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Originally Posted by outfished
And a big horrah for Penn! In China, it is estimated by many that of the 10 million children out of school, over 5 million are working in factories! Labor cost will drop, prices will go up and we get   IMO, you sold your soul to the devil  |
Yup, labor is cheap in CHina. Once they get their act together it will be cheap somewhere else. It is a pretty simple math equation to perform. Take a spinning reel that is more labor intensive to assemble than it is to make the parts, take one very well-paid US worker versus the on-going rate of a CHinese factory worker. One of our US workers will pay for an entire assembly line. Factor in the fact that Penn was losing more than $3million per year at our Spinning Reel Factory, and we were faced with three decisions:
1. Stop selling spinning reels altogether. Save a $3mil lost, stop selling all spinning reek products, while foreign competition continues to pump reel after reel into the market.
2. Make Reels in the US and lose $3mil/yr or double or triple the price of our reels Not an option. We would be better off with the first option.
or...
3. Close US Factory, save $3mil/year, help find employment and do the right thing for displaced employees, and import spinning reels that are made to Penn specifications so Penn can make money and keep employing the three hundred other US workers at Penn. Someone inside our group said this best, It is not how many people we are losing, but how many we can save.
What is you decision if faced with these three options??? Sold our soul to the devil? I think not. Walk a mile before casting the first accussation. No one likes what is going on, but at the end of the day, a company has to be profitable and viable if it is to survive.
How about an incentive for moving offshore courtesy of our good goverment and their abiliity to tax. Here is an interesting little tax we all pay, the Federal Excise tax levied on all fishing related products. In its simplest form, this is a 10% tax paid on all fishing products. It is calculated upon the first price paid for an item when it is sold in the US. So when Penn sells an item made in the US, we are already at an extreme disadvantage to our foreign compeition. What they will do is sell the product into the US at a lower value, possibly their cost, to a separate holding company, who then "sells" the product back to their US counterpart company. OK, so it costs them $1 to sell an item, and they pay a 10cent tax on this. They can then markup the item to distributors and dealers at a disadvantage to Penn because we must pay the 10% on the first price sold (often to distributors). So lets say instead of the $1 our competition is selling their product at, we are at $8. Our tax is 80cents compared to their 10cents. This is a very elementary version of what takes place, but I am sure anyone can get an idea how we are already behind the proverbial 8-ball with foreign competition.
Penn is trying to keep jobs in the US, and will do so to the best of our abilities, but the tackle industry is the laggard in the great outsourcing project that is China. Take a look at just about any textile, clock, toaster, microwave, etc. Manufacturing is becoming more and more impossible in the US, and we are managaging to maintain a lion share of our reels as still being built in the US.
Brent Kane
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