. workers similarly employed.”

“Was I negatively affected?” Ms. Moore asked. “Yeah, I was. I lost my job.”

Sara Blackwell, a lawyer in Sarasota, Fla., representing the former Disney employees, said the suits charged that the companies had lied under oath when they said no Americans would lose their jobs.


U.S. Press Ignores Emotional Testimony of Disney IT Worker Displaced by H-1B Visa Program Abuse
By Tom Blumer
Newsbusters.org, 2016-02-29

Two categories of news the press has studiously avoided during the Obama era came together this week, causing it to (in my view) proactively decide to ignore emotional congressional testimony which should have been front-page news almost everywhere.

The first is their virtually complete disinterest in reporting on congressional hearings. The list is longer than can be recounted here, but certainly includes Operation Fast & Furious, the IRS targeting scandal (now on Day 1,025) and implementation of Obamacare. The second is their reluctance to report any news casting the government's handling of legal and illegal immigration in a bad light. Leo Perrero's shocking testimony, which detailed the treatment of American IT workers at Disney who were replaced by lower-skilled foreign workers they were required to train, contained both elements. It was thus ripe to be ignored — and was.

The H-1B visa program has been under considerable fire for some time. Outrage has grown in recent years as several U.S. companies — certainly far more than are widely known — have brazenly brought in foreign workers to replace U.S. citizens on their payroll and demanded that those being released train their replacements or face loss of severance pay or even immediate termination.

This is what has occurred at Disney.

Thursday afternoon, displaced Disney worker Leo Perrero testified at a hearing held by the Senate Subcommittee on Immigration and the National Interest headed by Alabama Senator Jeff Sessions. The Associated Press did not cover it (as seen here and here in searches on Perrero's last name and here in a search on "Disney" which returns no relevant results). Neither did the New York Times, though the Old Gray Lady did have a story on January 26 when Perrero and another former Disney coworker filed a lawsuit against the company.

Here is what Perrero had to say:


Why Ford's New Factory in Mexico Won't Mean Lost U.S. Jobs
Ford confirmed on Tuesday that it will build a new assembly plant for "small cars" in Mexico.
It's Ford's first new factory in North America in 30 years, but it has the United Auto Workers concerned.
Here's what Ford is probably planning, and why it could end up being a win for the UAW.
by John Rosevear
Motley Fool, 2016-04-05


It is, however, widely believed that the reason Ford is moving its compact-car production to Mexico is to use the Michigan plant to build more popular and profitable products. Specifically, it's widely expected that the factory will start building a new midsize Ranger pickup, a new Ranger-based SUV to be called the Bronco, and possibly a version of the truck-based Everest SUV that Ford sells in many overseas markets.

Those new products should keep the existing workers at Michigan Assembly quite busy. In fact, demand for the new Ranger and its SUV siblings may well lead Ford to add more shifts at the Michigan plant, which would be a net win for the UAW.


[In other words, the author believes production of some existing Ford models will be moved to the new plant in Mexico,
but the U.S. plant where those models have been, and are now, made
will be "repurposed" to produce some new models.
Well, if so, that might mean that current U.S. jobs will not be lost.
But what about all the new jobs that will be performed by Mexican workers at the new plant in Mexico?
If that plant had been built in the U.S., it would have given new jobs to U.S. workers.
That's called "growth", and is what we are constantly told by the "elite" is the answer to our economic problems.
Well, whether it is a magic elixir or not,
having the growth in employment occur in Mexico, not the U.S.,
may grow FMC's bottom line (lower labor cost in Mexico),
but it sure doesn't grow U.S. manufacturing employment.

To slightly change subject, to the media,
I sure wish the media would take a break from covering the topics that promote its P.C. agenda
and investigate the reasons why Ford chose to build this new plant in Mexico rather than the U.S.
Precisely what is it about the U.S. that makes it an unattractive location
for making, in this case, a $1.6 billion dollar investment in a new plant?
Could the reason be precisely the factors that the media has been so busy pushing on America,
without telling Americans the cost of those measures in terms of making America an unattractive place to make things?]

Donald Trump, Ford Motor and Kentucky Jobs:
What’s Really Happening

Auto maker pledges to keep production of a Lincoln model in Kentucky.
But it’s still building a factory in Mexico
By John D. Stoll and Christina Rogers
Wall Street Journal, 2016-11-18


U.S. president-elect Donald Trump promised nothing less than a restructuring of the rules of global trade—a system that has underpinned growth, but that has also cost America manufacturing jobs. The question is how much of the promised change will become reality.

As a candidate, Mr. Trump held Ford up as a poster child for U.S. companies moving work to Mexico, and as a reason the North American Free Trade Agreement needs to be retooled or trashed. Ford isn’t backing away from its bigger Mexico plan, it is just tweaking it.

Ford still plans to spend $1.6 billion building a new factory in Mexico
that will serve as the home of Ford Focus production.

That small car is currently built in Michigan,
but is a money-loser given the high cost of UAW union employees
and the low appetite that Americans have for the Focus.

Ford has argued that this move won’t cost American jobs
because the company plans to use the capacity at the Michigan plant to build new trucks and SUVs that are more profitable and in higher demand than the Focus.
However, some will argue
those new products could have theoretically come from a brand new U.S. plant
rather than a refurbished small-car plant.

Put another way,
all those new jobs that Ford will provide to Mexican workers
could have been given to American workers not currently employed by the company.


The Focus is far more important to Ford’s top line and to the UAW’s reputation
then the Lincoln that will remain in Kentucky is.
The Focus is a big seller, popular among young buyers on a budget
and rental-car companies looking for cheap people movers.
Even though small-car demand sinks when gas prices are low, they remain relevant.

The UAW, meanwhile, has aligned with Mr. Trump on trade—
particularly on disparaging Nafta—
and an area where it is most vulnerable is small-car production.
Ford’s $1.6 billion is a part of a flood of auto investment in Mexico,
which has lower wages and more free-trade deals,
which are two critical components for making small-car production viable.

When Ford decided to put Focus production in Michigan
shortly after the [2008] Detroit car-industry bailouts,
it was heralded as a win for the UAW and proof that
labor unions could make the compromises needed
to build a small car profitably in the U.S.

It isn’t clear why Mr. Trump specifically targeted Ford when all three Detroit auto makers are making bigger bets on Mexico. Fiat Chrysler Automobiles NV, for instance, is moving the small Jeep Compass from Illinois to Mexico. GM is also investing in Mexican production upgrades.

Importantly, Ford’s statement Thursday night indicated it is banking on Mr. Trump’s new economic policies to address the disadvantages that U.S. auto production carries. “

“We are encouraged that President-elect Trump and the new Congress will pursue policies that will improve U.S. competitiveness and make it possible to keep production of this vehicle here in the United States,” the company said.

[I would be interested in a breakdown of how much of the non-competitiveness of the U.S. in auto production is due to:
  1. the UAW,
  2. various government policies on healthcare, environment, PC, you name it,
  3. anything else.


Trump Wins in Automaker Attack as Ford Aborts Mexico Plant
by David Welch and Keith Naughton
Bloomberg, 2017-01-03

[Wow! This is big news, and for me, good news:]

President-elect Donald Trump on Tuesday notched the biggest victory of his campaign to get automakers to keep jobs in the U.S.
Ford Motor Co. canceled a $1.6 billion Mexican expansion,
saying it would add positions in Michigan instead.

The company’s announcement culminated a dizzying morning that started with Trump threatening to punish General Motors Co. for building a version of its fading compact car in Mexico. GM challenged his assertions, but minutes later Ford -- a frequent target of Trump’s campaign-trail criticism -- struck a different note.

Trump was “very pleased we were making this investment in U.S. jobs,” Mark Fields, Ford’s chief executive officer, told reporters at the automaker’s plant in Flat Rock, Michigan, where it will add 700 positions. “One of the factors we’re looking at is the more positive U.S. business environment that we foresee under President-elect Trump and the pro-growth policies that he’s been outlining. So this is a vote of confidence around that."


Fields said the decision to scrap the new compact-car plant in Mexico reflected shifting consumer tastes, not pressure from the president-elect. While Ford did notify Trump and Vice President-elect Mike Pence before the announcement, Fields said the same decision would’ve been made regardless of Trump’s comments.

“What we’ve seen is a marked decline in demand for small vehicles here in North America,” Fields told Bloomberg Television. “So we don’t need that capacity, and we’re going to take the Focus that was supposed to be produced there and produce it in an existing facility that we have in Mexico.”

United Auto Workers Vice President Jimmy Settles, who took the stage at Flat Rock after Fields, said he cried when he first learned of the new investment. The UAW has contended with declining membership for decades, and Settles said he had feared that any investment in electric cars might go to the U.S. West Coast. Now, temporary workers at Flat Rock have a chance to move into permanent positions.


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