Manufacturing Monday: Strike at Boeing, Dell to sell plants, and Solar Arabia,

(8 am. – promoted by ek hornbeck)

Greetings everyone, I hope your weekend was fantastic.  Welcome to another edition of Manufacturing Monday!  Some exciting and interesting stuff to cover this week.  First the big time strike happening at Boeing. Then theres computer maker Dell looking to sell of ALL of it’s factories, and finally could Saudi Arabia claim to be Mecca of solar energy beside crude oil??  

Dreamliner turning out to be a nightmare for Boeing and it’s workers

Honestly, Boeing should have seen this coming.  Well, in case you weren’t aware, the machinists at Boeing went on strike over the weekend.  The raison d’etre for calling the move?  Outsourcing of work, or basically job security was the main issue.  

Nearly 27,000 machinists walked off the job at 12:01 a.m. Saturday after last-ditch talks for a new three-year contract failed. While wages and health-care costs are big issues, job security has emerged as perhaps the most crucial one, with both sides signaling that the new contract represents a major crossroads.

Boeing says it needs flexibility in its manufacturing to avoid the problems that have befallen other big industrial companies, while the union is fighting to keep as many jobs as possible.

– excerpt from “Outsourcing at Crux of Boeing Strike“, WSJ.com, 2008.

Tensions had been mounting between the Machinists Union and Boeing for some time now.  In 2002, intense negotiations lead to a crappy contract for the workers.  One point in particular, that was a stab in the eye, was the allowance of non-Union work to be delivered to the plants.  All this was part of the aviation company’s long-term goals of streamlining (that is cutting costs) production.  There was some investment in the plants, but much of the grand design was to have it mostly made outside the company and then quickly assembled.

You see, on paper, Boeing’s plans looked good.  Well, OK, good for the accountants.  The aerospace giant was looking to spread out the costs by shifting as much of the parts to companies other than Boeing. Now in Boeing’s Quixotic quest to cut costs, they went to suppliers all over the world, from Japan to Italy to well..you get the picture.  Each of these companies was to either produce a part that would go into the Dreamliner, or produce a part that would go into a part.  Boeing was thinking it was mimicking the automakers, or at least taking this Just-in-Time manufacturing to aerospace.

Problem was, when you rely on so many outside suppliers to provide so much crucial components, you’re asking for trouble.  A hiccup from one supplier could cause the whole thing to stall.  Whose to say that the Italian supplier won’t face labor problems?  Or that if the price of shipping suddenly skyrockets, Boeing is facing more increased costs?  They thought they were taking advantage of globalization, but in reality, they were merely taking on more risk.  

This is what has happened.  Suppliers, mainly from overseas, have not been able to deliver the parts in time.  Customers are demanding their planes, so Boeing is then forced to have their machinists build these parts and put them in the plane.  For the union, who had been warning the company that this could happen, this was the last straw.

Could you really blame them for striking?  Now a conservative friend of mine was telling me that the workers should be expected to make the part anyways.  This is not logical, because often when such a situation arises, the work is handed to the machinists in the last minute. Work schedules have to be reorganized and work has to be completed that was not agreed to via the union contract.  

It would be as if I worked in your bakery, and we had a contractual agreement that I would only be making cakes.  Now all of a sudden, you come to me and say “Venom, I need you to make chocolate bars in addition to cakes, so I’m going to have to ask you to stay longer.”  On the outset, I’d be making more money with the longer hours, but that wasn’t the deal.  In addition to this, you can’t just throw this on me without notice and secondly how do I know when I’m done making chocolate bars, that you won’t take that or the cake making gig away from me?  OK, I grant you, this ain’t a great example, but it’s the only one I could think of at the moment.

The Machinists Union has been proclaiming that it’s workers could do the jobs that Boeing was handing off to suppliers.  They’ve got the trained workforce, and such.   Yet, Boeing, looking to cut costs, said no but if the company felt like it they may…just may get to do other parts work.  Well, as employees, this was unacceptable.  

Folks demand some certainty on their jobs, they cant’ come in one day and be told “sorry, we don’t want you doing this anymore, but maybe tomorrow or the day after you will.” This is where the issue of job security comes in.  Because when you outsource much of the work, you make a lot of folks redundant. Employees want some sort of guarantees.

Outsourcing may sound great, it can cut costs, but it can also backfire.  I can see why Boeing is doing this, as it’s main competitor is Airbus, which gets state help.  They may deny it, but it’s been proved time and time again.  Why?  Because those countries know the value of the work that could be outsourced.  Look, I’ve been saying for a while now, that America may be playing by the rules for globalization but other nations have not.  From auto companies like Toyota to pharmaceuticals, I mean you name it, in other countries they get some sort of help.  Sure this all flies in the face of WTO rules, but really it only seems that America gets punished.  

We need to keep work, that the Machinists Union is fighting for, here in this country.  These are critical components, and in many cases dual-use, meaning they could have military applications.  Oh alright, I’m sure cushioned seats and tray holders can’t be used to bomb cities, but that’s not what I’m talking about.  You see, it starts with components, but then eventually it could be the whole product.  This is one of the biggest fears that the Machinists Union has, that the whole plane could be made by another company.  This has happened time and time again, as we will cover, Dell is now looking to NOT make computers anymore.  Yes, laptops and 747s are two different products, but is it really all that different in the bigger picture?

Dude…you’re getting…outsourced!

Many years ago, here in the Chicago area, we used to get two ads from Dell Computers.  The first was this dorky one where this reject from Bill & Ted’s Excellent adventure used to go spazo when someone he knew got a Dell.  Another ad, not a television one but a paper and radio one, at the time was one highlighting the company’s Texas roots.  Basically, that the computer you ordered was supposedly custom made right there in the Lone Star state.  Back in 2001, while on a driving trip with my old man (he thought he was dying) who wanted to “see the country”, we passed by Dell’s places in Texas.  Looked big and fancy at the time, trucks and folks coming in and out.

Well, now it seems Dell doesn’t want to be in the computer-building business.  Oh, they want to sell you a PC, they just want someone else to make it.  They are following other computer makers like IBM, Apple, and others, who have shifted much or all of their manufacturing to a contractor.  Often, these have been Asian contract fabricators like Foxxconn in China.

This is sad really, another industry lost to wage arbing.  Dell’s in a precarious situation, as it’s competing in a commodity business now.  Supposedly they will continue to design newer models, but really who is to say that as well wouldn’t be outsourced?  Dell hasn’t been going like gangbusters like it had in the 1990s and early 2000s.  

The PC industry, as previously mentioned, is shifting into a commodity product.  A computer company really has to design their machines into a truly unique matter to stand out.  Walk into any big box story, or peruse the net and one will see that they are all almost standardized.  So maybe this is what Dell has to do to survive.

Yet, as the Wall Street Journal noted, Dell may encounter some problems getting rid of those plants.  In many places, states hungry for jobs made deals with the Round Rock company, a new owner may find it difficult to close down such factories.  That’s the fear of many working at these facilities.  A contractor looking to get Dell’s business may take on those factories, but really there is nothing to stop to the new owners from shutting them down and producing the remaining future stocks in places like China.  

A Dell spokesman asked to comment referred to a company filing with the Securities and Exchange Commission earlier this year that said Dell is “continuing to expand our use of original design manufacturing partnerships and manufacturing outsourcing relationships.”

Dell could face several obstacles to selling its plants. Contract manufacturers may be hesitant to buy factories in places with high labor costs, like the U.S., said one person with knowledge of the talks. And some facilities could be encumbered by agreements with local governments. Dell’s North Carolina plant, for example, received several million dollars of state and local tax incentives that are contingent on the factory meeting certain employment and local-investment goals by 2015.

– excerpt from “Dell Plans to Sell Factories“, WSJ.com, 2008

When I was working at my old alma matter, I noticed that virtually all of the new Dells that came in were made in China.  Now I don’t personally own a Dell (built my own machine), but friends have told me that tech support seems to be coming from India or the Philippines. Nothing against those folks over there, I’m sure they need the work.  Just noting how this “American” PC company isn’t so special and just like every other multinational.  Nothing new here, folks, just this company moving to the next phase of offshoring I guess.

From Oil Shieks to Solar Shieks

When many think of Saudi Arabia, often oil comes into mind.  Everyone knows that Saudi Arabia is the biggest player in petroleum holdings.  Sure their wells are beginning to go, but they still export the hell out of what they got.

Well, it seems now they may be in position to do for solar energy what they did for oil.  According Forbes magazine, it turns out that geography has given the region a second wack at eco-related wealth.  Man, what luck, I say.

Sitting in the center of the so-called Sun Belt, the country is part of a vast, rainless region reaching from the western edge of North Africa to the eastern edge of Central Asia that boasts the best solar energy resources on Earth. With the cost of oil skyrocketing, this belt is attracting the attention of a growing number of European leaders, who are embracing an ambitious proposal to harvest this solar energy for their nations.

– excerpt from “The Saudi Arabia Of Solar Energy“, Forbes.com, 2008.

Don’t think this has escaped notice over there.  There is already plans and designs to take advantage of this.  Now I’m not sure what the state of transmission technology regarding solar energy is.  But I’m sure with enough money, that something will be developed.  There is already an organization being setup, as Forbes reports, called Trans-Mediterranian Renewable Energy Cooporation (TREC).  These folks want to build solar energy farms across the desert and design and setup a souped up electrical grid to transmission the product across the region.  And as technology improves, perhaps Europe, Africa and parts of Asia.

Recently, Fareed Zakaria had Thomas Friedman on his show this past weekend.  Friedman has a new book about green manufacturing.  Anyways, Friedman proclaimed that whomever managed to get alternative energies like this solved and came up with a viable way of transmitting it first, would be in a very enviable position.  Now I don’t care for his pro-free trade stuff, but the man has a point here.  Whomever gets to providing a stable supply of alternative energy at an affordable price could be in a similar situation as say Saudi Arabia.

Should TREC be able to do what they are planning on, do we really need an alternative energy version of OPEC?  Environmentalists have been screaming for years that the ball is in our court here and that it can be done without harming the Earth.  National security folks have been echoeing similar thoughts, but focusing on the fact that the country needs its own secured supply of energy.  Well, the Saudis or some solar-OPEC can’t embargo the Sun on us, but if we rely on them for transmission, then they got us again.

The US, it doesn’t have to be said, needed to take the lead on this along time ago.  This is why I have no faith in the Drill Drill Drill crowd.  From everything they have said, despite hossanas about alternative energy, their commitment is about as strong as building made of twigs in a wind storm.  I could see Barack Obama administration (ahhh…just saying that feels good!) promoting a domestic solar energy transmission system. But John McCain or Sarah Palin?  Oh please, not unless the damn thing was owned by EXXON!  Folks, we can’t let history repeat itself!  

^{Cross posted on The Economic Populist – A Community Site for Economics Freaks and Geeks}