PrintMy eye was drawn to the provocative headline, “Alcoa head says weak dollar is bad for US industry.” How could that be? Aren’t American manufacturing firms being hurt by an overvalued dollar that increases the price of their goods made here relative, say, to imports from China? That may be true, I learned, but that is not what bothers Klaus Kleinfeld, the CEO of Alcoa. He is worried because a weaker dollar makes the products that Alcoa manufactures outside the United States more expensive inside the United States. “It is actually hurting us substantially,” Kleinfeld told the Financial Times. “Most [US manufacturing firms] have an even larger manufacturing base today outside of the U.S.”
The German-born and educated Kleinfeld, who until recently headed Siemens, said he had been discussing the matter with officials in Washington. And what, I wonder, was their response? “Yes, Mr. Kleinfeld, we know it’s a big problem. We’ve been trying for years to get American manufacturers to ship their jobs overseas, and now this decline in the dollar is undermining our efforts." I wonder what Ron Bloom would have said.
COMMENTS (4)
I assume Kleinfeld isn't talking about finished goods; he couldn't be that insensitive. He must be referring to components manufatured elsewhere for export to a US facility for assembly into a final product, such as raw materials extracted and fabricated elsewhere. But even assuming that to be the case, Kleinfeld isn't telling the full story. US companies with foreign affiliates (CFCs) have latitude in apportioning costs (profits) between the US and the CFCs. If you think brain surgery is complex, take a look at the CFC regulations, the primary purpose of which is to prevent shenanigans (i.e., unreasonable apportionments to the CFC). With regulations so complex few can track costs and p ... view full comment
I assume Kleinfeld isn't talking about finished goods; he couldn't be that insensitive. He must be referring to components manufatured elsewhere for export to a US facility for assembly into a final product, such as raw materials extracted and fabricated elsewhere. But even assuming that to be the case, Kleinfeld isn't telling the full story. US companies with foreign affiliates (CFCs) have latitude in apportioning costs (profits) between the US and the CFCs. If you think brain surgery is complex, take a look at the CFC regulations, the primary purpose of which is to prevent shenanigans (i.e., unreasonable apportionments to the CFC). With regulations so complex few can track costs and profits between the US and the CFCs, strong dollar or weak dollar, the game is the still the same.
Kleinfeld is talking about his final product, whether raw materials (like aluminum blocks) or finished goods (bodies-in-white or other car components). US CEOs talk like that all the time, just not to US employees. Call it insensitive or not, but they all talk that way.
Example: I worked for TI until 2006. I vividly remember around 2002, after TI went through a big layoff in the US, the then CEO was in India, beaming about how TI was going to expand their Indian facilities dramatically. The CEOs' announcement was in a Bangalore facility and TI two days before sacked about 5,000 US employees. Since then TI did not grow at all in the US but has dramatically in India. There are other examp ... view full comment
Kleinfeld is talking about his final product, whether raw materials (like aluminum blocks) or finished goods (bodies-in-white or other car components). US CEOs talk like that all the time, just not to US employees. Call it insensitive or not, but they all talk that way.
Example: I worked for TI until 2006. I vividly remember around 2002, after TI went through a big layoff in the US, the then CEO was in India, beaming about how TI was going to expand their Indian facilities dramatically. The CEOs' announcement was in a Bangalore facility and TI two days before sacked about 5,000 US employees. Since then TI did not grow at all in the US but has dramatically in India. There are other examples (Pfizer comes to mind).
What was curious was TI would put out internal emails to US employees 3-5 times a day that were basically press releases. That particular PR was not sent to employees in the US. I only accidentally found it in a Yahoo PR Newswire feed.
Maybe I'm missing something, but aren't currency valuations expected to rise and fall with trade deficits? Assuming Alcoa's exec is a free marketer shouldn't he view this as a signal to move more operations to the US where presumably it's now cheaper?
Maybe I'm missing something, but aren't currency valuations expected to rise and fall with trade deficits? Assuming Alcoa's exec is a free marketer shouldn't he view this as a signal to move more operations to the US where presumably it's now cheaper?
Pete, you would think so, but shifting large operations, if you moved most of your capacity from location X to Y, isn't so easy. Still, I shed no tears when any company moves operations off-shore then cries when it kicks them in the teeth.
I believe that Robert Reich said it best years ago, government needs to quit looking after American companies' interests (policy as it's always been) and instead have policies that look after American workers' interests. If that means helping Toyota over GM, Siemens over GE, so be it. Governments must look after their citizens, and the mulitnational companies are anything but citizens.
Pete, you would think so, but shifting large operations, if you moved most of your capacity from location X to Y, isn't so easy. Still, I shed no tears when any company moves operations off-shore then cries when it kicks them in the teeth.
I believe that Robert Reich said it best years ago, government needs to quit looking after American companies' interests (policy as it's always been) and instead have policies that look after American workers' interests. If that means helping Toyota over GM, Siemens over GE, so be it. Governments must look after their citizens, and the mulitnational companies are anything but citizens.