American Factory and Thoughts on the Future American Economy

Guest post from John Wilder at Wilder Wealthy Wise.

“China is here, Mr. Burton. The Chang Sing, the Wing Kong?  They’ve been fighting for centuries.” – Big Trouble in Little China

I mean, the camo looks so good, maybe they wanted to show it off?

I watched the documentary American Factory this weekend, and it seemed like a good jumping off point to discuss several topics – globalization, employment, and Jenga®.  In 2008, the General Motors® plant in Dayton, Ohio was closed during GM’s© bankruptcy.  According to American Factory (now streaming on Netflix®), 10,000 people in the Dayton area lost their jobs when the factory closed.  In this current climate, I’m trying to come up with more unemployment jokes, but they all need work.

Fast forward to 2016, and a Chinese company, Fuyao Glass America®, started a new business making windshields for cars in the old GM© plant.  Fuyao bought the empty factory and spent on the order of $500 million dollars setting up the glass factory.  Then Fuyao brought hundreds of Chinese supervisors over to start the facility and train the American workers.  This makes sense – you don’t want to come across an ocean and have an employee like me when I sold used cars.  One customer, looking at a minivan, asked me, “Cargo space?”

I answered, “Car no fly.  Car go road.”  Obviously that didn’t go very well.

One of these Chinese supervisors mentioned that he was committed to stay for two years.  This was a father of two, and he’d receive no extra pay for being away from his family.  The Chinese supervisors were sleeping four to an apartment with furniture from the offices supplies aisle at Wal-Mart™.  Living with a roommate is tough.  One roommate suggested I had schizophrenia.  The joke was on him – I didn’t even have a roommate.

Poster from the documentary.  That’s it.  No joke.  Move along.

Clips from workers talking as they were just starting their work at Fuyao made it clear that the Fuyao jobs were nowhere near the pay of the GM© jobs:  At GM™, one worker made about $29 an hour in quality control until the plant closed.  In the new Fuyao plant, she made less than $13 an hour.  I talked to a local dog breeder about a summer job for Pugsley.  She said that she only paid in expensive pure-bred puppies.  Pugsley thought about it, and decided it was income-petable.

And the work is tougher than the GM® work was.  The temperature in some parts of the production area was 200°F, or about 63 kilograms.  One worker spent over an hour a shift in ten minute increments in that heat in the furnace room, and the plant safety guy was trying to figure out how to keep him from overheating.  But that level of heat had a plus side:  during the filming I saw two hobbits throw a ring in the furnace room.

What surprised me was that the Chinese gave such access to the people making the documentary.  They caught candid moments with the Fuyao founder, Cao Dewang, (called simply “Chairman Cao”) throughout the documentary.  There were moments where he was clearly doubtful, arrogant, or out of touch.  We all have those moments, but most of the time billionaires try to avoid looking stupid in public.  I mean, except Elon Musk.

I kid.  I actually admire Mr. Musk, who seems to be able to do what NASA forgot.  Fly people into space.

On starting the plant, production levels were described as “low” so Fuyao took the step of sending several of its plant supervisors to China.  The clash of cultures was obvious at the start of the documentary, but it was during the sequence in China that really showed the difference in the way Americans and Chinese do business.

The conflict started at the first meeting.  All of the Chinese business people were in suits.  Most of the Americans were in jeans and t-shirts – one of them was wearing a Jaws® movie t-shirt.  In what was probably pretty embarrassing for the Americans, in the next scene you see them wearing Fuyao company logo polo shirts.  How did that conversation go?  “Excuse me, perhaps you would be more comfortable in a new company polo shirt and not your mustard-covered t-shirt advertising a forty year old movie?”

But it was far, far beyond just the informal dress that’s common with line supervisors in a factory.  One sequence showed all of the employees singing the corporate anthem.  Another showed line production employees in a line, yelling out productivity slogans and propaganda like Marines responding to R. Lee Ermey when he was a drill instructor.

They were all out of bat.

One of the American supervisors (who had learned Chinese) was bad-mouthing his employees to a Chinese supervisor.  To me, the American supervisor came across as someone who would do anything to make the Chinese like him – he was a suck-up.  After one negative comment about his own team, the Chinese supervisor said, “You should all be united and concentrate your efforts.”  It was a subtle but nuclear insult – the Chinese supervisor was slamming the American for not being united with his own workers.  And the Chinese supervisor was right.

So, refresh the page.  Am I still dead?

And working in China sounds as bad as I’d expected.  Workers typically only get one or two days off a month – a five day work week hasn’t made it to China yet.  The workers also work 12 hour shifts.  The Chinese want their workers engaged in the company.

In fact, the American supervisors were there for the company annual Chinese New Year party, where the show was put on entirely by the employees.  And as for engaged?  There were several marriages performed at the company party.  One of the Americans was so overcome with the sense of belonging around him that he was as emotional as a teenage girl watching Titanic.  Me?  I like my emotions like I like my beer.  Bottled.

A quick trip through the Fuyao workers union (which is also the company’s communist party headquarters) showed that the division between company, country, party, and worker is non-existent.  The Chinese are certain that they are superior to Americans – several times in the film this is stated by Chinese people on camera.  But they are also very proud of being Chinese – when Chairman Cao was talking to his Chinese employees in America, he told that that no matter where they go, or where they are buried, that first and foremost they will always be Chinese.

China is nationalist, (mostly) ethnically homogeneous, and unambiguously pro-Chinese at the expense of everyone else on the planet.  Work is for the government and the party.  Why are the Muslims in China in reeducation camps?  Because Islam isn’t Chinese.  China is a country built on unity and Islam isn’t on the menu.  And if you’re not on board?

Literally.   

Next, Fuyao fired the plant manager when production and profits were too low, but it was probably the lawsuits on safety that sent him over the top.  The plant manager had been an American – they replaced him with a Chinese guy.  I’ve actually seen this in real life in one company I did business with.  When things weren’t going well, the owners fired the American and replaced him with a person from their country.  I mean, if you’re going to yell at the guy, you probably don’t want to do it through a translator.

The documentary ended with increasing tensions ahead of a vote to bring in a union.

I’m torn.  Nearly every union person I’ve ever worked with has been the opposite of what I see on television.  They’ve worked hard and with great skill.  But to listen to a labor organizer for a union talk makes me feel nothing but that I want to keep one hand on my wallet.  They have a sense of entitlement that seeks to make the worker feel that they are a victim, and to a certain mindset that’s an easy sell.  One person who early in the documentary had been so thankful to have a job, any job, had now put himself in the role of a victim at a union meeting.  Heck, in America we even have unions for pirates – but their claims always end up in arrrrbitration.

As noted above, safety and adherence to American laws wasn’t really a Chinese priority, at least at first.  But with the union vote on the line, the Chinese gave a $2 per hour raise across the board and the Plant Manager committed to solving most problems in just one day.  The plant workers voted to reject becoming unionized, by a 2-1 landslide.  After that, the Chinese terminated several vocal union supporters, but since this wasn’t China, that wasn’t a literal termination.

Some thoughts that this movie brought out:

• The Chinese like being Chinese, and like being around Chinese people. They don’t have much use for everybody else on the planet except economically.  I’m sure they keep visiting the United States to measure to make sure that their stuff will fit.
• A factory worker used to be able to support a family as a sole breadwinner. The same can be said of the skilled trades.  Immigration (illegal and legal) destroyed this because demand for jobs didn’t increase, while numbers of workers did.  “Greedy” factory owners get blamed, but the reality is open borders means all jobs that don’t require certificates or diplomas are under pressure from about several billion people willing to do it cheaper, especially if it can be done over the phone by “Bob” from Bangladesh.
• Every union worker I’ve worked with has been awesome. Every union organizer I’ve ever seen on a documentary has reminded me of a conman.
• This documentary showed the aftermath of the outsourcing of American manufacturing, a transition that has been ongoing since 1995.
• The next economic transition is upon us. The new jobs that will be created are going to be quite a bit different than the ones disappearing.
• The Mrs.’ Grandmother would offer her a shiny nickel to rub her corns. There’s a job that won’t be taken away soon.
• The documentary ended with discussions on how the Chinese were trying to automate the factory even more – replacing workers with robots. It was less than thirty seconds of the documentary and the equivalent of writing something at the end of the essay that you wanted to write about but forgot.  Given Chinese recent history with something as simple as eating bats, I imagine that automation will turn into automated killer robots that will kill all of humanity.  But, hey, productivity is up!!!

I purchased some suspenders a few weeks ago.  Pugsley immediately pounced.  “Want me to get your varmint rifle, Pa?”

I’d like to think that globalization is doomed, however I read a story two weeks ago about a surgical mask and protective equipment maker in Dallas.  During the Swine Flu wave back in 2012, the owner had expanded capacity to meet with demand.  What did the buyers do after the rush?  They went back to sourcing from China.  The owner was left with high unemployment insurance cost and new equipment that he had to pay for even though it was unused.

This time, the owner was more than happy to expand production, but he’d only do it on a long-term contract.  Last I heard?  No takers.

But nah, I’m sure that we’ll figure out that at least partially, globalization was what made our economy so fragile that a virus could cause it to collapse like a Jenga® game played by a drunk Michael J. Fox.

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