Forging Operations

[David W.]

Surprising but....

I was recently talking to a President of a company who was going on and on about how WalMart was really putting a huge squeeze on their business. Margins had been squeezed so much by their demanding purchasing tactics, he was unsure if his company could survive if they didn't move production to a lower cost country. He was very dispondent and very negative about his largest customer, Walmart. Nothing new right? Well this guy was Chinese and his plant was outside Shanghai.

He told me it was almost fully decided they would close their plant there and build a new one in Vietnam. The costs were much lower there according to their research.

The conversation was absolutely amazing to me.

[Craig S.]

Re: Surprising but....

Doesn't WalMart advertise about how they buy "American" goods? Craig

[Chuck S.]

Re: Surprising but....

Dave, your conversation isn't all that surprising.

A certain amount of demand for lower pricing is negotiation posturing. It doesn't mean the buyer can get the product any cheaper...it's simply a "poker bluff" to determine if he can't reduce the supplier's price to improve his competitive postion or margin. Like your friend, if a company finds itself with one customer taking almost its entire production, it is in dire straits. It can slowly be extorted into bankruptcy or risk losing its sole customer; they are on the "horns of a dilemma". Customer diversification is the answer for him.

In every economy, the low tech jobs go first as wage rates and the standard of living increases. If you happen to be in that business, then you will see the changeover first. In this country, it was textiles, and I wouldn't be surprised if your friend wasn't in the textile business as well.

China's experiment in free enterprise has been, in my opinion, one of the most phenomenal miracles of the last twenty years. You can see it in the limited documentary film you see on TLC or Discovery Channel...the country went from an improverished people, plainly dressed in rags, and on ten zillion bicycles, to a well-dressed, well-fed population plagued by automobile traffic jams and industrial pollution.

The US still has the undisputed lead in one area of manufacturing...aerospace. Europe would really like to displace us, but when push comes to shove, they can't quite pull it off. The only problem is...all those billions of Chinese can't afford airplanes...yet.

[Patrick H.]

Re: Surprising but....

Doesn't surprise me a bit. My Dad is the one often helping with such negotiations, on the plant side (not the WalMart side). WalMart gives him more headaches than any other company.

Patrick

[John H.]

Re: Forging Operations

I was on Dick's staff when he was Exec VP of Manufacturing at Chrysler, and I can assure you that he now has a smile about a mile wide

[Terry F.]

Re: Forging Operations

I remember learning in nursing school that we spend over 90% of our life time medical expenses in the last 3 years of our life. I see new borns addicted to meth with scrambled brains that cost half a million just to get out of the NICU. Then, they get out of the hospital and start a life time of special needs that is not measureable in terms of dollars. We all get to pay for it with our tax dollars. If we fixed the problems associated with all this junk, half the people that worked for state and hospital workers would be out of work. Its a mess and it is not getting any better. I have only watched it get worse. We are becoming more socialized, I guess.