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Posted on Thu, Sep 16, 2010 : 5:50 a.m.

The changing face of outsourcing in Michigan

By Rick Haglund

I've been around long enough to remember when outsourcing had nothing to do with China and Mexico.

Popularized in the 1980s, outsourcing originally referred to the practice of farming out noncore functions of a business, ranging from janitorial to information technology services, to vendors.

In the auto industry, outsourcing meant shifting parts work performed in automakers' unionized factories to lower-cost, nonunion suppliers that were virtually all in the United States.

But the advent of the Internet, the tearing down of trade barriers with Mexico, the opening of the Chinese economy and the growing manufacturing expertise of Third World countries has globalized outsourcing.

Critics says outsourcing now represents the offshoring of the American dream.

And woe be it to any business executive who runs for public office if his company has been involved in outsourcing.

Just ask Michigan Republican gubernatorial candidate Rick Snyder, a former top executive of computer maker Gateway Inc.

His Democratic opponent, Lansing Mayor Virg Bernero, is blasting him with claims he outsourced jobs to China at Gateway.

(Snyder says the outsourcing took place starting in 2003 when he was on the board of directors and was a lone voice in opposing most of those moves.)

What is less discussed is that outsourcing isn't just a cost-cutting strategy. It's become the business model of the computer industry and others.

Look at Apple Computer Inc., widely admired as one of America's most innovative and successful companies.

Apple's computers, iPods, iPhones and iPads are stamped with this inscription: "Designed by Apple in California. Assembled in China."

Apple has about 25,000 employees in the United States. But another 250,000 workers employed by a contractor in China assemble Apple's products there.

That arrangement obviously is good for Apple, but bad for the American economy, one commenter said recently.

And no, it wasn't Michael Moore. It was Andy Grove, the retired CEO of computer chip giant Intel, writing in Bloomberg BusinessWeek magazine.

His provocative July 1 column took the position that unless the United States can somehow regain its manufacturing prowess, the nation faces a prolonged period of high unemployment.

The country just won't be able to produce enough jobs to put its millions of unemployed citizens back to work unless it makes more computers, cars and appliance, in Groves' view.

"You could say, as many do, that shipping jobs overseas is no big deal because the high-value work — and much of the profits — remain in the U.S. That may well be so," he said.

"But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work — and masses of unemployed?"

What we need is a "U.S. strategy" to grow manufacturing, not a "China strategy" to outsource jobs that many companies employ, he said.

Groves suggested taxing corporations for every job they send offshore and put the money in a fund to help corporations that want to "scale" or grow their operations here.

Unless we undertake efforts to grow manufacturing here, Groves said we are likely to lose our nascent advanced auto battery and other "green" manufacturing industries to Asian countries eager to take them away.

Groves didn't address some other crucial issues, such as how American companies can compete against low wages paid in China, or whether we're likely to create many manufacturing in today's highly automated factories.

But his assertion that we need American strategy to revitalize our economy is something that's been ignored for too long.

E-mail Rick Haglund at


G.W. Williams

Sat, Sep 18, 2010 : 8:57 p.m.

The costs of doing business in Michigan are 3- to 4-percent higher than the states with which we most often compete for new business growth. That's why we need to reduce the costs of doing business here and encourage job providers to locate here. The easiest way of doing this is to reduce the Michigan Business Tax and eliminate the personal property tax. These two steps alone would do wonders for our ability to attract firms to our state and retain the ones that are already here. Learn how we can streamline our tax code without producing a gaping hole in the budget.


Thu, Sep 16, 2010 : 8:13 p.m.

Well I am old enough to remember the 70s and 80s when inflation was a huge social issue. With outsourcing, oddly enough, some widget, gadget or thingamajig can be made across the globe, shipped back here and still cost less than if it were made in the US. No more cries about runaway inflation. But if we made our widgets here with the high wages we demand, not to mention benefits the price of these do--dads get so high we complain about....inflation. And we use U scanners in the grocery, Netflix for our movies, MP3 downloads for our music, and kindles and such to read books! No need for cashiers, movie rental stores, music stores, CDs,DVDs and printed books. We can buy our gas by sticking a card in the pump and not have to give it to a cashier. And the jobs that do that stuff!! Isn't technology a peach!! So who has the answer? Frankly I do not want to have to pay 3-4 times what I pay now for my Levis (made in Mexico) and my Champion polo shirt (made in Cambodia). Quite a mess we've gotten ourselves into, eh?


Thu, Sep 16, 2010 : 6:48 a.m.

Hits the nail on the head!