High Ho High Ho For Delphi It’s Off To Mexico We Go

Since Delphi split from G.M. they have continually blamed the companies abysmal performance on the high costs associated with the manufacturing facilities in the U.S.. Out of 159 manufacturing facilities in 36 countries they started with only 27 of them in the United States. The powers at Delphi have closed plants, laid off workers only to hire less expansive staff and outsourced at every opportunity. Guess what, their abysmal performance is getting worse. Who are they going to blame when there are no U.S. workers left.

Delphi Automotive Systems has informed the union that represents the workers of their Kettering, Ohio plant that they are “considering” outsourcing to Mexico.

From a Dayton Business Journal article:

“The Kettering plant is one of five plants in Montgomery County. It is part of Delphi's Automotive Holdings Group, made up of plants the company plans to sell or close.”

“Thorpe said a potential buyer is looking at the Kettering plant. Including temporary employees, there are about 800 workers at the facility.”

In a previous article I read that Delphi is committed to closings or moving 22 of their 27 U.S. plants to somewhere else.

From the Delphi Leadership page:

“As leaders of Delphi, we are visible, we are accountable, we are determined. People inside -- and outside -- observe what we say and do. Each and every day, we strive to embody the qualities of leadership through our words, our behaviors, and our commitment to making Delphi a strong and respected corporation.”

Here are the “leaders” that are determined to close the majority of Delphi’s U.S. manufacturing.

Developmental Agencies Face The Music

An article in the Washington Business Journal by Senior Staff Reporter Joe Coombs describes some of the political problems that two local development agencies are having. It seems that the NCRC, National Capital Revitalization Corporation, and the AWC, Anacostia Waterfront Corporation, are under attack by several of the cities councilman. From the article:

“Legislation already has been drafted to eliminate the AWC and NCRC and fold their operations into the Office of the Deputy Mayor for Planning and Economic Development. That bill will come up for consideration "as soon as possible," says Councilman Kwame Brown, D-at large and chairman of the council's economic development committee.”

Across the country development corporations are popping up to act as a bridge between, the often cumbersome, local, county, borough, regional and state agencies that are willing to offer incentives to businesses, that bring jobs into their communities.

It’s been my experience that when governments think that they can “do it better” businesses tend to run. Politicians are only successful when they can introduce the active parties and then take the credit. When they try to deal directly with business, too many peripheral issues come into play.

Governments should have a clear outline of reasonable expectations for publicly funded development agencies to prevent politics, personalities and egos from entering into their performance review. We have seen to much self-serving politics and people have to speak out.

Hancock Fabrics Closing 134 Stores

In a March 20, Press Release, Hancock Fabrics, Inc. (NYSE: HKF), announced the closings of 104 stores. This is addition to the 30 closings announced last month. Hancock has 403 units in 40 states.

In a March 21, Press Release:

Hancock Fabrics, Inc

"(NYSE: HKF), announced today it has filed a voluntary petition for Chapter 11 relief in the United States Bankruptcy Court for the District of Delaware. Its subsidiaries are also filing for the same relief. Hancock took this action so that it can use the reorganization process to improve the Company's operating performance, reduce its secured debt over time, close underperforming locations, and exit Chapter 11.”

From these releases it appears that the decision to close these stores has been a last minute one and there is no news of which locations or the timing was listed.

Various blogs have posted that going-out-of-business signs have already been posted on the 30 units announced in February with closing dates of around June 1, 2007. So far I have not been able to find any listing of which stores will be closed and which will be spared.

Offshoring Has Little Effect

…Other than it is good for business. That is what is repeated over and over by journalists who feel the need to write about the outpouring of American jobs. What’s the contemporary term being bandied around, workplace evolution.

From an interesting story by Kevin Krolicki of Reuters, Detroit property is selling at auction for a fraction of its value. Click on the above link because the story is interesting and is the extreme case of what is happening in some of our communities.

From the article:

“Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac.”

“At a weekend sale of about 300 Detroit-area houses by Texas-based auction firm Hudson & Marshall, the mood was marked more by fear than greed.”

“The city, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.”

“After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!"’

Intel Investing 2.5B In New Plant - In China

This information came from an article in the Sacramento Business Journal.

It’s hard to be upset with Intel’s decision to build a major manufacturing “campus” in Dalian, China. The world leading computer technology company building a plant in the world’s largest and fastest growing country is a nobrainer. Not to mention the additional benefit of low labor costs.

China isn’t the only location that Intel has expansion plans for, from a February 26th press release:

Rio Rancho, New Mexico; $1 Billion

"Our new 45 nanometer process represents one of the most significant manufacturing breakthroughs in decades and we believe that putting it in our factory in New Mexico will help us deliver the best possible products for our customers," said Paul Otellini, Intel Corporation's president and chief executive officer. "Our Rio Rancho site has successfully operated in New Mexico for 27 years. Based on that success, we are pleased to position Fab 11X for Intel's next generation of technology."

Chandler, Arizona; $3 Billion

“…The company is currently building two other factories that will use the 45nm process. The $3 billion Fab 32 in Chandler, Ariz., will commence production late this year…”

Kiryat Gat, Israel; $3.5 Billion

“…$3.5 billion Fab 28 in Kiryat Gat, Israel, will begin production the first half of next year.”

From a June 22, 2006 Press Release:

Leixlip, Ireland; $2 Billion

“The US$2 billion factory has begun high-volume production using 65nm process technology produced on the industry’s largest wafer size (300mm), which provides the Intel fab with the potential to generate the world’s highest microprocessor output at the lowest cost. Along with Intel’s Fab 12 in Arizona and D1D fab in Oregon, the new facility (called Fab 24-2) is the most technologically advanced, high-volume semiconductor manufacturing plant in the world building multi-core microprocessors.”

From an older Press Release dated September 15, 2005:

Shanghai, China; $1.3 Billion

“For more than two decades, Intel has invested nearly 1.3 billion dollars to China and cultivated a workforce of over 5,000 talented professionals. R&D has been a huge part of the company's investment since it first established the software labs in China in 1994.”

Is Inflation A Worry

Today the Federal Reserve issued their Federal Open Market Committee statement. Wall Street cheered because they dropped the possibility of a rate increase from the statement. They did indicate that the:

“…readings on core inflation have been somewhat elevated.” and “the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected.”

Two of the underlying indicators, wholesale prices and factory orders, do not look positive for future inflation concerns. From Economic Slowdown Sooner Rather Than Later the January reading of factory orders showed the largest drop in 6 ½ years and as indicated in a Martin Crutsinger article on the AP, in February wholesale prices jumped 1.3%, also a negative trend for future inflation.

Many prominent economists seem to feel that these indicators are only bumps in the road to prosperity. But any slowdown could also be accelerated by ignoring these economic factors today.

Massachusetts Fighting Back

As shown in my previous post, Massachusetts Job Dilemma, the Boston area along with the entire state are having problems, drawing and keeping workers, because of a high cost of living and unreasonable commuting difficulties.

From a Boston Business Journal article:

"The administration of Gov. Deval Patrick counts 300 companies, 58,000 jobs and $4 billion in private investments in its expansion and relocation "pipeline," the state's top economic development official said last week.”

"We are on our way to earning back the 150,000 jobs that we lost," O'Connell said during a budget hearing in Worcester.” Other than “…including public housing restoration…”

in their plan to restore jobs to the state, I see very little that addresses why they can’t get people to stay.

Bush Abandons Manufacturing

Over the last six years President Bush has signed numerous Trade Agreements with countries in Asia, Middle East and the Americas. These Agreements often ignore human rights issues and have the practical effect of diminishing the ability of American businesses to compete and grow.

In his unexplainable and continuous effort to open the borders while exporting American jobs he is sending to Congress a budget that cuts by more than 55% the funding for the Manufacturing Extension Partnership.

From a Kent Hoover article in the Tampa Bay Business Journal:

“The partnership is a network of 59 centers with 350 locations around the country. These centers provided technical assistance and business support services to 16,448 small and medium-size manufacturers in fiscal 2005.”
“They receive state, local and private-sector funding in addition to federal funds.”
“The National Association of Manufacturersalso criticized the proposed MEP cut.”

Some Good Interview Advice

Penelope Trunk penned an article published on Yahoo Finance Nine Steps to Acing a Job Interview. There are thousands of articles written about the interview process but few answer what to do and how to prepare for the typical questions asked by less qualified interviewers, like; “Tell me about yourself” or “Tell me about a time when”.

These are common questions that often lead to an interview becoming disjointed. Her suggestions 1, 2, and 4 should be read.

Interesting Facts About Last Years Job Growth

From a Pew Hispanic Center study titled Construction Jobs Expand for Latinos Despite Slump in Housing Market and written about in an UPI article.

While comprising nearly 14% of the overall population, Hispanics have captured 36.7% of the entire job growth in 2006. This is not meant to disparage Hispanics, but it further illustrates that the job creation that is being bragged about is at the lower end of the wage scale.

The focus of the article is that 2 out of 3 new construction jobs are being filled by Latinos. Considering the downturn in construction, the prospect for non-Latinos in construction does not look good.

U.S Commerce Secretary Carlos M. Gutierrez Blowin’ Smoke

While searching for some accurate numbers pertaining to the economy today, I ran across what is billed as “Top Economic Story” on the U.S. Commerce Departments web site. Secretary Gutierrez blatantly announced that the economy is great and all of us can just go home and kiss our dog. He bases this overwhelming complacency in the economy on two numbers; the Trade Deficit and Job Creation.

First the slightly lower trade deficit that was brought about by two factors, an increase in exports due largely to the decline in the value of the dollar and a single months15% drop in the price of oil, lowering the import amount. The second is that we have created 7.6 million jobs over the last 3 ½ years. As quoted before, nearly all of these new jobs come from positions created in the medical field and, in the last year, services.

With the price of oil back up, housing falling apart, 1.5 million general accounting jobs to be “exported” soon and the dollars further decline, I can’t wait to see what he brags about next.

Economic Slowdown Sooner Rather Than Later

Martin Crutsinger an AP Economics writer wrote in his Factory Orders Dive Amid Broad Declines that factory orders fell in January by the largest amount in 6 ½ years. This comes after two months of moderate increases. Normally a single month accounting is less than a dependable indicator, but with the housing market is a year long decline, this could be the signal that the downturn in housing is beginning to spread.

Most of the economic news we get is lagging, putting what has already happened into context. Factory Orders are a leading indicator, and with factories normally sitting on 90 days of orders, could indicate additional layoffs this summer/fall.

Also reported on by Mr. Crutsinger was that Productivity came in at 1.6% the last quarter of 2006. This was about half of what was expected and as I reported on in Economics Can Be Difficult the lower Productivity number can also be an ominous indicator for the overall economy.

From Economics Can Be Difficult:

“Productivity is a concept that is often referred to in statements made by Ben Bernanke or the former Fed’s Chief Alan Greenspan, but never seems to add much meaning.”

Some added meaning from Mr. Crutsinger’s article:

“Productivity is the key element needed for rising living standards. It allows businesses to pay workers with the wage gains financed by the increased output. Without productivity gains, businesses often have to resort to boosting the cost of their products to finance wage gains, a process that increases inflation.”

Interesting Discussion Of Small vs. Large Companies

I just ran across an article in the Boston Business Journal: Small companies make best employers, readers say

There are some interesting reader comments, take a look.

Greenspan May Have Had It Right

Two weeks ago, just prior to the coaster ride the market took, Greenspan addressed a business conference, via satellite, of Hong Kong businessman. Part of that speech from a Martin Crutsinger article on the AP:

"When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign,… While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown,"

The average Jason or Jennifer judge the economy from their own direct environmental input, their personal situation and that of those around them. As in everything American there is a rift growing between economists, on one side is the doom seers and the other are the “contemporary” wisdom crowd. The pessimistic group look at the cancers of our economy, the trade deficit, the breakdown of the housing market, the extraordinarily high levels of credit by consumers and government, the outpouring of American manufacturing jobs, health care costs rising at three times inflation the upcoming Social Security dilemma and governments inability to effectively react to these risks. On the other side are a group of highly educated economists and leading financial engineers, some of which are responsible for hundreds of billions of dollars in our retirement accounts, and they claim that since everything looks healthy (our economy), then the patient must be healthy.

Each of the potential detriments are a study in themselves, and some of the contemporary arguments are convincing, but we urge all to take a conservative approach in making any decision that might be affected by a recession in the next 24 months.

Trade Deficit Deceit

Back in November I predicted in an article titled $29,852 that the average American would spend $7463 (each) on foreign made products. I was wrong, the actual number was $7289 or a 2.3% difference.

The deceit comes into the politically correct term “trade deficit”. Why politically correct? Because it fails to illustrate the full extent of the problem while softening the impression that that there is even a problem. Numerous economists have stated that the trade deficit is meaningless, just look at today’s unemployment rate, the nation is at full employment and we have had a deficit for 30 years.

Let’s look at unemployment and wages. Unemployment is very low but the entire credit for positive job creation, since 2001, could be attributed to the medical field. From my article back in November Jacob Weisberg was on Lou Dobbs:

“At this time, with unemployment at 4.4%, the economy appears to be strong, but the truth is there are less people working today, as a percentage, than there has been since in 1991. In the last five years the medical field has added 1.7 million positions, the private sector has netted out at 0 new jobs.”

Factor in the gains from the lower wage service sector, and all the other sectors combined, were negative. Wages have shown some rebound in the last few months but with substantial losses in the higher wage manufacturing sector, wages in constant dollars, are lower than 1973. With medical coverage costs increasing at three times the rate of inflation, wages are squeezed even further.

The effects of our trade deficit is not standing up and shouting; Here I am. But the effects are real and unfortunately, will become more easily identifiable if/when the economy turns.

Global Warming Hitting The Pleasure Industry

From the Metro.co.uk :

“Petra Nestorova, who runs an escort agency in Sofia, said: 'We have hired students, but they are temps and nothing like our elite girls.'”

Tagged as: Lay-offs

CompUSA Quick Overview

From a Jaime S. Jordan article in the Dallas Business Journal CompUSA is closing 126 of their stores. The remaining stores are rumored to be the list provided from the CompUSA web site.

The blog is filled with stories of poor after-the-sale service such as this and high pressure to purchase extended warranties, that if service is needed, put you into their service hell.

The IT BLOG WATCH lists numerous posts concerning various issues surrounding CompUSA.

It is also rumored that employees will not be receiving their pension benefits. We’ll have to wait on that one.

Two years ago CompUSA was ordered to provide the promised rebates for the products it sold in their stores. From the Federal Trade Commission.

New Buzzwords: Nearshoring & Smartsourcing

In a San Jose Mercury News article, Nicole C. Wong writes that “nearshoring” is becoming a reality in the tech world.

From the article:

“Language fluency was a big reason some of Sun Microsystems' (Nasdaq: SUNW) technical support jobs were moved from India to Nova Scotia.”

As previously written in Call Centers: The Best And The Worst many of the tech giants are experiencing a low level of customer satisfaction from their call centers in India and Asia. So there is a rush to move some of these facilities to countries closer to the U.S. and that has less of a language problem.

It seems that the “powers” in these companies are convinced that it is impossible to operate these centers here and are determined to keep them out of the U.S.. Part of that attitude comes from groups that profit from offshoring and produce self-serving studies such as the one referenced in; How Fortune 500 Companies Can Save $58 Billion a Year -- Just Send 1.5 Million More Jobs Overseas.

Smartsoucing is a term used in Tom Koulopoulos’s latest book Smatsourcing. Mr. Koulopoulos illustrates that there will be a worker shortage of 9 million people by 2020 in the U.S. and companies have to offshore to fill the gap. My difficulty with that is he only uses the most base of numbers to get to that 9 million worker shortfall. Today the unemployment rate is very low and is considered by most economists that we are at full employment. But, in the United States, there are nearly 100 million people who aren’t working. Some are too young and some are too old but we estimate that nearly 20 million have just stopped looking for work because of a lack better paying jobs. Most of these people would become productive workers if jobs were available at a reasonable wage. By 2020 this number will grow and would more than cover his projected shortfall.

Part of the problem is that these companies are offshoring reducing the pool of reasonable paying positions.

Tennessee Supporting Business

These are the types of programs we need to see more of. Preferably at the federal level.

I often have a problem the canned rhetoric that is constantly being printed about the need for higher education. That’s a nobrainer, what companies are very publicly calling for are highly skilled production workers. Those trained in robotics and engineering prints. Most companies are less than willing to incur the expense and time required to hire and send a new employee to specialized training only to have them leave for a variety of reasons.

From a Nashville Business Journal article by Gwenn Bradley, four years ago Tennessee started an Incumbent Worker Training Program as part of the Tennessee's Department of Labor & Workforce Development that aids companies in recovering the costs involved in that training. The success of this program is evident in the fact that it has grown 50% to 100% a year. This is type of program that all communities need to seriously look at because it creates a base of successful businesses with highly trained residents.

TENNSCO – More Uncommon Common Sense

In a Nashville Business Journal article by Josh Flory, Tennsco a Dickson, Tennesssee manufacturer of business filing and storage systems, needed skilled workers. Hiring people with the training needed was becoming increasingly difficult. Some manufacturers would use this as an excuse to move facilities overseas or to contract production. But Tennsco did the uncommon, the sent their staff to school.

When viewing the companies newsletter (pdf) I was impressed with the emphasis and pride they displayed in their staff.

Wall Street Idioms For Layoffs

#1 Downsizing – A term constantly used to indicate layoffs are planned for U.S. workers. Trite, overused and always rewarded with a small pop in the stock. Very commonly used to cover the costs incurred in the companies stock option plan.

#2 Synergize Efficiencies – Another way of saying #1.

#3 Offshoring – Contracting production or services to companies outside the United States. Usually precedes #1.

#4 Nearshoring – This is a new term that is being used to demonstrate that management is concerned with the customer experience. Usually precedes #1.

#5 Economic Resizing – See # 1.

#6 Restructuring – See # 1.

#7 Production Realignment – See #1.

#8 Globalization – We’re building new facilities out of the United States and we are going to #1 our U.S. work force.

#9 Accelerated Retirement Program – Downsizing targeted at the companies over 50 crowd. Very vogue and just coming into style because it eliminates the companies highest paid and most expensive workers. The loss of the companies most loyal experienced workers seems to be just a perk.

#10 Economic Realignment – A contemporary term used by economists to indicate that it is a good thing that jobs are leaving the U.S.. The switch from higher paying manufacturing and technical jobs to lower paying service positions is actually part of the natural order and needs to be accepted with a smile.

Layoffs No Longer Just Manufacturing

Kansas City Light & Power

In a press release from Kansas City Power & Light, they are purchasing Aquila Inc’s Missouri’s properties and plan to cut about 350 white collar jobs at Aquilas Kansas City operations.

From an article in the Kansas City Business Journal, by Jason Shaad:

“The majority of the job cuts will happen at the corporate level, in areas such as human resources, accounting, legal and communications, Aquila spokesman Al Butkus said.”

United Parcel Service

From an Atlanta Business Chronicle article:

“The Atlanta-based package shipper (NYSE: UPS) said 194 took the deal, which was offered in December to employees who were age 50 or older with at least 10 years of service. Normal retirement age at UPS is 65.”

“The buyout offer is part of UPS' attempts to consolidate corporate support functions in areas such as network planning, procurement, human resources, finance and sales.

”

Wheatland Tube

Wheatland is laying off 85 workers at three of it’s facilities, what makes this note worthy is that the layoffs is in defense of Chinese imports of lower priced pipe. The article in the Coshocton Times says that the layoffs represent 20% of the firms white collar staff. The article didn’t say how many of the layoffs are in the Coshocton area, but the mid Ohio city of Coshocton does not need any more layoffs or lost businesses.

American Axle & Manufacturing Holdings, Inc.

In a Business First of Buffalo article by Thomas Hartley AA & M is laying off 15% or 200 of it’s white collar staff. This follows nearly 1,500 blue collar production workers last year. This follows an undisclosed agreement that allows workers to be hired at rate that is less than half of the current wage. Quoted from the article:

“The company, which is the largest supplier of axles to General Motors Corp., also said it has a labor agreement with the United Auto Workers union that cuts by more than half the compensation for newly-hired production workers.”

(Wall Street applauds) “Shares of American Axle (NYSE: AXL) stock were up 19 cents to a 52-week high of $26.01 Friday afternoon.”

Ford Motor Company

This is just too big of a subject for this post so please see: At Ford Job # 1 Is To Leave Job

Masco Corporation

Masco, maker of Delta & Peerless Faucets along with Bahr Paints announced last week that they would cut 8,000 jobs by the end of the quarter. This is about 15% of their workforce.

If you follow the more contemporary economists the current decline in housing is not having an effect on the economy.

At Ford Job #1 Is To Leave Job

If your interested in what is happening at Ford, Sarah A. Webster a Free Press Business Writer, pens a must read article on freep.com. She paints a dismal picture of employee moral at Ford that is only aggravated after Ford’s proposed buyout offers were withdrawn for some of the anxious white collar staffers. The offer was originally targeted to trim 10,000 “white-collars” from Ford’s payroll, the overwhelming response in some departments, has caused Ford to rethink the program.

From the article:

“Ford began offering salaried workers three buyout packages in September 2006 in an effort to eliminate 10,000 positions. That was on top of 4,000 salaried jobs already slashed”

“Workers who talked to the Free Press said the high take rate on buyouts -- for both hourly and salaried workers -- shows employees have shaken confidence about management and the future of 103-year-old Ford…”

“Last fall,… Ford also targeted 30,000 hourly factory jobs to be eliminated… Ford reported that 38,000 UAW workers signed up for buyouts during a six-week window that opened Oct. 16 and closed Nov. 27.”

“But rescinding buyout offers for workers who want to leave is corrosive to Ford's already-dismal morale, a few of the employees told the Free Press.”

"My manager told me he knows everybody is looking for a new job," the marketing employee said. "I'm just disgusted with the entire company."

After reading the blogs by several of Ford employees, it seems that things aren’t as bad as the article portraits. The attitude from these blogs is that there is a lot of “noise” being made by a very vocal few. Things just aren’t as bad as being hyped in the press.

If 14,000 white collars are being let go, things just can’t be that great either.

50 & Overs Offered Separation Deal At UPS

194 UPS employees have accepted a buyout offer being offered to “50 and older” employees with 10 or more years of service. From a UPS press release:

ATLANTA, Feb. 28, 2007 - A voluntary separation offer made by UPS (NYSE:UPS) to a small group of corporate employees has been accepted by 194 individuals.

The offer was extended in December to employees who were age 50 or older with at least 10 years of service. Normal retirement age at UPS is 65.

As a result of the acceptances, UPS will record a one-time charge to expense of approximately $80 million during the first quarter of 2007. The company expects to generate a positive return on the program after two years.

The buyout offer was part of an on-going effort to consolidate corporate support functions in such areas as network planning, procurement, human resources, finance and sales.

Also from the UPS website Diversity Section:

Diversity at UPS/UPS People

Diversity and UPS PeopleUPS´s workforce is multicultural, multidimensional, and reflective of the broad attributes of our global communities. In fact, each year since 1999, UPS has been consecutively ranked by FORTUNE® magazine as one of the "50 Best Companies for Minorities."UPS understands that diversity encompasses more than ethnicity, gender, and age. It´s how employees think, the ideas they contribute, and their general attitude toward work and life.

UPS has every right to offer this separation package to staffers that are 50 and over in an attempt to get the best bang for its buck. But in doing so it is also sending a clear message to their other 400,000 employees how they feel towards their most experienced and seasoned staffers.