MT Magazine November/December 2022

ECONOMICS ISSUE

FEATURE STORY

14

The transformation that may be required of manufacturers could take up to 20 years, and to achieve that transformation, “creativity, commitment, and significant innovation” are required. Which brings us back to the R-rating: This is hard. Not for the weak of heart or for those not willing to make a complete commitment. Any margin reduction – to say nothing of seven points – is tough to take. But not as much as Chapter 7 or 11. The Lead Actress Mary Barra is the chair and CEO of General Motors, where she has worked for some 33 years. She began at the company in 1980 as a Kettering University co-op student at Pontiac Motor Division (R.I.P., 2010 – after 84 years in operation). Her first full-time job at GM was in 1985 as an acting superintendent, maintenance and tooling/senior plant engineer. In her career Barra has had roles in manufacturing planning, as plant manager, and as vice president of global manufacturing engineering. *Remember: Even if the supplier factory is next door, it can still burn down; this is not a hypothetical. In May 2018 a Meridian Magnesium Products of America Plant in Eaton Rapids, Michigan, supplying diecast components for vehicles, including the Ford F-150 and the Super Duty, had a massive fire that caused the vehicle manufacturer to halt production of the vehicles at Kansas City, Dearborn, and Louisville. To get the plants back up, Ford removed 19 dies from the damaged plant and even flew an 87,000-pound die in an Antonov** cargo plane to Nottingham, U.K., where it was installed in another Meridian plant; the parts produced there were then flown on daily Boeing 747 flights back to the United States. **The name “Antonov” may ring a bell, as that is the name of the Ukrainian company that built the world’s largest cargo plane, the Antonov An-225, which was destroyed by Russian troops in February 2022 during their invasion of Ukraine. Ukrainian companies are responsible for about 7% of the wire harnesses used by auto companies in the European Union. The invasion caused the shutdown of several suppliers, which, in turn, caused slowdowns or stoppages of production at facilities of Volkswagen and BMW. The Ukrainian suppliers are geographically proximate to the OEMs they are supplying. So, here is another example of something unexpected that can disrupt a supply chain. While this is highly unlikely to occur in the United States, odds are, people in Wolfsburg and Stuttgart didn’t think it would happen, either.

competitiveness in key manufacturing industries could boost US GDP by more than 15 percent over the rest of the current decade.” At this point you might think to yourself that this information should be G-rated – not only for general audiences but “Great!”

But the McKinsey analysis goes on to point out that while 44% of people in various manufacturing sectors say they have increased their regional sourcing as a consequence of the supply chain disruptions caused by the COVID-19 pandemic, and 51% say they think the approach (aka reshoring) will be relevant going forward, the consultancy warns that this is not going to be easy and that in order to accomplish the transition, it will require that

51% say that the approach (aka reshoring) will be relevant going forward ...”

companies have a “solid financial and operational plan that is aligned at all levels of the organization and spells out detailed actions and clear responsibilities for all stakeholders.” People need to know what is going on because the task is tremendous. One scenario laid out by the analysts presents a “hypothetical midsize US consumer electronics company with a highly globalized production network.” Not an unusual organization. Going to local production for this fictitious company will, as a result of rising factor costs that will occur during the next seven years, have its margins cut by six percentage points over the same time period. Add in the costs of carbon emissions and “likely supply chain risks,”* and five more points of margin are removed. And “Even aggressive levels of automation would still leave the manufacturer with a seven-point margin reduction.” All that said, the analysts point out: “Doing nothing may not be an option.”