Isn’t it amazing how every issue, every situation, can have two distinct sides? Which is why I often liken regulatory controls to pushing on a balloon… there will be an opposite reaction on some other side, and rarely are you lucky enough to guess where it might manifest itself.
These days we’re dealing with the effects of the weak dollar. Travel to Europe is unbearably expensive and there is even talk of some commodity markets switching from dollars to euros. But at the same time it has made the U.S. an attactive market, with home buyers from Europe flooding certain tourist-centric careas. Exporting from the U.S. is also far easier, often completely offsetting the supposed cost advantage of "cheap" overseas labor. And foreign home buyers aren’t the only investers; foreign companies are also rushing to set up shop in the U.S. That’s a bad thing? Not in my book.
Mr. Murphy’s company [Remote Diagnostic Technologies Ltd. of Britain] is among the growing ranks of European businesses struggling to stay competitive in global markets as the euro and pound hit new highs against the dollar. He is shifting more of his costs into dollars by raising his purchases from American suppliers and relocating sales jobs to the U.S. Other businesses are considering the U.S. over Asia or their home markets to manufacture.
I bet there are some traditional U.S. companies scratching their heads, wondering where their offshored savings have gone, and wondering why a foreign company just built a factory next door. Times change.
Of course to be fair I should use the same argument with foreign companies as I’ve used with U.S. companies that have caught the offshore outsouring bug: first focus inward to improve your operations and you’ll probably find that the savings offset "competitive burdens" such as currency exchange rates and direct labor costs. Hey wait a minute… who has the competitive burden now?? Some foreign companies are looking inward instead of complaining and looking outward.
European companies’ efforts to counter the impact of strong currencies have pushed them into new markets and made them leaner and more productive – which could help them weather tougher times ahead.
At Inflight Peripherals, an Isle of Wight manufacturer of components for inflight entertainment systems, productivity has become a priority. The company has managed to cut packing and shipping times by 25%, and halved the time it takes to test some products and rework others.
So European companies, along with Asian and Indian companies, are improving. If a U.S. company is chasing the siren song of cheap labor instead of focusing inward, or resting on its laurels during this window of currency exchange "competitive cushion", they will have a rude and perhaps deadly awakening when exchange rates realign and all of a sudden they are competing against world class companies. But let’s get back to the near-term benefits to the U.S.
Robert Johnson, chief executive of Craftsman Tools Ltd., a machine-tool equipment maker based outside Leeds, England, is scouring the U.S. Midwest to buy a new factory. French based Airbus is considering relocating some production to dollar-based economies, including the U.S.
Perhaps Airbus should take a look at some of the ex-Boeing facilities in the U.S. that were spun off in Boeing’s quest to move offshore. Those spun-off companies are now profitable in their own right, and might make for excellent partners. As long as outbound Airbus Belugas stay clear of inbound Boeing DreamLifters…
The trick is to take advantage of hard times to improve… and then use the luxuries of good times to improve even more. Taking a breather can be deadly.
History suggest a strong currency can be good for productivity: Most experts say the overvalued dollar of the early 1980s set the stage for the economic vitality of the U.S. in the 1990s, as many manufacturing industries were forced to adopt new productivity-boosting technologies to survive.
Productivity-boosting technologies such as lean manufacturing. Times may be a bit easier for U.S.-based exporters right now, but this is not the time to stop improving. Don’t forget that cycles have an amazing tendency to be… cyclic.