Cheap natural gas and increasingly competitive labor costs are bringing factories and jobs back to the U.S. Eight ways to win.
As the only industrialized superpower not decimated by World War II, the United States once made nearly 40% of the planet’s goods. These days, that number has shrunk to 18%. We make American Girl dolls in China, Levi’s jeans in Mexico, and enough movies in Vancouver to nickname it Hollywood North.
After decades of outsourcing, however, the U.S. is quietly enjoying a manufacturing revival, and companies like Apple (ticker: AAPL), Caterpillar (CAT), Ford Motor (F),General Electric (GE), and Whirlpool (WHR) are making more of their goods on American soil again. It isn’t just U.S. companies that are drawn to our cheap energy, weak dollar, and stagnant wages. Samsung Electronics (005930.Korea) plans a $4 billion semiconductor plant in Texas, Airbus SAS is building a factory in Alabama, and Toyota (TM) wants to export minivans made in Indiana to Asia.
The Rust Belt owes its new shine to many factors, including rising wages and industrial-land costs in Asia. But none is bigger than the U.S. energy boom. Thanks to a head start in extracting oil and gas from shales, North America now produces far more natural gas than any other continent. Unlike oil, gas isn’t easily transported across oceans, and a result is some of the world’s cheapest energy within our reach: Natural gas here costs $3.55 per million British thermal units, versus roughly $12 in Europe and $16 in Japan. Cheap energy not only reduces our trade deficit and our addiction to Middle East oil, it also makes our factories more competitive globally — a boon for a country that had gone from exporting American goods to exporting American jobs.
The biggest beneficiaries are energy-guzzling companies like chemical producers and steelmakers, and Barron’s has identified eight stocks that should prosper in our gas-fueled manufacturing upswing. They are Southwestern Energy, LyondellBasell Industries, Nucor, Dover, Calpine, CF Industries, Williams, and Union Pacific. But any glow will also rub off on regional lenders, home builders, and local small businesses. “The U.S. is the Saudi Arabia of natural gas,” declares Nancy Lazar, co-head of the New York research firm International Strategy & Investment. “And Middle America is my favorite emerging market.”
Our energy boom got cracking with fracking, a controversial process in which pressurized fluids are pumped through rock formations, often a mile or more under the ground, to extract oil and gas. Critics condemn fracking, which they contend causes environmental harm, but even they agree that it’s led to an abundance of cheap gas. Over the past six years, U.S. production of petroleum and natural gas has jumped from 15 million barrels of oil-equivalent a day to 20.1 million, a 20-year high. Over the same period, imports have fallen from 14 million barrels a day to below eight million, a 25-year low.
It’s a sign of the times: Graduates from the South Dakota School of Mines & Technology — acceptance rate: 88%; mascot: Grubby the Miner — now command a median starting salary 16% higher than that of Yalies.
By 2020, the U.S. will become the world’s biggest oil producer, says the International Energy Agency. By 2025, North America will be a net energy exporter, predicts ExxonMobil (XOM).
That edge should remain ours for decades. “It isn’t just the huge reserves we have underground,” says Tim Parker, who manages T. Rowe Price’s natural-resource stock portfolios. “No one else has our predictable cocktail of infrastructure already in place, know-how, a relative abundance of water, and a favorable royalty regime that give landowners a stake in the exploration game.” Europe, for instance, is averse to fracking and has little infrastructure; Japan has hardly any shales; and while China has vast reserves, only shales nudging the Yangtze River have enough water for fracking.
Of course, an especially frigid winter could send gas prices soaring, but any such spike should be temporary. Given our expanding reserves and record inventory, commodity strategists expect U.S. natural gas to stay between $3 and $5 per million BTUs for years — well below prices abroad.
CHEAP GAS ISN’T THE ONLY booster in our tank. In the decade since China joined the World Trade Organization in 2001, that nation has become Earth’s low-cost factory. But wages and benefits there are rising 15% to 20% a year, while they’re stagnant here. Despite Beijing’s efforts to hold it down, the yuan has gained 33% against the dollar since 2005. Industrial land averages $10.22 a square foot across China, but rises to $11.15 in the coastal city of Ningbo and $21 in Shenzhen — compared with $1.30 to $4.65 in Tennessee and North Carolina. “Within five years, the total cost of producing many products will be only about 10% to 15% less in Chinese coastal cities than in parts of the U.S. where factories are likely to be built,” says Hal Sirkin, a senior partner at Boston Consulting Group. Add duties and shipping, and the cost gap shrinks further.
Location-scouting manufacturers also are looking beyond mere costs. Moving part of their supply chains closer to the U.S. — still the world’s biggest consumer market — helps companies react faster to changes and also speeds innovation, says Gary Pisano, a Harvard Business School professor. Adds Robert McCutcheon, who heads PricewaterhouseCoopers’ U.S. industrials practice: “You protect not just the intellectual property of your products, but your processes as well.”
Companies, of course, won’t completely shutter overseas factories. U.S. corporate taxes are still high, compared with many other countries’, and there’s a limit to how many jobs will return, given advances in automation and productivity. But BCG’s Sirkin conservatively estimates that 2.5 million to five million manufacturing positions will be added by 2020, which could shave two to three percentage points from our unemployment rate, now near 7.8%. We’ll also expand exports, at the expense of higher-cost developed rivals, such as Germany and Japan. And U.S. ports stand ready and idle, operating at just 54% of capacity, well below 59% in Europe, 67% in Latin America, and 76% in Southeast Asia.
Busier factories would help the entire country. For every dollar spent on manufacturing, another $1.48 is added to the economy, says the National Association of Manufacturers. Another bonus: Manufacturers account for two-thirds of what the private sector spends on research and development.
And we’ve only just begun: Abundant gas and a weak dollar are long-term trends, and U.S. wages should behave until unemployment falls well below 6%, says Jeffrey Korzenik, chief investment strategist at Fifth Third Private Bank. “Offshoring had gone on for decades, but the re-shoring trend is only in year two or three.”
Here are eight stocks that should benefit:
Southwestern Energy (SWN)
Cheap energy is a boon for manufacturers, but a curse for exploration companies, and investors are shunning the producers most exposed to slumping gas prices. With 99% of Southwestern’s production and reserves in natural gas, you’d think the Houston company’s managers would be anxiously sweating over prices near decade lows.
But they aren’t. That’s because Southwestern is a highly efficient, low-cost producer. It works its 926,000 acres in the Fayetteville shale with operational aplomb, using dense wells, some of its own rigs, and vertically integrated services. The company has another 187,000 acres in the Marcellus shale. At $34, its shares trade at a small premium to its gassy peers but still a discount to its net asset value.
Ken Settles, who co-manages the RS Global Natural Resources Fund, expects gas prices to hit $5 to $6 eventually. “But the benefit of focusing on a low-cost producer is that, even with gas prices below sustainable long-term levels, Southwestern’s assets are still profitable and creating value for its owners.”
Southwestern plans to increase 2013 production by 11% to 13%, and analysts see its per-share profit climbing 19% this year. Earnings will grow even more if natural-gas prices rally, but you won’t sweat waiting for that to happen.
Compared with other economically sensitive stocks, Dover is more diverse and more stable. Management has allocated capital shrewdly, making acquisitions, buying back shares, and lifting return on capital to 12.4% — a decade high. Dover has a 2.1% dividend yield, and its 9.7% profit margin trumps the sector’s average. Yet its shares, at $67, trade at 12.8 times 2013 profits, a discount to the market and other machinery stocks.
Calpine (CPN)
Calpine is the largest independent U.S. producer of gas-powered electricity, and runs some of the newest, most efficient plants. Just six years ago, nearly half the nation’s power came from coal. But gas’ share has swiftly risen from a fifth to a third, while coal’s has waned.
The ongoing switch to cleaner natural-gas-generated electricity is one reason whyBarron’s has been bullish about the stock (see “Calpine Gets Ready to Light Up,”July 23, 2012). The company also has unused capacity that puts it in the driver’s seat as utilities replace decades-old coal plants.
At first blush, that advantage seems well reflected in the shares, which, at $19, fetch 27.6 times 2013 profit estimates of 69 cents a share. But that seemingly lofty multiple is below its median over the past five years, and Calpine is generating more than $1 a share in free cash flow and continuing to pay down debt. “When power prices are low, Calpine benefits by taking market share from less-efficient producers,” says MacKenzie Davis, who co-manages the RS Global Natural Resources Fund. “But it also benefits if power prices rise, since margins and cash flow will improve.”
Made in America: The Next Boom
in Uncategorized/by MAM TeamJANUARY 2013
After decades of outsourcing, however, the U.S. is quietly enjoying a manufacturing revival, and companies like Apple (ticker: AAPL), Caterpillar (CAT), Ford Motor (F),General Electric (GE), and Whirlpool (WHR) are making more of their goods on American soil again. It isn’t just U.S. companies that are drawn to our cheap energy, weak dollar, and stagnant wages. Samsung Electronics (005930.Korea) plans a $4 billion semiconductor plant in Texas, Airbus SAS is building a factory in Alabama, and Toyota (TM) wants to export minivans made in Indiana to Asia.
The Rust Belt owes its new shine to many factors, including rising wages and industrial-land costs in Asia. But none is bigger than the U.S. energy boom. Thanks to a head start in extracting oil and gas from shales, North America now produces far more natural gas than any other continent. Unlike oil, gas isn’t easily transported across oceans, and a result is some of the world’s cheapest energy within our reach: Natural gas here costs $3.55 per million British thermal units, versus roughly $12 in Europe and $16 in Japan. Cheap energy not only reduces our trade deficit and our addiction to Middle East oil, it also makes our factories more competitive globally — a boon for a country that had gone from exporting American goods to exporting American jobs.
The biggest beneficiaries are energy-guzzling companies like chemical producers and steelmakers, and Barron’s has identified eight stocks that should prosper in our gas-fueled manufacturing upswing. They are Southwestern Energy, LyondellBasell Industries, Nucor, Dover, Calpine, CF Industries, Williams, and Union Pacific. But any glow will also rub off on regional lenders, home builders, and local small businesses. “The U.S. is the Saudi Arabia of natural gas,” declares Nancy Lazar, co-head of the New York research firm International Strategy & Investment. “And Middle America is my favorite emerging market.”
Our energy boom got cracking with fracking, a controversial process in which pressurized fluids are pumped through rock formations, often a mile or more under the ground, to extract oil and gas. Critics condemn fracking, which they contend causes environmental harm, but even they agree that it’s led to an abundance of cheap gas. Over the past six years, U.S. production of petroleum and natural gas has jumped from 15 million barrels of oil-equivalent a day to 20.1 million, a 20-year high. Over the same period, imports have fallen from 14 million barrels a day to below eight million, a 25-year low.
It’s a sign of the times: Graduates from the South Dakota School of Mines & Technology — acceptance rate: 88%; mascot: Grubby the Miner — now command a median starting salary 16% higher than that of Yalies.
By 2020, the U.S. will become the world’s biggest oil producer, says the International Energy Agency. By 2025, North America will be a net energy exporter, predicts ExxonMobil (XOM).
That edge should remain ours for decades. “It isn’t just the huge reserves we have underground,” says Tim Parker, who manages T. Rowe Price’s natural-resource stock portfolios. “No one else has our predictable cocktail of infrastructure already in place, know-how, a relative abundance of water, and a favorable royalty regime that give landowners a stake in the exploration game.” Europe, for instance, is averse to fracking and has little infrastructure; Japan has hardly any shales; and while China has vast reserves, only shales nudging the Yangtze River have enough water for fracking.
Of course, an especially frigid winter could send gas prices soaring, but any such spike should be temporary. Given our expanding reserves and record inventory, commodity strategists expect U.S. natural gas to stay between $3 and $5 per million BTUs for years — well below prices abroad.
CHEAP GAS ISN’T THE ONLY booster in our tank. In the decade since China joined the World Trade Organization in 2001, that nation has become Earth’s low-cost factory. But wages and benefits there are rising 15% to 20% a year, while they’re stagnant here. Despite Beijing’s efforts to hold it down, the yuan has gained 33% against the dollar since 2005. Industrial land averages $10.22 a square foot across China, but rises to $11.15 in the coastal city of Ningbo and $21 in Shenzhen — compared with $1.30 to $4.65 in Tennessee and North Carolina. “Within five years, the total cost of producing many products will be only about 10% to 15% less in Chinese coastal cities than in parts of the U.S. where factories are likely to be built,” says Hal Sirkin, a senior partner at Boston Consulting Group. Add duties and shipping, and the cost gap shrinks further.
Location-scouting manufacturers also are looking beyond mere costs. Moving part of their supply chains closer to the U.S. — still the world’s biggest consumer market — helps companies react faster to changes and also speeds innovation, says Gary Pisano, a Harvard Business School professor. Adds Robert McCutcheon, who heads PricewaterhouseCoopers’ U.S. industrials practice: “You protect not just the intellectual property of your products, but your processes as well.”
Companies, of course, won’t completely shutter overseas factories. U.S. corporate taxes are still high, compared with many other countries’, and there’s a limit to how many jobs will return, given advances in automation and productivity. But BCG’s Sirkin conservatively estimates that 2.5 million to five million manufacturing positions will be added by 2020, which could shave two to three percentage points from our unemployment rate, now near 7.8%. We’ll also expand exports, at the expense of higher-cost developed rivals, such as Germany and Japan. And U.S. ports stand ready and idle, operating at just 54% of capacity, well below 59% in Europe, 67% in Latin America, and 76% in Southeast Asia.
Busier factories would help the entire country. For every dollar spent on manufacturing, another $1.48 is added to the economy, says the National Association of Manufacturers. Another bonus: Manufacturers account for two-thirds of what the private sector spends on research and development.
And we’ve only just begun: Abundant gas and a weak dollar are long-term trends, and U.S. wages should behave until unemployment falls well below 6%, says Jeffrey Korzenik, chief investment strategist at Fifth Third Private Bank. “Offshoring had gone on for decades, but the re-shoring trend is only in year two or three.”
Here are eight stocks that should benefit:
Southwestern Energy (SWN)
Cheap energy is a boon for manufacturers, but a curse for exploration companies, and investors are shunning the producers most exposed to slumping gas prices. With 99% of Southwestern’s production and reserves in natural gas, you’d think the Houston company’s managers would be anxiously sweating over prices near decade lows.
But they aren’t. That’s because Southwestern is a highly efficient, low-cost producer. It works its 926,000 acres in the Fayetteville shale with operational aplomb, using dense wells, some of its own rigs, and vertically integrated services. The company has another 187,000 acres in the Marcellus shale. At $34, its shares trade at a small premium to its gassy peers but still a discount to its net asset value.
Ken Settles, who co-manages the RS Global Natural Resources Fund, expects gas prices to hit $5 to $6 eventually. “But the benefit of focusing on a low-cost producer is that, even with gas prices below sustainable long-term levels, Southwestern’s assets are still profitable and creating value for its owners.”
Southwestern plans to increase 2013 production by 11% to 13%, and analysts see its per-share profit climbing 19% this year. Earnings will grow even more if natural-gas prices rally, but you won’t sweat waiting for that to happen.
LyondellBasell Industries (LYB)
Chemical makers guzzle energy and also rely on byproducts from oil and gas purification — stuff like ethane, butane, and propane — for raw materials. So the shale boom delivers a double blessing of cheap feedstock and energy. In fact, PwC thinks that we might start seeing more plastic-based substitutes for materials like metal, glass, or wood. That’s good news for diversified specialty-chemical giants like DuPont (DD), and also Dow Chemical (DOW), which is investing $4 billion to boost production and build an ethylene plant in Texas that could hire 2,000 workers.
Still, Tim Parker of T. Rowe Price says that the narrower profit margins of more commoditized base-chemical companies might see a bigger boost from the new world order of cheaper feedstock and energy. His pick: LyondellBasell.
Since the Rotterdam-based company emerged from bankruptcy in April 2010, its New York-listed shares have climbed 184%. The shares, recently trading at $62, fetch 10.7 times 2013 profits. LyondellBasell’s management team is boosting earnings and returning capital to shareholders through share buybacks and dividends. The stock yields 2.6%. And net profit margins of 5.6% trump the 3.7% average of its peers. With new capacity, cheap feedstock and $14 billion in free cash flow, it can earn $10 a share by 2016 and become a $100 stock, Deutsche Bank analyst David Begleiter maintains.
Nucor (NUE)
Steel-making isn’t just another energy-intensive business. Steel pipes and products are integral to energy exploration and transportation, not to mention manufacturing and construction. With 99% of its revenue earned in America, Nucor, the largest U.S. minimill operator and metals recycler, is well-hitched to that energy and manufacturing boom.
The steel industry is vexed by excess capacity, and its volatile stocks surge or slide with temperamental economic data. So it helps that Nucor is more defensive than its peers. Wells Fargo steel analyst Sam Dubinsky favors it over the long haul, “due to its lean cost structure and product diversity, both of which have resulted in earnings at the high head of the peer group.” Nucor also is most levered to the bottoming construction market. A healthy balance sheet and a 3.1% dividend yield further burnish the appeal of its stock, recently at $47.78.
Dover (DOV)
Is the U.S. really ready to make more things again? The average age of our manufacturing plants is 15.5 years, while our equipment has been around almost six years. Both are near five-decade highs. “Old equipment and manufacturing plants suggest the need for a large replacement cycle,” writes ISI. Over the next five years, the research firm expects capital expenditure’s share of the economy to rise from 10.2% to 14%, putting it near its early 1980s peak. That’s good news for Dover. The conglomerate makes a vast array of industrial products — from refrigeration systems and specialty pumps to drill bits and bar-code equipment — making it a proxy for our manufacturing boomlet.
Calpine (CPN)
Calpine is the largest independent U.S. producer of gas-powered electricity, and runs some of the newest, most efficient plants. Just six years ago, nearly half the nation’s power came from coal. But gas’ share has swiftly risen from a fifth to a third, while coal’s has waned.
The ongoing switch to cleaner natural-gas-generated electricity is one reason whyBarron’s has been bullish about the stock (see “Calpine Gets Ready to Light Up,”July 23, 2012). The company also has unused capacity that puts it in the driver’s seat as utilities replace decades-old coal plants.
At first blush, that advantage seems well reflected in the shares, which, at $19, fetch 27.6 times 2013 profit estimates of 69 cents a share. But that seemingly lofty multiple is below its median over the past five years, and Calpine is generating more than $1 a share in free cash flow and continuing to pay down debt. “When power prices are low, Calpine benefits by taking market share from less-efficient producers,” says MacKenzie Davis, who co-manages the RS Global Natural Resources Fund. “But it also benefits if power prices rise, since margins and cash flow will improve.”
Energy can account for nearly 70% of the cost of producing fertilizer, and Jack Ablin, BMO Private Bank’s chief investment officer, singles out CF Industries as a big beneficiary of plentiful natural gas.
The company, which produces nitrogen and phosphate fertilizers, earns 85% of its revenue in the U.S. Shares of Deerfield, Ill.-based CF, at $226, have outrun their peers and climbed 73% over the past two years, the latest leg coming as drought sent corn and soybean prices soaring. Fearful that cyclical earnings have peaked, analysts are downgrading the stock, and investors fret that margins and share buybacks will suffer as management spends $3.8 billion to expand its nitrogen capacity.
But any pullback is an opportunity for long-term investors. Cheap gas costs should keep operating margins near a record 50.1%. Tight corn supplies, low water levels in the Mississippi, and a still-dry Corn Belt should support grain and fertilizer prices, and CF’s investment-grade credit rating and low debt let it borrow money cheaply should it need to. Its stock trades at just 8.2 times what CF earned over the past 12 months, well below the 12.3 times median since it went public in 2005.
Williams (WMB)
So why aren’t American drivers enjoying a bigger windfall at the pump? For one thing, global demand dictates gasoline prices. After decades of ferrying imported oil, our infrastructure also needs to be re-oriented toward redistributing domestically produ
ced na
tural gas. That benefits master limited partnerships that operate pipelines, and for investors who want to avoid MLPs’ complex tax-filing regimes, their parent companies.
Williams gathers and transports natural gas, and owns 78% of its namesake MLP, Williams Partners (WPZ). It has diverse assets, pays a 3.9% yield, and thrives as demand increases for natural-gas processing and infrastructure.
Williams Partners, which sports a 6.6% yield, fell 22%. Shares of its parent also struggled after it issued stock to help finance a complicated $2.25 billion investment in privately held Access Midstream Partners and the MLP it controls.
Still, the deal boosts Williams’ position in the Utica and Marcellus shales, and adds steady fee income that tempers Williams’ exposure to fluctuating commodity prices. Investors fret that Williams, which trades at $34, may have to raise more money, but cash flow of about $1.6 billion this year exceeds the adjusted net income of $816 million that Wall Street expects and should more than cover payouts, letting Williams deliver on its promise to increase dividends at a 20% annual rate through 2015.
Union Pacific (UNP)
All manufactured goods must move from the factories in which they’re made to somewhere else. Kansas City Southern (KSU), which has a unique North-South network linking the Midwest with Mexico, could benefit from any spillover of manufacturing south of our border. But the king of rail remains Union Pacific.
Spawned 150 years ago, after Abraham Lincoln signed the Pacific Railway Act, Union Pacific’s dense network blankets the map west of the Mississippi. Stephens’ transportation analyst Brad Delco flags Union Pacific as one of the rail stocks most exposed to energy-intensive groups like autos, chemicals, and steel. It hugs the Gulf Coast, has the largest U.S. chemical franchise among rail carriers, and hogs 75% of the western U.S. traffic for assembled autos and parts. Its relative absence along the East Coast further shields it from coal’s dying embers.
Union Pacific shares have run up 44%, to $133, over the past two years, nearly twice as much as the rail group has. But the stock trades at 14 times projected profits, a small premium to its peers, and no higher than its own historical average. Management has lifted operating margins to a decade-high 36%. The stock boasts a 2.1% yield, and the company has paid a dividend every year since 1899, when the steam engine propelled the U.S. to its first industrial boom. The rail giant’s in great shape for the next one
Made in U.S.A. Supplier Summit Coming Soon
in Uncategorized/by MAM TeamBoth appointments were a little lost in the shuffle as the new responsibilities for Gloeckler and Hall were listed at the bottom of a memo that included announcements about 15 other merchandising executives. They aren’t lost in the shuffle anymore following the announcement earlier this week by Walmart U.S. president and CEO Bill Simon that Walmart plans to purchase an additional $50 billion worth of merchandise from U.S. suppliers during the next five years.
Gloeckler and Hall now figure prominently into those plans and accompanied Simon to the National Retail Federation convention where he was a featured speaker on Tuesday morning when the purchasing initiative was announced in front of several thousand people.
“Walmart and Sam’s Club will grow U.S. manufacturing on two fronts: by increasing what we already buy here – in categories like sporting goods, apparel basics, storage products, games, and paper products. And by helping on-shore U.S. production in high potential areas like textiles, furniture, pet supplies, some outdoor categories, and higher end appliances,” Simon said.
He indicated the company will help convene a manufacturing summit this summer to bring the retail industry together and promote domestic sourcing more broadly.
“Instead of working on these issues separately, we will accelerate these changes by working together,” Simon told the NRF attendees. “And when we do, it will benefit all of us. Any new factory can sell to any of us. Every investment made in partnership with one of us lowers the cost for all of us. Every new hire at one of our suppliers is a new customer who might come through your doors or ours.”
While Walmart has committed to $50 billion in new domestic manufacturing, he suggested the broader retail industry could set its sights at $500 billion in purchases over a 10 year period. Such a commitment would give American manufacturers the confidence they need to invest in domestic manufacturing at a time when rising energy costs and overseas labor rates are causing suppliers to give domestic manufacturing a second look.
Simon contends suppliers just need a nudge. So in addition to the $50 billion commitment, Walmart plans to execute longer term purchase agreements to give company’s greater visibility into demand for their goods.
Silicon Valley Plant Named as Apple Manufacturer
in Uncategorized/by MAM TeamTaiwan-based Quanta was listed as operating Macintosh computer and iPod MP3 player assembly plants in China.
Cook, in a pair of interviews given in December, said one line of Mac computers will be made exclusively in the United States, but did not say which one.
Asked why Apple would not move out of China entirely and manufacture everything in the United States, Cook told NBC, “It’s not so much about price, it’s about the skills.”
Cook also told the broadcaster that he hopes the new project will help spur other US firms to bring manufacturing back home.
“The consumer electronics world was really never here,” he said. “It’s a matter of starting it here.”
Apple Says China Agent Forged Papers for Underage Workers
in Uncategorized/by MAM TeamJanuary 25, 2013
“Underage labor is a subject no company wants to be associated with, so as a result I don’t believe it gets the attention it deserves, and as a result it doesn’t get fixed like it should,” Jeff Williams, Cupertino, California-based Apple’s senior vice president of operations, said in an interview.
A total of 158 facilities globally lacked proper procedures or didn’t perform adequate audits of their own suppliers, according to the report.
Forged Papers
The investigation found that Shenzhen Quanshun Human Resources Developing Co., a Shenzhen-based labor broker with an office in Henan, had cooperated with families to forge documents allowing the children to get past age-verification procedures, according to Apple. Shenzhen Quanshun’s manager Wu Yong denied involvement with the manufacturer named in the report.
Guangdong Real Faith Pingzhou Electronics Co., which supplied circuit-board components, had its business with Apple terminated after an audit in January last year found underage workers supplied by Shenzhen Quanshun, according to the report. Wan Xiaocheng, deputy general manager at the supplier’s parent Guangdong Real Faith Enterprises Group Co. declined to comment.
“Given the high turnover rate in the factories and the production pressure in the peak season, the factories may not strictly comply with labor laws and the code of conduct,” said Debby Chan, a spokeswoman for Hong Kong-based Students and Scholars Against Corporate Misbehavior.
Apple decided to name the companies to highlight the systemic problem of labor agencies recruiting underage workers, Williams said. The company also is identifying those agents to its suppliers.
“Most companies, they either don’t report on it at all, or they say they look for it and found none, or they obscure the data in some way,” Williams said. “If they’re not finding it, they’re not looking hard enough.”
Apple outlined the findings of 393 audits covering 1.5 million workers in 14 countries. Twenty-eight inspections were surprise visits, it said in the report. The number of inspections in 2012 was up 72 percent from 229 the year before.
The company tracked work hours for 1 million workers, and suppliers boosted the compliance rate for the maximum 60-hour work week to 92 percent from 38 percent in last year’s report. The average work week was less than 50 hours, it said.
Overtime Demand
People falsifying their own documents to gain employment and others seeking excessive overtime hours remain challenges for Foxconn, said Louis Woo, a spokesman for the Taipei-based company. Many employees want to work longer and may leave if they don’t get enough hours, he said.
“If we do not provide sufficient overtime hours, then we become uncompetitive in the marketplace for attracting workers despite the fact that our basic wage is higher,” Woo said.
Apple Chief Executive Officer Tim Cook, who was previously head of operations, helped design the network of suppliers and manufacturers that built the more than 80 million iPhones and 32 million iPads sold in its last fiscal year. The company had profit of almost $42 billion on sales of $156.5 billion last year.
Raw Materials
Apple didn’t disclose information about the source of raw materials for its products. While Apple said it’s taking steps to prevent the use of minerals from “conflict” areas, such as Democratic Republic of Congo, the report doesn’t disclose the sources for any of the four metals tracked by Apple in its supply chain — tin, tungsten, tantalum and gold — nor does it disclose the mines and refineries used by suppliers.
Cook said in an interview with Bloomberg Businessweek in December that “we’re back to the mines. We’re going all the way, not just at the first layer. And in addition to that, we’ve chosen to be incredibly transparent with it.”
Tin is the most widely used metal because it becomes the solder that binds components together in iPads, iPhones and other devices. A Bloomberg Businessweek and Bloomberg News investigation published in August traced solder used by Apple suppliers, including Foxconn Technology Group, and other top electronics manufacturers to Indonesia’s Bangka Island. Tin miners in those areas were found to be buried alive at a rate of almost one a week last year.
To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
Apple Drops Chinese Supplier For Using Underage Labor
in Uncategorized/by MAM TeamJanuary 25, 2013
Apple says it “didn’t stop there.” It said it also discovered that one of the region’s labor agencies had conspired with the manufacturer, providing children to them and helping forge age-verification documents. Apple said in its report that it alerted the provincial government, which fined the agency and suspended its business license.
“The children were returned to their families, and PZ was required to pay expenses to facilitate their successful return,” Apple says in the report.
In an interview with Bloomberg, Apple’s Senior Vice President of Operations, Jeff Williams, said child labor was being used more than companies care to admit. “Most companies, they either don’t report on it at all, or they say they look for it and found none, or they obscure the data in some way,” Williams told Bloomberg. “If they’re not finding it, they’re not looking hard enough.”
ABC News’ Bill Weir visited the factory of Apple’s Foxconn supplier last year and did not see any underage workers. “But while we looked hard for the kind of underage and maimed workers we’ve read so much about, we mostly found people who face their days through soul-crushing boredom and deep fatigue,” Weir wrote about his visit.
In the 37-page Supplier Responsibility Progress Report, which can be viewed here, Apple said there had been a 72 percent increase in facility audits. According to the report, Apple achieved an average of 92 percent compliance with the goal, for now, of a maximum 60-hour work week.
Apple vowed last year to improve working conditions at its manufacturing facilities in China, vowing to work specifically on reducing working hours for Chinese workers. In March 2012, the Fair Labor Association released a report on the poor conditions at Apple’s Foxconn supplier. The organization gave a long list of recommendations to Apple and Foxconn, and both Apple and Foxconn agreed to follow them.
In August, the FLA said that that Foxconn had completed 280 action items on time or ahead of schedule. By July 1, 2013, Foxconn has promised to reduce workers’ hours to 49 hours per week and stabilize pay — though the limit is rarely enforced because workers often want to work overtime and make ends meet.
Apple announced in December that it would begin to make some of its Mac computers in America in 2013. Apple’s stock has fallen over the last week, even though it announced a record number of iPhones and iPads sold in its last quarter.
Onshoring High-tech Manufacturing Jobs Makes Economic Sense
in Uncategorized/by MAM TeamPresident and CEO
SCHOTT North America, Inc.
January, 2013
This isn’t a story about selling more products because they’re “Made in the U.S.A.” It’s a financial equation. Quite simply, it’s becoming economically wise to manufacture in the U.S. But as U.S. businesses bring their manufacturing home, a challenge arises: how to attract and train the next generation of manufacturing employees.
A changing equation
A number of changes over the past 15 years have rewritten manufacturing’s financial equation. Wages in China have increased 500 percent since 2000 and are expected to continue to rise at a rate of 18 percent per year. Oil prices have tripled since 2000, and that jump is reflected in higher shipping costs. More recently, natural gas prices in the U.S. have fallen so far that natural gas in Asia now costs four times as much.
Many companies are increasingly concerned about lack of IP protection in China, which may encourage them to keep manufacturing closer to the vest. Companies are also beginning to understand the hidden costs of separating manufacturing from marketing and engineering. Companies lose time to shipping components and products, or flying management from country to country to oversee production. Potential communication issues can hurt the quality of a product. When manufacturing is outsourced overseas, the time to market hamstrings true innovation. And of course, there’s a human cost — some overseas manufacturing plants have awful working conditions.
The next challenge
All of these factors have made the U.S. a more attractive option for manufacturing in recent years. Higher U.S. worker productivity and more flexible unions are adding to the list of reasons for companies to onshore their manufacturing. On top of the financial equation, many companies — both B2B and B2C — just want to be closer to their customers.
But onshoring jobs will require an investment, both in new assembly lines and new workers. The shift toward electronics and other high-tech products requires different facilities and skill sets than the U.S. employed in its manufacturing heyday. And as a country we need to portray manufacturing as an attractive, stable career. The government and universities are partnering with the industry to offer relevant training and courses for careers in manufacturing. In addition, more companies need to take the initiative to train manufacturing workers. Apprenticeship programs, such as those that have had success in Germany, are one way to attract qualified individuals who may not have thought about going into manufacturing. SCHOTT North America recently initiated an apprenticeship program modeled after the tried and true German apprentice model.
Businesses looking to onshore manufacturing should begin laying out a growth plan for the next five years, including worker training. If more companies do the math on the true cost of manufacturing overseas, the onshoring trend established by GE, Lenovo, and Apple is sure to continue.
If you or someone you know is interested in reshoring your manufacturing business, please check out Harry Moser’s Reshoring Initiative. Their mission is to bring good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess their total cost of offshoring, and shift collective thinking from ‘offshoring is cheaper’ to ‘local reduces the total cost of ownership.’
Is Manufacturing “Cool” Again?
in Uncategorized/by MAM TeamJanuary, 2013
Of course, any manufacturing rebound in the advanced economies will not generate mass employment; but it will create many high-quality jobs. There will be more demand for software programmers, engineers, designers, robotics experts, data analytics specialists, and myriad other professional and service-type positions. In some manufacturing sectors, more such people may be hired than will be added on the factory floor.
Exploding demand in developing economies and a wave of innovation in materials, manufacturing processes, and information technology are driving today’s new possibilities for manufacturing. Even as the share of manufacturing in global GDP has fallen – from about 20% in 1990 to 16% in 2010 – manufacturing companies have made outsize contributions to innovation, funding as much as 70% of private-sector R&D in some countries. From nanotechnologies that make possible new types of microelectronics and medical treatments to additive manufacturing systems (better known as 3D printing), emerging new materials and methods are set to revolutionize how products are designed and made.
But, to become a genuine driver of growth, the new wave of manufacturing technology needs a broad skills base. For example, it will take many highly-trained and creative workers to move 3D printing from an astounding possibility to a practical production tool.
Consider, too, the challenges of the auto industry, which is shifting from conventional, steel-bodied cars with traditional drive trains to lighter, more fuel-efficient vehicles in which electronics are as important as mechanical parts. The Chevrolet Volt has more lines of software code than the Boeing 787. So the car industry needs people fluent in mechanical engineering, battery chemistry, and electronics.
Manufacturing is already an intensive user of “big data” – the use of massive data sets to discover new patterns, perform simulations, and manage complex systems in real-time. Manufacturing stores more data than any other sector – an estimated two exabytes (two quintillion bytes) in 2010. By enabling more sophisticated simulations that discover glitches at an early stage, big data has helped Toyota, Fiat, and Nissan cut the time needed to develop new models by 30-50%.
Manufacturers in many other branches are using big data to monitor the performance of machinery and equipment, fine-tune maintenance routines, and ferret out consumer insights from social-media chatter. But there aren’t enough people with big-data skills. In the United States alone, there is a potential shortfall of 1.5 million data-savvy managers and analysts needed to drive the emerging data revolution in manufacturing.
The shift of manufacturing demand to developing economies also requires new skills. A recent McKinsey survey of multinationals based in the US and Europe found that, on average, these companies derive only 18% of sales from developing economies. But these economies are projected to account for 70% of global sales of manufactured goods (both consumer and industrial products) by 2025. To develop these markets, companies will need talented people, from ethnographers (to understand consumers’ customs and preferences) to engineers (to design products that fit a new definition of value).
Perhaps most important, manufacturing is becoming more “democratic,” and thus more appealing to bright young people with an entrepreneurial bent. Not only has design technology become more accessible, but an extensive virtual infrastructure exists that enables small and medium-size companies to outsource design, manufacturing, and logistics. Large and small companies alike are crowd-sourcing ideas online for new products and actual designs. “Maker spaces” – shared production facilities built around a spirit of open innovation – are proliferating.
And yet, across the board, manufacturing is vulnerable to a potential shortage of high-skill workers. Research by the McKinsey Global Institute finds that the number of college graduates in 2020 will fall 40 million short of what employers around the world need, largely owing to rapidly aging workforces, particularly in Europe, Japan, and China. In some manufacturing sectors, the gaps could be dauntingly large. In the US, workers over the age of 55 make up 40% of the workforce in agricultural chemicals manufacturing and more than one-third of the workforce in ceramics. Some 8% of the members of the National Association of Manufacturers report having trouble filling positions vacated by retirees.
Indeed, when the NAM conducted a survey of high-school students in Indianapolis, Indiana (which is already experiencing a manufacturing revival), the results were alarming: only 3% of students said that they were interested in careers in manufacturing. In response, the NAM launched a program to change students’ attitudes. But not only young people need persuading: surveys of engineers who leave manufacturing for other fields indicate that a lack of career paths and slow advancement cause some to abandon the sector.
Manufacturing superstars such as Germany and South Korea have always attracted the brightest and the best to the sector. But now manufacturers in economies that do not have these countries’ superior track record must figure out how to be talent magnets. Manufacturing’s rising coolness quotient should prove useful, but turning it into a highly sought-after career requires that companies in the sector back up the shiny new image with the right opportunities – and the right rewards.
Made in USA Makes Comeback as a Marketing Tool
in Uncategorized/by MAM TeamJanuary 21, 2013
It’s working: Over 80% of Americans are willing to pay more for Made-in-USA products, 93% of whom say it’s because they want to keep jobs in the USA, according to a survey released in November by Boston Consulting Group. In ultra-partisan times, it’s one of the few issues both Democrats and Republicans agree on.
When considering similar products made in the U.S. vs. China, the average American is willing to pay up to 60% more for U.S.-made wooden baby toys, 30% more for U.S.-made mobile phones and 19% more for U.S.-made gas ranges, the survey says.
Now Wal-Mart wants a piece of the action. The behemoth, embroiled over the past year with worker protests and foreign bribery investigations, pledged recently to source $50 billion of products in the U.S. over the next 10 years, says Wal-Mart spokesman Randy Hargrove. They’re not alone. Mendoza says both Caterpillar and 3M have also made efforts to source more in the U.S.
“Regardless if this is a PR ploy or not, it doesn’t matter. A lot more people will look for the Made-in-USA tag,” she says, adding that, considering Wal-Mart’s size, $5 billion a year is only “a drop in the bucket,” for the retailer whose 2012 sales reached almost $444 billion.
Kyle Rancourt says his American-made shoe company, Rancourt & Co., hit it big as concern over U.S. jobs mounted when the recession hit in 2009. But he says he lies awake at night worrying if Made-in-USA is just a passing fad.
“It’s inevitable that times will change,” Rancourt says. “But I am still holding out hope that this has become a core value of our country.”
Mendoza says that if buying American turns out to be a passing fad, the country is in trouble.
“If they don’t understand the economic factor, we need to pull on their heartstrings,” she says. “The thought of having a country like China taking over, that alone is bone-chilling.”
But do folks care enough about U.S. manufacturing jobs to permanently change the way they shop? David Aaker, vice chairman of brand consulting firm Prophet, says the companies that get the most credit for being American, such as Apple and Cisco, don’t even source products in the U.S.
“I don’t think it matters unless it becomes visible,” Aaker says. “The most common way for that is if something bad happens, like if Nike gets some press about conditions in factories overseas.”
But Rancourt says his customers believe foreign-made shoes lack the soul of their American counterparts.
“There’s hundreds if not thousands of workers working on those factories. They do one specific job, maybe put an eyelet into a specific place,” he says. “They don’t have an idea or concept of a finished product and how that should look.”
Just watch out for phony Made-in-USA claims. It’s illegal to claim a product is U.S.-made unless both the product and all it’s components are sourced in the U.S. Even products that could imply a phony country of origin with a flag or country outline are verboten. Julia Solomon Ensor, enforcement lawyer at the Federal Trade Commission, says the FTC gets “several complaints each month about potentially deceptive ‘Made-in-the-USA’ claims.”
It sets a bad example. Mendoza says the U.S. needs to let kids know it’s OK to work in manufacturing. “Not all children are going to grow up to be dentists, and lawyers, and investment bankers.”
For offshored Jobs to Return, Rich Countries Must Prove That They Have What it Takes
in Uncategorized/by MAM TeamMr Blinder of Princeton University was among the most prominent economists to give early warning about the impact of sending services abroad. In an article in Foreign Affairs in 2006 he said that up to 42m American services jobs could eventually be lost; the shift could add up to a third industrial revolution.
It has now become clear that the worst fears have not been realised. Nobody knows exactly what offshoring has done to American employment since 2006, but estimates by specialist consulting firms such as the Hackett Group, based on confidential data from corporate clients, come up with relatively low figures. According to Hackett, the net number of business-services jobs in big American and European companies lost between 2002 and 2016 is likely to be around 3.7m, and only 2.1m of those will have been due to offshoring. That works out at a loss from that cause of just 150,000 jobs a year. .
The firm’s current estimate of how much has been lost and what is still to come is much closer to a forecast by Forrester Research back in 2004 that 3.4m American services jobs would move offshore by 2015, or about 300,000 jobs a year. McKinsey has also been far more sanguine than Mr Blinder; it said in 2006 that 11% of service jobs around the world could in theory be carried out “remotely”. In practice, it thought, only about 650,000 jobs a year would be affected. So far the optimists have been proved right.
The number one job-killer in America in recent years has been the recession, says Mr Blinder: “Only a trivial percentage of jobs has been claimed by offshoring.” He thinks that the move to reshore some manufacturing jobs is important, even though the scale of it is still small, but that a wave of services offshoring could yet hit Western countries. The main reason is advances in information and communications technology that could allow more and more senior and skilled jobs to be sent abroad. But it would take big cost savings to justify having such sophisticated, “high-touch” services done at a distance, and those savings are gradually disappearing, as this report has shown. Pay for highly skilled, English-speaking workers in developing countries who could offer such services is rising rapidly. And companies are becoming increasingly concerned that offshoring services may do longer-term damage.
The best argument for locating activities overseas nowadays is to be close to fast-growing new markets, and it will only become stronger. McKinsey estimates that by 2025 developing economies will account for nearly 70% of demand for manufactured goods. Whereas in the past firms treated such markets as sources of cheap labour, they are now looking for a deep local presence. ABB, for instance, has gone from having what it calls a “cost arbitrage” strategy for countries such as China to taking an “in country for country” approach, meaning that it wants not only manufacturing but also functions such as product management and R&D to be based there.
Strong growth in emerging countries will also prompt their own new multinationals to set themselves up as “local” in the West. The Rhodium Group, a consulting firm, says that Chinese investment in America has already created nearly 30,000 jobs there, and that by the end of the decade Chinese firms will employ up to 400,000 Americans.
Will reshoring and the move of emerging-country multinationals into Western markets generate lots of new jobs in the rich world? The Boston Consulting Group thinks that reshoring alone could generate 2m-3m jobs in manufacturing by 2020, up to 1m of which would come direct from factory work and the rest from support services such as construction, transport and retail.
A trickle, not a flood
But it is important not to overestimate the impact of reshoring on jobs. Manufacturing work will often come back only when it has been partly automated, so the number of jobs returning will be smaller than the number lost in the first place. Most companies that have recently built new facilities or expanded existing ones in America have brought in more automation, says BCG’s Mr Sirkin. NatLabs, for instance, a Florida-based manufacturer of dental implants, reshored much of its production from China because it was able to automate a large part of it. The best that can be hoped for, says Michel Janssen of Hackett, is not that millions of high-paying jobs will return and things will be as they were before, but that “the leak of jobs out of America will be largely stopped.”
Companies are becoming more sceptical about short-term enticements, and governments would do much better to work on the most useful and durable sort of incentive: the business environment they offer. In recent years policymakers have been able to point to the global labour arbitrage as the obvious and overwhelming reason why firms offshore. When Harvard Business School surveyed companies that were moving activities outside America, it found that lower wage rates were the main attraction for 70% of them. But a third also said that they were moving out to get better access to skilled labour.
As the gap in worldwide wage rates narrows further, it will become more obvious that other factors, such as skills, labour law, clusters of industries, infrastructure, tax and regulation are playing an ever more important role when companies decide wh
ere to
put their production. Now that many firms are taking another look at their outsourcing and offshoring policies, governments need to give them every reason to come back. “If companies are offshoring because of fixable policy problems at home,” says Mr Porter, “that is unforgivable.”
Can’t get the staff
In a recent report on global manufacturing, McKinsey said that in the near future the world is likely to have too few high-skilled workers and not enough jobs for low-skilled workers. Companies’ decisions on where to locate will increasingly be driven by where they can find the skilled workers they need. In 2011 a survey of 2,000 American companies found that 43% of manufacturing firms took longer than six months to fill some of their vacancies. The United States has a particular problem because it is producing too few college graduates and too many high-school dropouts. In Japan, four-fifths of companies have problems finding technicians and engineers. As a result, many firms will be unable to reshore because they cannot find workers with the right skills.
Another big problem is labour flexibility, which still varies greatly from country to country. In Britain, says Hans Leentjes, president for northern Europe at Manpower, an employee can be fired by following due process and paying a week’s severance money for each year worked. In Germany, by contrast, companies have to negotiate a settlement and pay between one and two months’ salary for each year worked. The German employee can still go to court and the company may have to reinstate him. “In a global economy where firms can go where they want, these differences have an effect,” says Mr Leentjes.
There are signs that labour in rich countries is becoming more flexible at the same time as workers in Asia are slowly acquiring more rights. Multinationals now recognise America’s low-cost, flexible workforce as an important attraction. Spurred by the euro crisis, Spain and Italy have both introduced big labour-market reforms. Another sign of the times is that Western carworkers are willing to work night shifts again. In August last year Jaguar Land Rover, owned by Tata, announced the return of night shifts at its factory near Liverpool, and the Big Three American carmakers are increasingly working around the clock. At the same time carworkers in South Korea, once the sort of hard-working, poorly paid competition feared in the West, succeeded in abolishing night shifts at Hyundai and Kia, two big firms.
But it is probably only in America and Britain that labour is flexible enough to have a good chance of persuading companies to reshore production. At the other extreme sits France, where Arnaud Montebourg, the minister appointed to rebuild his country’s industry, late last year told Lakshmi Mittal, an Indian steel tycoon, that he was not wanted in France after his struggling company, ArcelorMittal, tried to shut down blast furnaces.
Agencies providing temporary staff, such as Manpower, play their part, allowing firms to treat workers as a flexible resource not a fixed cost. It is no accident that Manpower’s biggest market is France. In Japan the labour market is also rigid. Back in 2007 Fujio Mitarai, chief executive of Canon, a maker of optical products, said that temporary agencies had helped manufacturing firms avoid the “hollowing out” of industry. But now the government has restricted the use of temporary workers. Along with the appreciation of the yen, that is prompting more offshoring by Japanese firms, says Manpower’s Hiroyuki Izutsu.
Lenovo’s North Carolina headquarters, inherited from IBM, sits at the heart of the state’s Research Triangle Park, a regional cluster of universities and hi-tech businesses. It is an example of the sort of business ecosystem that is capable of drawing corporate investment from around the world. The area boasts competitive costs, highly skilled workers, a close partnership with local universities and a business-friendly environment. Unlike Dell, Lenovo is taking no money at all from the state government for starting to manufacture at Whitsett.
Internally the firm’s factories compete hard with each other on cost, productivity and quality. It will quickly become clear if “Made in America” is a luxury or whether it creates sustained value for the Chinese firm. Tony Pulice, the firm’s factory manager in North Carolina, is ready to show what his country can do.
787 Grounding Puts Boeing’s Outsourcing in Focus
in Uncategorized/by MAM TeamParts came into Boeing’s Seattle, Washington and Charleston, South Carolina assembly plants from 135 other sites and 50 suppliers.
Those include Japan’s GS Yuasa, which made the batteries linked to at least two of the problems that led to the grounding this week, and France’s Thales, which assembled the batteries for delivery to Boeing.
No other aircraft around the world is put together from so many disparately-sourced pieces.
Fifty per cent of the Dreamliner is made from composite materials, including much of the fuselage and wings, which come from manufacturers in Japan, Italy, South Korea, the United States and elsewhere.
Some 70 per cent of the plane is outsourced, said Richard Tortoriello, an analyst at Standard and Poor’s.
“That creates a potential for more problems to occur than if production is centralized, because quality control can be better managed” in a centralized process, he said.
Tortoriello said the outsourcing strategy was partly to blame for the delays in delivering the first planes, which entered service in October 2011.
But he emphasised that so far there was “no indication” that the approach was behind the problems that began to surface two weeks ago among Japanese operators of the 787.
These include a tarmac fuel leak in a 787 and battery fires in two others, which led the US Federal Aviation Administration to ground the plane Wednesday, effectively taking it out of business globally.
Hans Weber, an independent security and defence expert, said Boeing had been too optimistic about its strategy.
“Boeing has admitted that it underestimated the level of management oversight and engineering support it needed to provide to its suppliers to make the highly distributed supply chain work,” he told AFP.
“If Boeing had done a better job at that, it would not have experienced the technical problems it has, in my opinion.”
He added: “I think the technologies on the 787 are sound, but the execution of the program could have been better.”
Since the 787 program kicked off in 2004, it has been dogged by numerous problems that delayed its first delivery, to Japan’s ANA, by three and a half years.
Michael Boyd, an independent aeronautical industry analyst, said the production system was not the 787’s problem.
Rather, “it’s the batteries — the quality control would have been the same” whatever the production strategy, he said.
A Boeing spokesperson told AFP that, for the moment, there has been no slowdown of production.
One of the largest industrial groups in the United States, Boeing currently completes about five aircraft a month and aims to reach a pace of 10 a month by the end of this year.
Tortoriello said he thought the new problem would slow 787 turnout.
“Given the amount of thought that went into the current battery system, we think a fix may take some time to develop and implement, and expect this focus will likely slow production,” he said.
“We continue to have confidence in BA’s engineering staff, see other issues with the 787 as non-critical, and view its value proposition to customers as high.”