Political  Calculations
Recommend this article

The March 2012 edition of the Harvard Business Review is featuring an article by General Electric's CEO, Jeffrey Immelt, a man we've previously described as someone who "couldn't compete his way out of a wet paper bag."

Immelt, who also heads President Obama's Council on Jobs and Competitiveness, writes on "Sparking an American Manufacturing Renewal". In that article, he points to GE Appliances as an example for the broken paradigm of offshoring work to foreign countries when it might otherwise make more sense to stay in the U.S. (HT: Mark Perry):

One thing is clear: Outsourcing that is based only on labor costs is yesterday's model.

Today at GE we are outsourcing less and producing more in the U.S. We created more than 7,000 American manufacturing jobs in 2010 and 2011. Our success on the factory floor rests on human innovation and technical innovation – the keys to leading an American manufacturing renewal. When we are deciding where to manufacture, we ask, "Will our people and technology in the U.S. provide us with a competitive advantage?" Increasingly, the answer is yes.

Engineering are hands-on and iterative, and our most innovative appliance-design work is one in the United States. At a time when speed to market is everything, separating design and development from manufacturing didn't make sense.

Complex trade-offs have always been involved in location decisions, but as these trade-offs have shifted, around 2008, we came to the conclusion that outsourcing was quickly becoming mostly outdated as a business model for GE Appliances.

It's funny that he uses GE Appliances for his example, because that division of the company also provides a unique example of how dependent the entire company has become upon federal government's mandates, protections and subsidies for its revenue.

Recommend this article

Political Calculations

Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.

Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.

TOWNHALL FINANCE DAILY

Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!