The article explores the significant challenges and emerging possibilities of reshoring manufacturing to the United States, using Guardian Bikes' successful transition from China as a case study, while also examining the broader economic and political debates surrounding this trend.
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Sam Markel: So we produce on each assembly line about a thousand bikes a day,
but that correlates into a bike every 30s.
VO: Here in Seymour, Indiana, Guardian Bikes operates a
540 zero zero zero square foot plant that manufactures high end
bicycles for kids.
The company is pulling off a unique feat starting in 2022.
It began shifting its manufacturing out of China.
Brian Riley: It wasn't easy. It took a lot of risk taking,
and it took a lot of kind of blazing a trail.
And it even took kind of getting into losing money.
VO: Guardian story reflects the broader difficulties that companies face in
moving manufacturing back to the US.
Between 1997 and 2023, the number of U.S.
manufacturing firms and plants dropped by 25% as global trade
barriers fell. In the late 1970s, nearly 20 million Americans were
employed in manufacturing jobs, accounting for more than 20% of
total employment.
Today, that number is just 12.7 million.
In President Trump has pushed to revitalize manufacturing.
President Trump: America will be a manufacturing nation once again.
VO: Companies like Apple, IBM and Johnson and Johnson have
also pledged to invest billions in the coming years.
But economists and trade experts are divided on whether a
manufacturing renaissance is possible,
or if it even makes sense.
Scott Paul: There are many.Obstacles to moving work back to the United States.
Colin Grabow: Think about how much a pair of sneakers would cost if they were
made here in the United States, it would be a lot more expensive,
so we should all welcome.
The fact that goods are being produced in the most efficient way
is possible, because that lowers prices for us and allows us to
raise our standard of living.
VO: To look at the challenges and possibilities of bringing
manufacturing back to the US.
Cnbc visited Guardian Bikes Midwest facility.
Guardian bikes got its start in 2013,
making safety brakes for bicycles.
A few years later, the company pivoted to making the
entire bike.
Brian Riley: And then eventually decided we could.
We could do a lot more.
VO: At the time. Bicycle production had largely shifted outside of the US.
Brian Riley: Let's say you go all the way back to World War II era. Pretty much
every bike sold in the United States was made in the United
States. And then by the time you get to 70s,
80s, 90s, it all evaporated.
VO: At first, the company imported its bikes from a Chinese OEM,
a manufacturer that makes products for another company based on
specifications it provides.
Brian Riley: These OEMs got an order wheels and tires and handlebars and grips,
and you kind of work with them to create a spec on what you'd like in
a bike.
Sam Markel: So a bike in a box is what we call it.
Came on a container, floated across the ocean,
came into the West coast, and then was distributed through a
distribution model in the US.
VO: As the brand grew, Riley wanted greater control over
quality. Manufacturing onshore would give them a better visibility
over the final product, as well as lowering shipping and
inventory costs.
Brian Riley: Your lead time is like 6 to 8 months to get bikes,
which oftentimes is the case when you're making them in China or
overseas. So you're always see shipping it across the ocean.
That makes it really hard to stay in stock of the right colors and
the right sizes and the right skews that people want.
Sam Markel: When we're ordering stuff from China, we have to build up massive
amounts of inventory here in the US to protect the business.
But when all the materials come from the US,
we can build the bikes essentially just in time.
VO: In 2022, the company opened its Midwest facility.
Today, the company says its annual revenue is over $100 million and it
produces about 12,000 bikes per week.
Sam Markel: We weld a bike in about three minutes in a full cycle,
and most of our component level parts are cut between 5 to 9
seconds, so this one here has shot 442,000 hubs since we've had it
over the last two years.
VO: But pulling off Made in America is not without its challenges.
The biggest problem finding parts outside of China.
Brian Riley: The supply chain for a lot of the parts,
doesn't exist in the United States anymore.
You have to talk to companies that might be making a totally different
part, and try to convince them to make some of the parts that you're
doing domestically.
VO: Now, Riley says that new tariffs are starting to change that
dynamic.
Brian Riley: With kind of the most recent tariff environment.
Now we're starting to get either cost parity or in some cases,
the domestic parts are cheaper than what you can get out of China.
VO: Guardian bikes has also been able to combat the advantages of
offshoring, like labor costs.
By creating a highly automated production process.
Sam Markel: We have to automate, and it has to be fast,
and it has to be very, very specific so that we can make
turns and have high volume production here with less people.
VO: But bike making still requires an element of human labor,
and finding skilled workers is something that many U.S.
companies have struggled with.
Guardian was able to find workers who were laid off from their jobs
at nearby auto plants, and the proximity to other
manufacturers helped them source parts locally.
Sam Markel: Our Vanguard is made at a company just down the street.
Our tubes purchased in Columbus, Indiana,
so a local supplier just 45 minutes north of us.
VO: By the end of 2025, the company thinks that 70% of the
bike's components will be made in the US.
By 2026, it says, that number could reach 100%.
To understand the challenge of ensuring,
let's take a look at what it takes to make a bike.
There's chains, handlebars, tires,
reflectors, rims, grips and a steel frame.
All of these components, called inputs,
require specialized machinery and parts to create them,
and these are supported by a bigger network of industries.
When a factory opens, input suppliers tend to open up
near the factory, creating a local supply chain.
Because of this, it's not always easy or even
possible in some cases to move every component to the US.
Scott Paul: There are many obstacles to moving work back to the United States.
One is that, oh, the inputs that I use all come from
overseas. And so how do I get access to those for the time being
if they don't exist in the United States.
There's also, in some industries, the sad fact that we're almost
starting from scratch.
Becky Quick: Why is it so difficult or so expensive to manufacture those same
toys here in the United States? You said you think it's impossible.
Rick Woldenberg: Well, I've looked on and off for ten years because at various times
there have been incentives to produce products in the US,
and we've tried to even create a range we could make here.
The reality is that nobody wants to produce products at our volume.
The labor costs in this country are also very high and labor is not
really available, so we're just kind of boxed out.
VO: So why did factories leave in the first place?
As trade barriers lowered in the late 20th century,
U.S. companies began moving manufacturing operations overseas
or not opening them at all, instead ordering components from
OEMs in countries like China, Mexico,
Vietnam and Thailand.
It started with globalization in the 80s.
The North American Free Trade Agreement in the 90s,
and then China joined the World Trade Organization in 2001.
Cheaper labor abroad meant lower prices and closed factories here.
China has since emerged as a dominant player,
first in textiles and now in consumer electronics.
Scott Paul: And that's for a couple of reasons.
Number one is just the size of China's manufacturing base.
It dwarfs everybody else in the world.
And so just size makes a difference.
VO: And then there's cost.
The average wage for a manufacturing worker in the US is
around $35 per hour.
In China, that rate is around $4 per hour.
In Vietnam, it's even lower at $1.30 per hour.
China has also spent billions, more than any other country,
to train its workers and build high tech factories.
Jensen Huang: China is an extraordinary manufacturing capability,
and they are doubling the number of chips that they're building every
single year.
VO: The most recent data available from 2019 estimates that China is
spending on industrial policy.
That year was around $248 billion.
That's compared to $84 billion by the US.
0.39% of its GDP.
China's tax benefits for research and development also rose by an
average annual rate of 28.8% between 2018 and 2022.
The US doesn't prop up its manufacturing base in the same way,
but it does provide some support for domestic production.
The 2022 Chips act, for example, allocated around $39
billion in federal subsidies and grant support for semiconductor
fabrication plants.
But those efforts are narrowly focused on one industry for
national security purposes.
Colin Grabow: The Biden effort was more premised on the idea that their particular
manufacturing activities that for national security reasons,
such as with chips, should be done here in the United
States.
VO: In the US, manufacturers also face concerns around environmental
impact.
Scott Paul: Even if we're able to bring more manufacturing back to the states.
Our environmental laws are there for a reason,
and it's to prevent what we saw at the turn of the 20th century with
cities that were cloaked in smog, with rivers that caught on fire,
with toxics leaking into our water supplies.
VO: Today, manufacturing hubs in China and Vietnam don't impose the same
environmental standards on companies as the US does.
Scott Paul: Working conditions are poorer and labor costs are a lot lower in
China. Same goes for environmental and pollution controls,
where those are very lax in China with lower standards.
And so the environmental costs that those firms have are far less than
what you would see in the United States of America.
VO: All of these factors making it challenging for manufacturers in
the US to be cost competitive without government support.
Earlier this year, solar panel maker Meyer Berger
closed an Arizona plant, citing an inability to compete with
lower priced products made in Asia.
Its story is one of thousands over the years.
Scott Paul: Every nation obviously has a right to try to boost its economy,
but there are guardrails that have been put into place so that some of
those efforts don't come at the expense of other countries.
Unfortunately, China has taken all of those guardrails off,
and unfortunately that's come at our expense.
It hasn't been a win win in the global economy.
VO: As conditions for manufacturing have become more favorable
overseas, the US has shifted from a goods economy to a services one.
Today, service jobs account for over 80% of non-farm employment in
the US. President Trump has claimed that new factories will bring more
jobs to the US, but economists are divided over whether a
manufacturing renaissance makes sense.
Robert Reich: I don't see. The tariffs bringing manufacturing back to the United
States, because what the president is talking about,
I assume, are manufacturing jobs, not just manufacturing factories.
We're talking about jobs.
The problem is that most of those jobs were lost not because of
trade. They were lost because of automation.
VO: And some manufacturers are facing challenges finding workers,
let alone skilled workers.
Currently, there are over 400,000 open manufacturing positions in the
US.
Colin Grabow: So I don't see a lot of evidence that Americans are clamoring for
these jobs. Which makes sense, because your average manufacturing
job doesn't pay as well as your average service sector job.
VO: President Trump has touted tariffs as a mean to boost goods production
beyond tech, but the debate is ongoing on whether tariffs can turn
back time.
Colin Grabow: You can probably find individual examples of tariffs being a success
for particular businesses that block out foreign competitors.
So they get to expand production, raise their prices,
and it's a win for them.
But overall, the context of the broader U.S.
economy, I think is clearly a net negative.
VO: But others argue that tariffs could bring back American jobs in some
industries and revitalize factories closed due to offshoring.
Robert Reich: A responsible and strategic use of tariffs is important for the
success of manufacturing policy and bringing some jobs back to America.
Tariffs alone will not do it, but our companies are not operating
in a vacuum.
VO: As for Guardian Bikes, it says it's not waiting on policy
and is continuing to bet that made in the US is not only possible but
advantageous. Today, its Seymour facility employs 250
workers, with plans to hire more as it scales up production.
Brian Riley: Even if it's not necessarily cheaper right away to make
something in the United States, we think it ends up being a
competitive advantage for us to do it,
and we find that those competitive advantages often outweigh a little
bit of a cost increase.
It's exciting to prove that it's possible,
and to do something that hasn't been done here in so many decades.
