Economy

Letter to the Editor: Take a Lesson from the Foundry Industry

September 25, 2018

I am a new subscriber to your newsletter, but I’m not new to manufacturing. Most of my career was spent working at a medium-sized machining company located in the Southeast, which specialized in production machining mainly to support automotive companies and other assembly plants in the United States. Over the past three decades, I have witnessed firsthand what unfair trade practice does to domestic companies.

At the company where I worked, the majority of the iron and aluminum die castings were purchased domestically. However, over the last decade or so, foundries have dwindled in this country to a sad state all because of unfair trade practices by China. And it happened so subtly that no one realized until it was too late. The big corporations were so much about getting cheaper prices in order to boost their profits that they turned a blind eye and a deaf ear to what would happen in the long run. The prices of cars didn’t decrease nor did the wages of the employees increase. But what did increase were the salaries of the CEOs/Presidents (which is a huge spread from what it was years ago), executive bonuses and higher returns for stockholders. As long as this was occurring, there was no reason to question anything. Pure and simple…it’s called GREED.

It was an eye-opening experience for me when my company was given an ultimatum by one of the “Big Three” to either match the prices they could get in Korea or they would terminate our contract, which still had three years left on it. It was an irrational demand since the cost of the raw casting alone was more than the target price they gave for a completed part. How is this possible? Because the Chinese government provides subsidies to the companies in their homeland so they can sell the product at less than their costs. They also receive money from their government for tooling, which costs hundreds of thousands and up to millions of dollars. These Chinese companies can afford to waive upfront charges in order to get the business. Essentially, they are buying the business. How long can they afford to do this? Not long, and the Chinese government knew this, but it was part of their long-term strategy to enter and eventually capture the U.S. market. They were willing to sacrifice for the short-term knowing they would gain in the long-term…and boy did they gain. Their long-term goal of making U.S. companies dependent on them for castings worked.

Prices in China have increased and U.S. companies are paying them due to the limited amount of capacity available in the U.S. The foundry industry has been crippled and does not have enough capacity to support all the demand. China’s plan to quietly reduce the competition worked. Foundries that were forced to idle their operations due to decreasing demand are faced with unreasonable EPA restrictions, making it costlier to re-open than to build a new operation that meets EPA rules.

This is another subject, but how is it the countries the U.S. buys from do not have to play by the same rules? They don’t have clean air and some of them still use child labor. In the U.S., the big corporations preach about humanities and the importance of clean air, but those convictions are quickly forgotten when the executives of these large companies see an opportunity to fatten their purse. My story doesn’t end well. The company ended up filing for bankruptcy and the lives of many were negatively affected.

I wanted to take this time to share my story and my views so that others can see from my experience what happens when we depend solely on other countries for our commodities. I see the same thing happening in the steel industry with the declining number of steel mills over the years. I am so thankful we have a president that is trying to do something about it before it is too late, as in the case of the foundry industry.

The action the president is taking in dealing with unfair trade practices should have been taken a long time ago. At the same time, the corporations here in the U.S. need to consider more than just their bottom line. This includes the steel mills. Don’t get blinded by greed. Pay people a fair and decent wage and there will not be a need for unions. The medicine is bitter when it goes down, but it will make us better in the long run.

Sonya Mitchum Joyner
Director of Business Development
Pegasus Steel
Goose Creek, SC