(What’s Left of) Our Economy: Major Pillar of Manufacturing Renaissance Claims Crumbles

This is a syndicated repost courtesy of RealityChek. To view original, click here.

The list of cheerleaders who have touted a phony U.S. manufacturing renaissance ranges from President Obama to the Boston Consulting Group to countless reporters who have parroted their largely fact-free claims. High on this list from nearly the start has been freelance journalist Charles Fishman, who published a lengthy cover story in The Atlantic’s December, 2012 issue boldly proclaiming the start of an “Insourcing Boom.”

Fishman’s distinctive contribution to Manufacturing Mania was his exhaustive look at General Electric’s decision to revitalize its Home Appliances and Lighting division, and in particular, the enormous appliance production complex the company had long maintained in “Appliance Park” in Louisville, Kentucky.

GE had tried to sell the unit in 2008 but found no takers (at an acceptable price, of course). So according to Fishman, the company decided to make chicken salad out of – well, you know – and within years, the results were nothing less than miraculous. In GE’s investment in the first new Louisville assembly lines in decades – including for products whose production was brought back from China – in ingenious process improvements he exhaustively described, and in favorable overseas trends like rising labor costs in China, Fishman saw evidence that much broader, long-time economy-wide trends encouraging manufacturing offshoring were coming to an end. Replacing them was nothing less than an historic industrial “renaissance” that was already “under way.”

The Atlantic was nice enough to run on its website a response of mine, documenting the abundance of statistics making clear that domestic industry was experiencing nothing more than a nice cyclical rebound from an horrific recession. But the renaissance claims have continued almost unabated.

How surprised its readers must have been, then, to see last week’s news that GE was again moving (quietly) to sell Appliances and Lighting. Although GE CEO Geoffrey Immelt invested $1 billion in reviving the division, Bloomberg News pegged the likely selling price at $1.5 to $2.5 billion. Of course, appliance production is likely to continue, at least for a while, in Appliance Park no matter who buys it. But the Bloomberg piece reminded that the sale was “part of a greater strategy to exit businesses where the company is not a leader or poised for growth.” In other words, GE’s new, supposedly revolutionary white goods factories weren’t meeting that standard, and indeed Bloomberg cited industry data showing that the conglomerate trailed Whirlpool and Electrolux in U.S. market share.

Fishman deserves credit for being smart enough to write near the end of his piece that “It’s possible that five years from now, everything will have unraveled—that the return of factory jobs will have been a temporary blip, that Appliance Park will be closed. (Business practices, after all, are prone to fads.)” The company’s reported decision to bring its Louisville experiment to an end – barely two years after Fishman’s breathless account of “a wave of fresh innovation…inspiring further, faster advances—shows that his qualifier was the only reality-grounded point Fishman made.

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