American Factory won the most recent Oscar for Best Documentary. You’re already paying for it so you might as well watch it on Netflix!
The level of access and candor is comparable to what you would see in The Office, but in a real workplace, mostly the Dayton, Ohio factory opened by Fuyao, a Chinese automotive glass manufacturer.
There are some great scenes in which Chinese and American cultures meet, e.g., an American hosts 13 Chinese guests for Thanksgiving with a huge turkey and ham, plus lots of backyard pistol and shotgun shooting.
The factory had been a unionized GM plant from 1981-2008. Fuyao invested $500 million to re-open it as a glass factory in 2016 (investment eventually totaled $1 billion). The opening ceremony hits a rough patch when Senator Sherrod Brown (D-Ohio) comes to speak about how all of the workers should unionize and take back what is rightfully theirs. This is later echoed by an Ohio state rep. Both of the politicians who appear in the movie are huge advocates for unionization despite the fact that they watched the unionized GM jobs migrate south and/or offshore.
How does it work to hire an older heavier heavily tattooed workforce? Not profitably at first. Chairman Cao: “American workers are not efficient and output is low.” He’s a regular cheerful hard-working guy who founded the company in 1987.
Americans are sent over to China so that they can see how a profitable line runs. At least one is too fat to fit all of his tattoos under the provided safety vests. The Chinese plant is like a ballet compared to the American plant. Workers are young, slender, and don’t object to their 12-hour shifts. If opposite sex workers fall in love, they get married at the big New Year celebration. (Same-sex marriage is not available in China and single parenthood is illegal, but that doesn’t mean they’re not celebrating a rainbow of love. YMCA was played at the factory New Year party. There is also an awesome company song, a hymn to transparency.)
(Can Chinese factories deliver Western quality? See this Car and Driver article on the Volvo XC60.)
How to explain the difference in output and quality? An American fluent in Chinese says to a counterpart in China: “Most American workers are there to make money, not to make glass.”
The biggest disappointment, however, turns out to be in the high paid American managers who proved ineffective and disloyal in the chairman’s view. They are fired and the new Chinese president who spent half his 53 years in US explains to the young Chinese supervisors that Americans shower children with praise and that’s why the resulting grownups are all overconfident. He reminds the Chinese overseers to keep praising the American line workers just for showing up.
Big drama in the film is provided by a United Auto Workers unionization drive and election. There are enough disgruntled workers to generate some negative publicity on unsafe conditions and excessive demands. The company spends $1 million on an anti-union consultant. The chairman comes over, surveys the middle-aged whiners, and tells subordinates to hire some young people. A Chinese furnace expert who is there on a two-year knowledge transfer stint says, regarding the union idea: “one mountain cannot hold two tigers.”
Eventually, the company is able to stop the red ink from flowing. A key part of that seems to be installing robots to do the stuff that Chinese workers can do quickly, but Americans cannot.
If you’re interested in business or China, you should see American Factory!
Presumably reflecting Americans’ lack of interest in numbers, the film never tries to explain why Fuyao wanted a U.S. factory. Why not build an additional factory in China and ship the output wherever in the world it is needed?
Chairman Cao explains in this interview:
First of all, China had a VAT tax, and the United States did not. Secondly, labor costs in the United States are very high, accounting for 40% of the operating cost, whereas in China it only accounts for 20%, but the proportion of insurance paid by Chinese companies was very high. Although labor costs are half as expensive domestically, we calculate that in our case we were nearly 4% more expensive than the United States, plus the VAT for auto glass, which is around 12%. Third, the American energy prices were lower than China’s. The price of natural gas there was one-fifth that of China’s, electricity was only 40% of China’s price, gasoline cost only half of what it did in China, and the cost of transportation and logistics were relatively low. These inputs made the price 4% to 5% cheaper, so the overall calculation made production 16% to 17% cheaper. Moreover, if I shipped the glass from China to the United States, the freight costs would increase by 15% to 20%.
Perhaps make it a double feature and watch the movie Gung Ho
https://en.wikipedia.org/wiki/Gung_Ho_(film) – “Gung Ho is a 1986 American comedy film directed by Ron Howard and starring Michael Keaton. The story portrayed the takeover of an American car plant by a Japanese corporation”
This documentary was indeed interesting. The comments online tend to focus on the fate of the workers and how globalization is hard on their lives and their ability to earn a living. All true.
I took away a different lesson, however. What I learned was to never, ever open a factory in the US.
The workers in China are clearly more willing to work harder and more carefully than the American workers. And it’s a lot more practical to work for very low wages in China than in the US, as expenses are so much lower.
I imagine Fuyao regrets investing their $500 m in the US. What a disaster.
Twenty years ago, I worked in Japan and visited a number of factories. The factory workers are simply much harder working, more conscientious in their work, and aren’t spending all their time unionizing and belligerently fighting with management. Instead, they work hard.
Japanese management, for their part, is much more focused on a quality product and treats their workers better.
Based on the black plague & historic interest rates, China’s productivity is more a story of their surplus population of workers & their lack of leverage rather than the ethics & dedication we’ve been taught. We’re taught in terms of Chinese workers being more dedicated, probably because we’re told communism is the great equalizer of workers, when in reality there are just too many of them.
American employees are just fine. It’s the price of American workers that is the problem. American workers in the high-paying sectors of the American economy are conscientious, creative, and work the longest hours on the planet.
They’re also compensated at a level far higher than Chinese factory executives, let alone Chinese factory workers.
At global manufacturing wages, you can hire from the middle, if not the top, of the Chinese worker distribution.
However, for those same global wages, we’re not sending our best.
Americans are sent over to China so that they can see how a profitable line runs. At least one is too fat to fit all of his tattoos under the provided safety vests. The Chinese plant is like a ballet compared to the American plant. Workers are young, slender, and don’t object to their 12-hour shifts.
Now you’re the sort of person whom you criticize regularly. Famously, many of these middle aged and older tattooed Ohio factory workers are Trump voters and you, a rich, educated Jew who leaves near a coast, looks down on them.
Hah! In case it wasn’t clear from my web site in context, I don’t think I would last long in either factory! And certainly if I showed up in the Chinese one, I would expect the workers to wonder “What is that old fat slow clumsy guy doing here?”
The question is, why would a Chinese glass company want to open a factory in the US? Why wouldn’t they continue to take advantage of their vastly more productive workers, and just ship the product overseas like everything else? Not only do they work 12 hours a day, but 6 days a week.
SP: It must be that labor is a small part of the cost of a finished product and shipping from China is expensive and slow. Certainly there was a lot of capital equipment in that factory. But you’re right, the film should have spent a few minutes explaining why the idea made any sense. Also, why not Mexico or the American South if the goal is to be close to auto assembly plants and not fight with workers accustomed to UAW/GM wages and benefits?
Could it be fake construction, something similar to what Foxconn did in Wisconsin?
– The company announces a new modern factory, the first on the US soil, and a stunning 1 billion new jobs, which is a great publicity stunt that draws praise from politicians. The company global operations are immediately excluded from the US tariffs.
– Trump twits that his great policies are working and that the stock market is the best ever.
– The local mayor is all set to win the re-election.
– The governor promises huge tax breaks and receives the badly needed national exposure and compliments from the GOP economists (yes, economics is the new pseudo-science); he is going to run for president in the next term.
– AOC and friends will get publicity as well: that is their chance to demonstrate and to yell that everything with capitalism is wrong.
– Elizabeth Warren attracts new campaign funding by asking a simple yet profound question of why not 100% of workers are of the Cherokee origin.
– The New York Times will get an opportunity to publish 150 op-eds, of which 20 praise the might of those American workers who are non-white and gay, 25 will pontificate about global warming, 45 denounce Trump as a menace to our society, and the rest is the usual clickbait.
Everybody wins. People get publicity and fresh wind in their sail. In the end, the factory never gets built, as it makes no economic sense to the Chinese owners.
PG: if labor is such a small part, which makes sense at least intuitively, why was there such a large focus on that component? I suppose there is some benefit to being near the big auto makers business and engineering hubs in terms of face time.
M: Perhaps it is just a trojan horse to get reduced taxes and tariffs for the company at large, including their imported products.
There were other things that didn’t make sense. At one point in the documentary, I think they said they were $40mil in the red for one month. The suggestion was that this was attributable to the inefficient American workers. The plant only employed about 2000 Americans, which works out to $20k a month per, about 10x their average wage which was said to be $14/hr. The Americans would have to have been destroying or sabotaging equipment to be responsible for those losses.
Senorpablo:
I would disagree with their characterization as a trojan horse: they are not set to kill people or destroy property. Would you say that Foxconn a trojan horse for Hon Hai Industries?
I tend to agree with your sentiment otherwise. The loss may well be a cost of doing business (or doing BS, however you may think of it–that’s why I wrote of a promise of “a stunning 1 billion new jobs”.) If so, those might have been calculated losses.
I found a good source (interview with Chairman Cao) and updated the original post. Labor costs are much higher in the U.S., but taxes, shipping, and other costs are lower. So it does make business sense whenever selling to a North American customer. Also, the film doesn’t explain this, but it seems as though they bought a float glass factory in Illinois during the Collapse of 2008. That’s the input to the Ohio plant.
Thank you Phil: some interesting stuff there.