Outsourcing can increase the profit margin on a vehicle that the car companies receive when they set the msrp.
So for a car that costs theoretically 10k at the dealership, every penny counts towards reducing the price of assembling it. Buy low , sell high.
Declan
I assume that the meme is that companies have an obligation to maximize returns for shareholders.
I would phrase this differently. The company has an ultimate obligation to the shareholders, since they own it, the company is merely an extension of the shareholders’ wishes. The shareholders elect a board of directors to be their representatives in making major decisions and selecting the high level corporate officers. If the company fails to meet expectations (of whatever kind) the board can be ousted at the next election.
The board has a duty to make good faith decisions that are in the best interest of the company, and by extension, the shareholders who elected them.
But, you’re looking for hard evidence, so let me give you the words of Paul Atkins on the role of the director to the Corporate Director’s Forum
How many of those lawsuits were brought as a result of the company investing in good labor relations when the stockholders wanted cutthroat labor practices? I agree that there have been stockholder revolts and that they are bloody and, ultimately, destructive. However, the ones that I have seen up close and personal had more to do with stockholders being upset at the level (too high or too low) of acquisitions (“you’re spending to much and bloating the company” vs “you’re not growing the company fast enough”) and an amazing number of “stockholder” revolts have been little more than personal feuds between primary stockholders and corporate officers. (In one case, all the nephews and nieces of the founders did not think the company’s stock price was rising fast enough on the 1986 stock bubble and demanded the company be sold so they could cash in.)
Were any of the suits you read about brought over outsourcing?
Our system that judges management and rewards them on a yearly basis is flawed. It makes it very difficult for corporations to invest in long term goals. It has also resulted in book keeping creativity to pad the bottom line. Huge salaries and bonuses have made it profitable to cheat .
The old story that Ford helped create the middle class thereby making it possible for employees to purchase their own product ,now falls on deaf ears. If outsourcing will have a serious ill effect on our overall economic future is not even a factor any more. Short term profits and huge bonuses have the seeds of our financial destruction in them.
I’ll have to go back and dig it out of storage (my basement), but I’m pretty sure that there was at least one about outsourcing. It involved an oil company and the means to use some kind of process or consultant overseas rather than the more expensive one back home. It’s actually amazing what people sue over. These business suits get pretty tricky and judges all the time make rulings which are narrowly defined, allowing for similar suits to come to bear even though similar ones have been adjudicated already. However, the notion of a shareholder suit is black letter law already (as you no doubt already know, but it wasn’t a settled concept for quite some time). Cheesesteak’s post gives the primary basis for a shareholder suit to be entertained. As you can see, the threshold isn’t very great. I don’t have much experience dealing with shareholder suits, but even corporations are subject to frivolous suits, the same as any real person.
I worked for seven years for a company that outsourced technical support for some of the biggest names in the high tech industries. We were never unionized. We got the contract simply because the client didn’t want to bother with tech or customer support.
I think the OP is making an error that’s common these days: Confusing “outsourcing” with “offshoring.” If I agree to build motors for GM to install in their cars, they’re outsourcing that to me, even if I build the factory in Nebraska. In that case I’ll still have to adhere to U.S. labor laws as they pertain to unionization. Only if I build the motors in a factory in Thailand or Mexico do I avoid the U.S. labor laws and (probably) enjoy lower labor costs. But, of course, the motors still have to meet U.S. manufacturing standards (emissions and so on.) So in this sense the unions aren’t responsible for outsourcing. Offshoring, on the other hand, might be another matter.
But I agree that unions are less responsible for that (if at all) than a variety of other factors. The non-union company I worked for paid most of its floor technicians (the production workers of the industry) nearly twice the minimum wage in order to attract people who would do that work. Even if we had been paid minimum wage, we’d have made more than the technicians in India, Costa Rica or Philippines, where the company took most of its technical support several years ago. Let’s face it, $10 an hour isn’t a huge wage, and yet we still couldn’t keep those jobs in the U.S. because we were a publicly owned company and the shareholders demanded a better profit margin. When I worked for the company I bought a bunch of its stock and, frankly, was disappointed in the stock’s performance.
'Tain’t an easy problem to solve.
if you look at the poverty level in the ne, it takes a family of 3 $35k according to COAH
we’ve lost the middle class due corp greed
And we should also note that so-called Made in the USA cars typically have many subassemblies made outside the US. You only need 75% of the parts to be of US origin and for the car to be assembled in the US to claim “Made in the USA”.
It is not always about getting “cozy.” Several significant SCOTUS decisions after 1980 have made it much easier for corporations to bust unions, fire strikers, and otherwise laugh at the notion of collective bargaining. It is not a corporate world, but the unions are much closer in status to the current Democrats in Congress who hold tenuous majorities, but who have far too little power to override vetoes. The unions look like they could strike at will, but the reality is quite different.
Still, it is, within living memory, a new thing here. After WWII the U.S. emerged as the world’s leading industrial power the same way it emerged as the leading military power – all the others had been devastated. This meant the whole non-Communist world was a captive market for American manufactures – which had to be made here, for reasons very obvious at the time. Industrial workers got solidly middle-class wages, benefits and status – a new thing, here and everywhere else. That lasted throughout the '50s and '60s, and an economy and society based on an abundance of low-skill, high-paid manufacturing jobs came to be perceived as the natural order of things. Then in the '70s we had to adjust to the oil shocks and an international economy where “Made in Japan” was no longer a synonym for “shoddy” – and then the '80s and '90s when globalization proceeded apace as improved transportation and communication technologies made it more practical for American companies to move operations to foreign countries employing foreign labor. And now here we are.
A good source on the above history is The Work of Nations, by Robert Reich, an economist who served as Clinton’s Secretary of Labor but eventually quit in frustration.
I’m well aware of that history, and I’ve posted the same thing here many times.
That doesn’t alter the fact that outsourcing and offshoring are not new. And as transportation costs start to increase, as they have already, it will make less sense to import certain items from long distances. Who knows what the next 20 years might bring if oil doubles or triples in price or if climate change finally forces the US to tax carbon emissions heavily. But trying to keep low wage jobs in the US just for the sake of keeping those jobs here is a losing proposition.
The real problem isn’t the commitment from employees - its the commitment from consumers. You can spend $40 on something manufactured in the U.S., or get something of similar quality for $30 manufactured in Korea. (Or you can buy Chinese toothpaste and get what you pay for). How many people “look for the Union label” or prefer things “made in the U.S.A.” - Not enough.
If I make my widgets in the U.S. and the labor cost means I have to price my product 20% higher than my competition, who makes his in Mexico, I won’t HAVE a business to employ anyone for very long. If I move my manufacturing to Mexico, I can continue to compete with him - and I continue to employ the accountants and marketers and sales staff and product development teams I didn’t outsource - and maybe be around to grow my business.
WalMart has proven time and time again that people will fight WalMart because they want a vital small business community - but if WalMart moves in - the majority of people in the community shop WalMart for low low prices and don’t give a damn about putting the locally owned hardware store out of business. I think there have been exceptions, communities where WalMart hasn’t been successful, but usually, consumer greed wins out.
…and that was what? 
I believe my comment was made in response to the assertion that it was the consumer’s demand for cheap goods that caused the outsourcing trend. As a current car shopper, I was simply asking to see the proof of the supposed result (and adding the rolling eyes as my commentary of the unlikely ability to see said proof). If the assertion is correct, there should be lower priced vehicles, not higher margins.
**High-**wage jobs, John. That’s the whole point, and you would see it if you held one that was threatened by outsourcing.
Makes no difference, really.
My whole industry could be outsourced, let alone my individual job. There are very few jobs that couldn’t be.
You keep saying that as if it were an established fact, John, but I’ve researched the question in popular economics texts at the library, and I can’t find anything that clearly supports it. The consensus seems to be that protectionism helps some economic sectors at the expense of others, but whether it is good or bad for a national economy as a whole varies with time and circumstances.
The abolition of all tarrifs and import controls by the neocon Coalition Provisional Authority in Iraq has devastated both the industrial and agricultural sectors there, according to Greg Palast. Not that they wouldn’t have been hurting anyway, under the circumstances.
Does it take more than 90% to form a consensus? How about almost universal?
Emphasis added.
And please, would you stop the silly “my thread is my cite” argument? Especially when it’s a thread that had only 10 posts in it, 5 of them yours.
I was going to say ‘It IS an established fact BG’, but John already did that. So, in the name of fairness (and because its a slow day for me and I need a distraction from the pain), could you provide a cite from a source other than a previous thread showing that there is some consensus among economists backing up your statement? BTW, as with a lot of things there IS a kernel of truth in what you say…if you close one eye and look at it a certain way. Let me restate part of what you said to make it true: There is general agreement that protectionism would help those industries being protected while hurting both consumers (by driving up prices) and other industries. In general, most economists consider this a BAD thing…while there is certainly a consensus among those who in the industries being protected that its certainly nice being sheltered from the harsh, cruel world of competition.
There…thats cleaned it up a bit. Now, how about that cite?
-XT
How long do you think it’s going to take for BG to start a thread: Is there consensus among economists that free trade is good for the economy?