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GM, Ford, Verizon Were Among Offshoring Leaders in 2019

August 30, 2020

By Jeff Ferry, CPA Chief Economist

CPA conducted an analysis of government data revealing that General Motors, Ford, and Verizon were some of the leaders in offshoring US jobs in 2019.

The US Department of Labor publishes annual data on which companies’ workers received aid from the Trade Adjustment Assistance (TAA) program because their jobs were eliminated. We identified the Top 25 companies, ranked by the number of workers at each company eligible for the TAA assistance.

GM, Symantec, Alorica, Husqvarna and Toys’R’US round out the top five job losers last year. Among the top 25, manufacturers shed the most jobs, followed by business services and other industries.  GM, Ford and Verizon, however, led the pack in terms of offshoring those jobs.

TAA and Employment Trends

The federal TAA program was enacted in 1962 to provide retraining and financial assistance to US workers who lose their jobs because of imports. Policy makers and economists assumed that workers losing jobs merely needed some help to find new, equivalent jobs. The TAA data reveals just a fraction of the total number of jobs lost due to imports, but it provides helpful information to identify industrial sectors in which workers are most harmed. Some jobs were simply lost while others were effectively moved to other countries by the companies.

TAA eligible job losses in 2019 were less than half as a decade ago.  As Figure 1 shows, the TAA total of eligible US workers hurt by imports for 2019 was 110,941. In 2009, the comparable figure was 288,274.  The Economic Policy Institute has analyzed past TAA program data in terms of jobs lost nationwide due to China trade.

 

Figure 1: Total Number of TAA-Approved Workers, Annually 2009-2019

Our CPA Reshoring Index showed that in 2019, US manufacturing industry reshored production by a significant percentage (0.59% of total US manufacturing consumption) the largest positive move since the index began, outside of recession years. Nonetheless, some jobs continue to be lost due to imports. 

Job Losses from Imports vs. Offshoring

The TAA program is open to any company and its workers that can show job losses were caused by “trade”, i.e. increased imports. Offshoring occurs when a company is eliminating jobs here and shifting production to foreign locations. We therefore use the term “offshoring” for General Motors, Ford, or Verizon because they are shifting US jobs or functions abroad while their overall production is stable or growing.

GM is often not technically moving the same job to Mexico, because it is launching new models in Mexico. However, strategically, GM is shifting its production mix to Mexico and other low-cost centers, as GM CEO Mary Barra often explains to investors in public conference calls. From an economist’s point of view, when a company changes its production mix to favor foreign locations, the net effect is to reduce US production and jobs.

The Top 25 Import Job-Loss Companies of 2019

We analyzed the top 25 companies ranked by number of workers approved for TAA assistance in 2019. Together they accounted for 36 percent of the 110,000 workers approved for TAA last year and appear to be representative of the entire list of over 1,000 companies. Table 1 shows the top 25 companies with the most TAA-approved workers for 2019. We discuss some of those companies below describing more specifically why those jobs were lost or offshored.

Table 1: Top 25 Companies Ranked by Number of TAA-Approved Workers in 2019

 

Company Name

Total No. Workers

City & State

Industry

Comment

1

General Motors

4794

Warren, OH; Warren, MI; White Marsh, MD; Detroid, MI; West Chester, OH

Automotive manufacturing

Plant closure plan

2

Symantec Corporation

3165

Mountain View, CA; Culver City, CA; San Diego, CA; San Franscisco, CA

Software & tech services

Refocused on consumer cyber-security

3

Alorica, Inc.

2732

Fredericksburg, VA; Terre Haute, IN; St. Joseph, MO; Irvine, CA

Business services

Full-service BPO

4

Husqvarna Consumer Outdoor Products N.A., Inc.

2434

McRae, GA

Machinery manufacturing

 

5

Toys ”R” Us - Delaware, Inc.

2121

Greenville, SC; Sioux Falls, SD; North Little Rock, AR; Eugene, OR; Hickory, NC

Retail

Bankruptcy and closure

6

Georgia-Pacific Consumer Operations LLC

2025

 Alpharetta, GA;  Crossett, AR;  Coos Bay, OR; Camas, WA

Paper manufacturing

 

7

Sitel Operating Corporation

1953

Albuquerque, NM; Caribou, ME

Business services

Call Centers

8

First Call Resolution, LLC

1922

 Roseburg, OR

Business services

Call Centers

9

Conduent Commercial Solutions, LLC

1532

Colorado Springs, CO; Boca Raton, FL

Business services

Formerly Xerox

10

Caterpillar Inc.

1519

Montgomery, IL

Machinery manufacturing

 

11

FCT US LLC

1438

Torrington, CT

Electronics manufacturing

 

12

Del Monte Foods Inc.

1369

Sleepy Eye, MN; Walnut Creek, CA; Mendota, IL; Crystal City, TX

Food manufacturing

 

13

Concentrix CVG Customer Management Group Inc.

1326

Las Cruces, NM; Charlotte, NC

Business services

 

14

Harley-Davidson Motor Company Operations, Inc.

1194

Kansas City, MO

Vehicle manufacturing

Shifting production to Thailand

15

Verizon

1070

Albuquerque, NM; Little Rock, AR; Richmond, VA

Telecom services

 

16

Wood-Mode Incorporated

1060

Kreamer, PA

Wood manufacturing

 

17

Ford Motor Company

1056

Flat Rock, MI

Automotive manufacturing

 

18

Kimberly Clark

937

Neenah, WI

Paper manufacturing

 

19

Continental Tire the Americas, LLC

937

Mt. Vernon, IL

Automotive manufacturing

 

20

Tenneco Automotive Operating Inc.

904

Hartwell, GA

Automotive manufacturing

 

21

Felchar Manufacturing

895

Binghamton, NY

Electronics manufacturing

 

22

Asteelflash USA Corp.

843

Morrisville, NC

Electronics manufacturing

Acquired by Chinese company USI Dec. 2019

23

ShopKo

827

Green Bay, WI; Lincoln, NE; Ord, NE; Plattsmouth, NE

Optometry services

Acquired by private equity firm Monarch

24

nThrive Solutions, Inc.

771

Alpharetta, GA

Business services

Health care vertical

25

Briggs & Stratton Corporation

766

Murray, KY

Machinery manufacturing

Filed Chapter 11 in July 2020

 

General Motors leads the list. GM has figured prominently with applications for large numbers of TAA workers over many recent years. The closure of its Lordstown, Ohio production facility (1300 jobs) in March last year is a big part of the reason for GM’s 4,794 certified TAA workers in 2019. GM is likely to continue to rank high on TAA lists in coming years. Lordstown was just the first of five plants it intends to close in the near future, with a total projected job loss of 14,000. Moving production to Mexico is a major factor in GM’s US job cuts. Also, in recent comments to investors, GM CEO Mary Barra made it clear that she is putting a high priority on the China market, which she suggested could account for total sales of 30 million cars a year, more than double the 14 million unit rate she said might be a reasonable long-term US sales figure. GM already exports at least one model from China to the US.

Ford came in at number 17 on the list, using TAA support for 1,056 workers. North America was the best-performing region for Ford, with revenue up 1 percent compared to a global decline of 3 percent to $143.6 billion. Still, it shifted jobs out of the US.

Harley-Davidson took 14th place on the list, claiming TAA support for 1,194 workers. Most of those jobs were likely not offshored but were simply cut, as Harley loses market share to imported motorbikes. Last year, Harley sales fell 8 percent to $4.6 billion as motorbike shipments fell 6 percent to 214,000 units. Harley has long suffered from Japanese competition, which benefits from an undervalued yen currency. However, in business there are often multiple drivers of difficulty. Harley has failed to develop new models to appeal to the younger biker and its core audience is slowly dying off. Harley CEO Matt Levatich promised last year that 2020 would be a transformational year for the company.

Number 2 on our list is software vendor Symantec, with 3,165 workers eligible for TAA support. Last November, Symantec sold off its business-to-business division and renamed itself Norton LifeLock. It now focuses on selling cyber-security products to consumers. This is a low-margin business and technology companies often seek to outsource activities to low-wage centers as their profit margins decline. Symantec’s business is not shrinking. Norton LifeLock said on August 6th that consumer revenue was up 4 percent and it now has 20.6 million customers, an increase of 416,000 over a year ago.

Verizon came in at number 15 on the list, claiming TAA support for 1,070 workers. Verizon is a growing company, with more wireless subscribers, a larger network, and now investing heavily in 5G technology. Verizon reported revenue of $132 billion last year, only slightly up on 2018 but earnings surged by 24 percent to $4.65 a share, as consumers spent more on wireless services. Verizon has a program to cut $10 billion out of its costs in the three years from 2019 to 2021. The offshoring of 1,070 jobs played its part in reaching this goal.

Asteelflash, a Germany-based electronic contract manufacturer, came in at number 22 on the 2019 list with 843 TAA-approved employees in North Carolina. In December 2019, Asteelflash announced it would be acquired for $450 million by a Chinese contract manufacturer, United Scientific Industrial (USI) of Shanghai. USI already has a partnership with chipmaker Qualcomm and has said it is supporting the technology industry. On its website it talks about the trends of “globalization” and “regionalization” so it will be interesting to see if it continues Asteelflash’s offshoring or changes gear to meet the growing demand for US-based technology manufacturing.

 

Table 2: Top 25 Companies By Sector

Manufacturing Sectors

No. Workers

% of Total

Automotive manufacturing

8,885

22.4%

Machinery manufacturing

4,719

11.9%

Electronics manufacturing

3,176

8.0%

Paper manufacturing

2,962

7.5%

Food manufacturing

1,369

3.5%

Wood manufacturing

1,060

2.7%

Total manufacturing

22,171

56.0%

     

Service Sectors

   

Business services

10,236

25.9%

Software & services

3,165

8.0%

Retail

2,121

5.4%

Telecom services

1,070

2.7%

Optometry services

827

2.1%

Total services

17,419

44.0%

Grand Total

39,590

100.0%

 

The auto industry is the largest sector in our sample of TAA-approved workers at the top 25 TAA companies. We include auto parts, accessories (tires) and motorcycles in the automotive sector. Machinery manufacturing is the second-largest manufacturing sector. Companies like Caterpillar and Briggs & Stratton (now in Chapter 11 bankruptcy) are struggling with depressed markets as well as import competition. The COVID crisis only makes the situation worse.

The services sector is almost as large as the manufacturing sector as outsourcing and offshoring of services grows as a phenomenon in corporate America.

Business Services aka Business Process Outsourcing (BPO)

Number 3 on the company list is a business services giant few have heard of, Alorica. Headquartered in Irvine, California, but with over 100,000 employees in over 100 worldwide locations, Alorica is a leader in a popular industry trend that is not widely known, business process outsourcing (BPO). BPO companies perform back office functions for other companies, including call centers, help desks, tech support, accounting and human resources functions. The modus operandi of a BPO is often to engage with a large US customer with a significant amount of the work done initially by US staff at the BPO company, but over time to shift the work to low-cost centers elsewhere in the world. Alorica has offices in China, India, the Philippines, and many other low-cost nations.

Our Top 25 survey shows that business services accounted for more TAA jobs than any other single industry. This underlines the fact that many white-collar service functions inside US companies are ripe first for outsourcing, and then for offshoring. This is a much newer trend than the offshoring of manufacturing which began at least half a century ago.

The status of BPO firms within the TAA program is interesting. For a manufacturing company like GM, there is no question the company is shrinking its US footprint and US workforce as it shifts more production overseas. Government-funded TAA support to former GM employees makes good sense to us as they are victims of a fundamentally misconceived trade policy, namely the belief that high-paying US industries and US jobs can be sacrificed to globalization without a negative impact on the entire US economy and society.

BPO firms are pursuing a slightly different strategy. They are not downsizing. Alorica, for example, said on August 6th, that it intends to add 33,000 people to its 100,000-strong workforce. Some of that total is likely in the US. Most BPO companies are in a continual process of winning new clients in high-wage nations like the US, using US employees in the early part of the process, and later laying some of them off, as the work moves offshore. They then might re-hire more US employees as they win more new clients. To its credit, Alorica claims on its website that it offers training, health insurance, and 401K programs to its US employees. However, employees at a BPO are always in competition with employees from other countries earning less than half the standard American wage and the overriding trend is for jobs to move offshore.

The main attraction for a large US company of working with a BPO is that its average cost per employee in the help desk, finance, call center, or HR function falls, sometimes dramatically. Keeping these jobs in the US, at US pay levels, would benefit the US economy, and US white-collar workers, more than supporting BPO companies in their offshoring efforts.

Do TAA Programs Benefit Workers?

The TAA program was enacted because economists and political leaders believed that imports did not kill jobs but merely changed the mix of jobs. Trade would improve economic efficiency, they said, allowing workers to move to higher productivity jobs.  TAA is needed merely to help the transition to those new and often better jobs.

There is increasing recognition that this is not the case. Indeed, CPA and others released an innovative Job Quality Indexlast year showing that the quality of jobs has systematically deteriorated as workers are forced from tradeable sectors like manufacturing to nontradeable sectors, often in services.

Outcomes are another important factor in evaluating the TAA program. A fascinating study by two American University economists, Kara Reynolds and John Palatucci, found that TAA workers, after the training process and help to find another job, “earned on average 30 percent less than they made at their previous job.” This corresponds to our own study, Manufacturing Jobs and Income Decline which found that the average manufacturing worker in the year 2000 who moved to a non-manufacturing job by 2018 suffered an income loss of 19 percent.

But the Reynolds-Palatucci analysis went further and found that workers who participated in the TAA program actually suffered a greater income loss than displaced workers who chose not to participate in the program. They said: “participating in the TAA program causes a wage loss approximately 10 percentage points greater than if the displaced worker had chosen not to participate in the program.”

This perverse finding is borne out by an excellent book, Janesville, on the closure of the GM assembly plant in Janesville, Wisconsin, in which reporter Amy Goldstein found that those who took up the offer of TAA-funded retraining at a Janesville training center called Blackhawk earned less money than other workers laid off by GM. According to Goldstein: “the people who have found a new job without retraining are being paid, on average, about 8 percent less than they were paid before. But those who went to Blackhawk are being paid, on average, one third less than before.”  (Janesville, pg. 169)

The bottom line is that high-wage industries like automotive are high-wage because the US economy excelled at generating high wages in leading industries for many decades. Globalization and increasingly unbalanced trade, especially with nations like China that ruthlessly exploit trade agreements and naïve importing nations with subsidized exports and other forms of trade cheating, have caused a decline in traditionally strong US industries, greater inequality, and less productivity growth. Additionally, America’s economic growth rate has slowed as our strong, high-growth industries are replaced with slow-growth, low-wage service industries. And the workers left high and dry by those imports are left to make the best of a program like TAA with transitional, often ineffective benefits, or struggle to find a job on their own.

 

The author would like to thank Virgil Bierschwale and Arpan Dahal for valuable support with data analysis.

 

 


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