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Friday, December 19, 2014         

NEW YORK TIMES


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An American model for tech jobs?

By Bill Vlasic, Hiroko Tabuchi and Charles Duhigg / New York Times

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SMYRNA, Tenn. » The dairy farms that once draped the countryside here were paved over so the Japanese carmaker Nissan could build its first U.S. assembly plant. Eighty miles to the south, another green pasture was replaced by a Nissan engine factory, and across Tennessee about 100 Nissan suppliers dot the landscape, making steel in Murfreesboro, air conditioning units in Lewisburg, transmission parts in Portland.

Three decades ago, none of this existed. The conventional wisdom at the time was simple: Japanese automakers would not build many cars anywhere but Japan, where supply chains were in place, costs were tightly controlled and the reputation for quality was unparalleled.

"They were very unfamiliar doing anything outside Japan," said Sen. Lamar Alexander, a Republican who was governor of Tennessee when Nissan opened its factory here in 1983. "They were tentative and awkward even discussing it."

Today, echoes of that conventional wisdom can be heard within the U.S. technology industry. For years, high-tech executives have argued that the U.S. cannot compete in making the most popular electronic devices. Companies like Apple, Dell and Hewlett-Packard, which rely on huge Asian factories, assert that many types of manufacturing would be too costly and inefficient in the U.S. Only overseas, they have said, can they find an abundance of educated midlevel engineers, low-wage workers and at-the-ready suppliers.

But the migration of Japanese auto manufacturing to the U.S. over the last 30 years offers a case study in how the unlikeliest of transformations can unfold. Despite the decline of American car companies, the U.S. today remains one of the top auto manufacturers and employers in the world. Japanese and other foreign companies account for more than 40 percent of cars built in the U.S., employing about 95,000 people directly and hundreds of thousands more among parts suppliers.

The U.S. gained these jobs through a combination of public and congressional pressure on Japan, "voluntary" quotas on car exports from Japan and incentives like tax breaks that encouraged Japanese automakers to build factories in the U.S. Pressuring technology companies to move manufacturing here would pose different challenges. For one thing, Apple and many other technology giants are American, not foreign, and so are viewed differently by politicians and the public. But it is possible and the benefits might be worth it, some economists say.

The debate is not just economic, however. Increasingly, it is political. With high unemployment, the question of how to create jobs has taken a role in the presidential race between President Barack Obama and Mitt Romney, and both have traded barbs on outsourcing by U.S. companies.

Although the car and technology industries are different -- and the eras are separated by 30 years -- the resurgence of U.S. auto manufacturing in the 1980s is an example of how one industry created tens of thousands of good jobs. Since its first pickup truck rolled off the line here on June 16, 1983, Nissan has produced more than 7 million vehicles in the U.S. It now employs 15,000 people in this country. It makes more than a half-million cars, trucks and SUV's a year, with the plant in Smyrna building six models, including the soon-to-be-produced, all-electric Nissan Leaf.

In the auto industry, the belief that U.S. workers could not match Japanese workers has long since faded. "A big part of the reluctance of Japanese automakers to come to the U.S. was the belief that their manufacturing systems could only work with loyal Japanese employees," said Stephen D. Cohen, a professor emeritus of international studies at American University. "Everybody was surprised how quickly the systems were adopted here."

Within the technology industry, workers in Asia are viewed as hungrier and more willing to tolerate harsh work schedules to achieve productivity. The numbingly repetitive jobs of assembling cellphones and tablet computers, executives say, would be scorned here; they worry that many Americans will not make the sacrifices that success demands, and want too much vacation time and predictable work schedules.

Earlier this year, when Apple's chief executive, Tim Cook, took the stage at a technology conference, he was asked if his company -- which once made computers in America, but now locates most assembly in China and other countries -- would ever build another product in the U.S.

"I hope so," Cook replied. "One day."

That day came recently for Brazil.

In Jundiai, an hour's drive from Sao Paulo, a strip of asphalt has recently been rechristened Avenida Steve Jobs, or Steve Jobs Avenue. Alongside is a factory where workers make iPhones and iPads. Brazil got these jobs through tactics the U.S. once used to persuade Nissan and other foreign carmakers to build plants in America: It cajoled Apple and Foxconn with a combination of financial incentives and import penalties.

Like the U.S., Brazil is a big market -- the third largest for computers after China and the U.S. It has long imposed tariffs on imported technology products to encourage domestic manufacturing. Those fees mean that smartphones and laptops often cost consumers more in Brazil -- and that domestic manufacturers can be at a disadvantage if their products require imported parts.

In April 2011, Brazil's president, Dilma Rousseff, traveled to Asia with a pitch -- much as Alexander did in 1979. The federal government would give Foxconn tax breaks, subsidized loans and special access through customs and lower tariffs for imported parts if it started assembling Apple products in Brazil, where Foxconn was already producing electronics for Dell, Sony and Hewlett-Packard.

Foxconn agreed. Within months, new Brazilian engineers were flying to China for training. By year's end, Foxconn was making iPhones in Jundiai, and it began making iPads there in early 2012, according to Evandro Oliveira Santos, director of the Jundiai Metalworkers Union, whose members work at the plant. Stores now carry Apple products with the inscription "Fabricado no Brasil" -- "Made in Brazil."

Throughout his term, Obama has regularly gathered advisers to discuss manufacturing, according to former high-ranking White House officials.

Now, with unemployment high and a growing debate over outsourcing of jobs, manufacturing is on the political agenda. In March, Gene B. Sperling, director of the White House's National Economic Council, outlined initiatives -- including tax breaks for building factories here, infrastructure investments and going after "unfair trade practices" -- to reinvigorate manufacturing. In May, the Commerce Department announced tariffs on Chinese solar panels for selling below fair-market value.

Washington, however, has generally shied from addressing the protectionist measures of countries like China with countermeasures, as politicians once did against Japan.

After the Senate last year passed legislation imposing tariffs on nations whose currency is undervalued -- a salvo aimed at China -- the bill went nowhere in the House of Representatives, and the White House indicated it did not like the proposal.

However, champions of "in-sourcing" legislation -- which takes away benefits from companies moving jobs abroad and provides incentives for those bringing jobs back -- said the tenor of the debate is changing.

Sen. Debbie Stabenow, D-Mich., also favors tax breaks, rather than penalties. "I love my iPad," she said. "And I want it made in America."






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