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U.S. companies need to find ways to offset Chinese advantages

Post Time:Nov 12,2013Classify:Industry NewsView:40

A typical production worker in China earns about 53 cents an hour compared to $15 in the United States. Chinese employers also have access to tens of millions of rural workers to fill those production positions. Michael E. Collins, a senior associate with Jordan, Knauff & Co., an investment banking firm in Chicago, shared information about Chinese companies during an overview of the residential and commercial window and door industry Jan. 31 at the Insulating Glass Manufacturers Alliance 8th Annual Conference in Sanibel Island, Fla., Jan. 28-Feb. 1. The other advantages the Chinese companies have compared to counterparts in the United States are lower business costs that include labor, land, taxes, energy and commodities, Collins said. The government loans in China often are not repaid, the Chinese infringe upon intellectual property rights and the country graduates 350,000 engineers a year who can duplicate products, he said. He also noted that the quality of their product continues to improve. “The people who don’t think the quality is there are the people who have made up their minds that they don’t want to buy from Chinese companies anyway,” Collins said. “Companies that are using Chinese glass report that the quality is absolutely there. They’ve addressed the shipping issues, and it’s coming over undamaged. The price is there. The proof is that the Chinese are starting to win more and more jobs over here.” The Chinese are picking up more business because American companies can actually see completed, quality jobs on buildings in the United States, Collins said. When an attendee at the IGMA conference told him about a curtain wall project in New York City using Chinese glass, he said he expected a West Coast to East Coast migration but was surprised how quickly the Chinese reached New York. U.S. companies could compete effectively with China by providing faster delivery times and other services, Collins said. “Focus on orders that have to be delivered in a very short time period,” Collins said. “Companies should cater to the customer with frequent design changes that require different styles and varieties. You just don’t want four choices. Jobs that need to be customized at the last minute and delivered to the customer are types that typically have to stay over here. Companies also could integrate installation and provide seamless services from selection of glass all the way through installation.” Disadvantages for U.S. companies include: research and spending viewed as a luxury and being replaced by applied product development; and structural costs, which include corporate taxes, pension benefits and health care, are 31.7 percent higher in the United States than the U.S.’s nine major trading partners--Canada, China, France, Germany, Japan, Mexico, South Korea, Taiwan and the United Kingdom--Collins said. To stay competitive, U.S. companies can hire an outside consultant to help redesign the organization, Collins said. Also, employees should interact with end customers and, if possible, their customers. Manufacturers surprisingly know little about the people who use their product, he said. "You've got to be a miner of data about your company,” he said. Companies need to embrace lean manufacturing, decrease setup and change-over times, cross-train workers and increase the technology content of a product, Collins said. Other topics at IGMA conference Collins displayed a list of trends affecting the industry: consolidation, automation, conservation, litigation, globalization, innovation, professionalism, expansion and contraction. FMI, management consultants and investment bankers to the construction industry, predicted green nonresidential construction to increase to $21.2 billion in 2008 compared to $13.4 billion in 2006. The greatest concern in green building is the first costs of the projects, Collins said. The industry’s key challenge is refocusing life cycle costs. He pointed to a limited willingness to pay for more green buildings despite a cost that is less than 10 percent in most cases. The environment for commercial construction remains favorable because of inexpensive financing, ongoing government and educational construction as well as high corporate profits and plenty of cash on balance sheets, Collins said. The expected strongest sectors are health care, public safety, office and transportation facilities, he said. Collins noted the Association of Foreign Investors in Real Estate ranked the United States the top country in the categories of providing the most stable and secure real estate investments and providing the best opportunity for capital appreciation. Collins also mentioned that larger window and door manufacturers are contemplating an investment in garage doors. IGMA’s next meeting is June 16-19 at the Westin Resort and Spa in Whistler, British Columbia. —By Matt Slovick, editor in chief, Glass MagazineShare this article:

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