China Now Comes to USA for Cheap Labor?

Re: [spiers] China Now Comes to USA for Cheap Labor?

Another few points:
1) You say "labor cannot be critical. If they turn a nice profit, how so? since
USA automakers cannot. If they do, the difference will necessarily be Chinese
management, since all other factors will be the same." But, of course, labor
costs are not necessary the same. Labor costs vary among the present US
automakers and a new company entering the system, with no legacy pension costs,
etc., would be expected to have lower labor costs than many existing
manufacturers. That is not to say that management (and other factors of
production) are not also important.
2) You say "USA pays the most for everything". But US costs of goods are
generally not higher and in many cases lower than in other western societies.
If you have been to Europe lately, you will find that costs of goods (both in
dollars and in the local currency) are often higher than here.
3) Your thesis that labor costs are irrelevant is absurd. Labor costs are one
component of final total product costs. To the extent that labor is a large
component of final total product costs (vs. materials, transportation, etc.)
labor will be a relatively important factor in the cost of the good, its price
competitiveness and ability to compete in the marketplace.
4) Let me know when you mag-lev it to your front door, either here or in China.
Mag-lev (which I have ridden in China) is, as you know, a form of heavy rail and
comparable to our train or subway systems. Not anytime soon to replace all
other forms of transportation, but a possible substitute for heavy rail in the
future.

----- Original Message -----
From: John Spiers
To: spiers@yahoogroups.com
Sent: Tuesday, July 18, 2006 10:43 AM
Subject: Re: [spiers] China Now Comes to USA for Cheap Labor?


Exactly... China is going to do exactly what USA has been doing... "So they
will take a
respected name (MG), build it with high priced labor, use Chinese-sourced
parts, and make
good margins" Since USA pays the most for everything, they can do this.

But a couple of points... if the Chinese can use high priced USA labor and
make money, then
labor cannot be critical. If they turn a nice profit, how so? since USA
automakers cannot. If
they do, the difference will necessarily be Chinese management, since all
other factors will be
the same.

Another reason to make cars in USA is China has a labor shortage right now,
and
unemployment is rising in USA if you take govt jobs out of the picture. With
inflation, USA
labor has been getting cheaper.

I agree China will sell these cars inside usa, because they will cost too much
to sell outside
the USA, any more than any other USA car will sell well outside of usa.

Finally, the Chinese market is growing rapidly, so saturation is hard to
gauge, I suspect there
will be new car companies yearly in china, until the decide to leapfrog USA
and go completely
mag-lev.

John

On Mon, 17 Jul 2006 18:26:02 -0700, Paul Snyder
wrote :

>
> I don't think it supports your theory about management. It's just an
> investment decision. The Chinese auto market is super-saturated, so
> Nanking Motors is looking to put their money somewhere it will grow
> better. So they will take a respected name (MG), build it with high
> priced labor, use Chinese-sourced parts, and make good margins. The
> car will sell only in the US, I predict.
>
> On Jul 17, 2006, at 1:18 PM, John Spiers wrote:
>
> > Folks,
> >
> > If you believe cheap labor is a factor in int'l trade, then what do
> > you make of China to build
> > British cars in USA?
> >
> > http://tinyurl.com/lu9fq
> >
> >
> > John

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