The U.S. has long been struggling to keep manufacturing jobs within its borders, while other countries promise companies cheaper labor and fewer regulations to contend with. One of President Donald Trump’s signature campaign promises was that he and his administration would focus on bringing back strong manufacturing jobs to help bolster the middle class.
But after a year, manufacturing has been damaged across the U.S., with the latest ASEA Brown Boveri layoffs hitting over one hundred manufacturing workers. The Swiss company, commonly referred to as ABB and on the market as ABB Ltd (ADR) (NYSE:ABB), maintains a number of operations in robotics, power, heavy electrical equipment, and automation, among other sectors. The most recent round of U.S. job cuts, however, is coming to a transformer manufacturing plant in St. Louis. The ABB closing affects the power grids division, the largest but least profitable part of ABB.
The ABB Group closing represents one of the larger layoffs to take place in the field of manufacturing in recent days. This round of ABB Group job cuts numbers over one hundred, but across the U.S., the manufacturing sector is experiencing a migration of sorts. Jobs leaving America was one of the most hotly discussed issues during the presidential campaign a year ago, and much of that discussion related to the vaunted manufacturing sector, which has long been seen as an indicator of the overall health of the middle class. Especially considering that the industry holds one of the last few options for well-paying jobs for people with lower education levels, although even those opportunities are dwindling.
While the ABB closing represents one engineering company and electrical equipment manufacturer slashing jobs, the overall effect is far more profound both in American politics and on the psyche of its people.
ABB to Close Electrical Transformers Plant in St. Louis: 120 Job Cuts to Follow
The ABB manufacturing plant closing that will leave 120 employees without a job is the result of a wider move within the company to reorganize its power division. Power grids division job cuts were not unexpected within the multinational, as it recently rejected calls from its second-largest shareholder to spin off power from the main company, as it is the least profitable, albeit largest, part of the company.
The final cuts were also part of a longer trend. In 2012, the plant had more than 250 workers. The company said that in recent years, more than 70% of the electrical transformers in the U.S. power grid were made by the company or its predecessors, with the St. Louis plant specializing in medium and large transformers.
“We have a number of job openings across all of our business units. Employees are encouraged to apply for these roles. They will become eligible to receive the ABB severance plan. Counseling as needed for them and their families as well as outplacement services.”
The jobs are also likely to be shipped around the country, as well as beyond the border. Compounding on these manufacturing industry layoffs is that some of these jobs will end up in India and China, with more than 500 positions set to be created over the next two years, according to ABB.
This makes these manufacturing industry closings all the more difficult to handle, as a continued shift towards other nations will likely lead to deeper investments in those areas, potentially leading to more job cuts and closings down the road.
Part of the reason that the company is moving to these locations is that customers in India and China prefer to buy products locally, making manufacturing plants in the U.S. less desirable if they want to effectively capitalize on those markets.
Decline in Profit Margins at ABB’s Power Grid Division Led to Restructuring
The ABB restructuring plan, which is estimated to cost about $60.0 million to $80.0 million, has led to job cuts not only in St. Louis, but also across several other countries that house the international company’s operations.
ABB’s profit margin is one of the main drivers for the restructuring, with the power grids division suffering a nine-percent drop in orders this year, with the profit margin, as a result, similarly plummeting by 9.9%. ABB’s other businesses bring in about 12.5% in profit margin. The company is focused on bringing its power grid division up to about 10% to 14% next year.
The ABB closing of the U.S. plant is a cost-saving measure, while the pivot towards China and India is an attempt to take advantage of growing consumer bases abroad.
Manufacturing Industry Jobs Leaving America in 2017
Aside from the ABB closing, manufacturing industry job cuts abound in 2017.
Ford U.S. job cuts will take place as Ford Motor Company (NYSE:F) plans to move its manufacturing of small cars to an existing plant in Mexico. This was confirmed by Ford President of the Americas Joe Hinrichs in January.
In a similar vein, General Motors Company (NYSE:GM) is also going to be moving more jobs into Mexico. Resulting GM U.S. job cuts have yet to be confirmed.
Rexnord Corp (NYSE:RXN) has also been eyeing Mexico. Rexnord U.S. job cuts will impact over 300 workers as it moves an Indiana plant to Mexico. Trump himself singled the company out in a tweet, threatening to hit the company with tariffs if it decided to go along with its Mexico plan. The tweets, it seems, were ineffective in keeping the jobs in the U.S.
Rexnord of Indiana is moving to Mexico and rather viciously firing all of its 300 workers. This is happening all over our country. No more!
— Donald J. Trump (@realDonaldTrump) December 3, 2016
The overall effect is that the trend of jobs leaving America in 2017 has not slowed, despite harsh words and threats from the president, with hundreds of workers across the country suffering as a result.
“Department of Energy visits ABB transformer facility in St. Louis,” ABB, October 17, 2012.
“Jobs Leaving America Under Trump: US Manufacturing Companies Moving To Mexico Despite President’s Warnings Of Tax Hikes,” International Business Times, February 9, 2017.
“ABB closing St. Louis electrical manufacturing plant; 120 jobs lost,” Fox 2 Now, November 6, 2017.
“ABB to discontinue production in St. Louis; 120 jobs lost,” St. Louis Post-Dispatch, November 6, 2017.
“ABB overhauls Power Grids, cuts U.S. and Swiss production,” Reuters, November 6, 2017.