Insourcing Sees Growing Trend (CAT, GE)
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Price: $889.31 -0.07%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.7%
EPS Growth %: +31.1%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 0.7%
EPS Growth %: +31.1%
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In a growing trend of manufacturing companies bringing operations back to the U.S., Caterpillar Inc. (NYSE: CAT) is reportedly considering relocating some of its heavy-equipment production from overseas back to the states.
This shift in company mindset for the manufacturing will like initiate serious competition among states in the U.S. for the new jobs that factories would create.
The trend is a direct correlation to the weak U.S. dollar, as it makes it more expensive for companies to import products from overseas.
Other incentives to bring factories back to the U.S. include possible future job creation incentives that will likely intrigue employers, as well as the negotiating power with U.S. suppliers that have been hurt by the economic downturn making them more likely to bargain.
"It's really a long-term look at where we think this market and this product is going globally and how can we best get ourselves positioned," said Caterpillar spokesman Jim Dugan when speaking about the company’s plans to meet the demand in the U.S., while also taking into consideration the impact of the weak dollar on offshore manufacturing.
Over the last decade that saw companies expand globally at rapid pace, economists say that companies are starting to feel the impact of offshore production, including shipping costs, complicated logistics and quality issues. The threat of political unrest and security of intellectual property in foreign countries pose additional problems for offshore manufacturing.
Other companies that are making the transition back to the U.S. in cost-cutting efforts include General Electric Co. (NYSE: GE), which said last summer that it will move production of some of its water heaters to its Louisville, Kentucky facility from China starting in 2011. The company has also said that under a new labor agreement with employees, new workers will be paid $13 an hour, down from nearly $20 an hour.
Shares of Caterpillar are up 40 cents in premarket trade to $59.30 on Friday.
This shift in company mindset for the manufacturing will like initiate serious competition among states in the U.S. for the new jobs that factories would create.
The trend is a direct correlation to the weak U.S. dollar, as it makes it more expensive for companies to import products from overseas.
Other incentives to bring factories back to the U.S. include possible future job creation incentives that will likely intrigue employers, as well as the negotiating power with U.S. suppliers that have been hurt by the economic downturn making them more likely to bargain.
"It's really a long-term look at where we think this market and this product is going globally and how can we best get ourselves positioned," said Caterpillar spokesman Jim Dugan when speaking about the company’s plans to meet the demand in the U.S., while also taking into consideration the impact of the weak dollar on offshore manufacturing.
Over the last decade that saw companies expand globally at rapid pace, economists say that companies are starting to feel the impact of offshore production, including shipping costs, complicated logistics and quality issues. The threat of political unrest and security of intellectual property in foreign countries pose additional problems for offshore manufacturing.
Other companies that are making the transition back to the U.S. in cost-cutting efforts include General Electric Co. (NYSE: GE), which said last summer that it will move production of some of its water heaters to its Louisville, Kentucky facility from China starting in 2011. The company has also said that under a new labor agreement with employees, new workers will be paid $13 an hour, down from nearly $20 an hour.
Shares of Caterpillar are up 40 cents in premarket trade to $59.30 on Friday.
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