Black & Decker to Leave China for India?

Black & Decker (BDK) continues its never-ending search for a cheaper manufacturing venue. Next move: India and Vietnam? From the company’s Q408 conference call:

The difference between our restructuring in early 2001 was our manufacturing footprint. We were manufacturing at a lot of high cost areas in Western Europe and the US and we dramatically changed our manufacturing footprint to low cost areas. We are in low costs areas and I think have a very good manufacturing footprint now so that opportunity to the same extent is not available to us.

However, we continue to look at low cost regions. We’ve seen cost increase recently in China and therefore we continue to look at India and Vietnam and other places. As you recall when we put those plants in these low costs areas we put them in such a way where we wouldn’t have the dramatic costs of shifting our manufacturing from one facility to another or even to lower costs countries.

So, we continue to evaluate that and we’ll make manufacturing footprint changes as the market demands.

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Comments

[APM:]

So in 2001, labor cost in India and Vietnam was more expensive than in China? Why didn't they move the production to those places then?

China's competitive edge is not just low cost. It is the combination of cost, skills, and strong work ethic of its workforce.

Feb 03 06:04 PM

[HaavBline:]

This is a non-event. Every company will say they constantly evaluate options for lowering cost and doing everything to make more profit for the shareholders. What else are they suppose to say?

Feb 04 12:03 AM

[SivBum:]

It's the searching for cheapest labor, human exploitation, that gives globalisation a bad name. On the other hand, if B&D don't do it, Stanley Tools will. And business ethics continue to be in the dumpster.

Feb 04 10:59 AM

[Gedankonomist:]

"Footprint" seems to be the latest fad-word amongst these elites.

Feb 04 02:07 PM

[WorkinginChina:]

China does NOT have a competitive edge for 'skills'. Secondly, the problem is not just rising labour costs, the problem is much deeper.

China has a large unskilled workforce, but is extremely lacking in skilled labour. This is the number one problem cited by all multinational and domestic companies. 'That can't be right, what about all those millions of graduates China pumps out every year?' I hear you say. Actually the majority of China's graduates are equipped with useless skills and undesirable to companies (the exception being graduates from universities such as Qinghua University and Zhejiang Univeristy). Hence why several multinationals have to partner up with local universities and the government to create new courses and/or colleges.

Black and Decker is wise to move out of China for a number of reasons. Here are a few:

1) Labour costs have been rising at a ridiculous double digit rate
2) China's currency has strengthened considerably, thus eroding foreign exporter profits
3) Black and Decker is no longer welcome in China. Well, they are, but their labour intensive factories are not. The government has clearly stated over and over again it doesn't want polluting and/or labour intensive factories. They effectively want to move themselves up the value chain. Consequently the government scrapped incentives for exporters (though it has recently reinstated a couple as a result of its economy tanking) and local governments actually discourage them now.
4) The new income tax law that came into effect last year effectively added an extra 10% tax on all foreign firms in China, another cost for Black and Decker.

On Feb 03 06:04 PM APM wrote:

> So in 2001, labor cost in India and Vietnam was more expensive than
> in China? Why didn't they move the production to those places then?
>
>
> China's competitive edge is not just low cost. It is the combination
> of cost, skills, and strong work ethic of its workforce.

Feb 04 08:55 PM

[KeithW:]

China's competitive edge isn't just cheap labour, its infrastructure and network of suppliers. Go to any Chinese zone set up for industry and you'd find 1000s of supplies just next door.

Black and Decker can move to India and Vietnam, but who will supply them?

Jul 18 10:25 AM