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America is now more appealing to manufacturers than Germany

By Catholic Online (NEWS CONSORTIUM)
6/3/2014 (3 years ago)
Catholic Online (https://www.catholic.org)

High cost of energy and environmental policies are hurting Germany's economy

Many workers in the United States may agonize over growing job losses thanks to low-cost workers in India or China. For many in Germany, the U.S. may take that role thanks to the low cost of energy.

German manufacturing firms are finding America an increasingly appealing place to open factories, because of the low price of business.

German manufacturing firms are finding America an increasingly appealing place to open factories, because of the low price of business.

Highlights

By Catholic Online (NEWS CONSORTIUM)
Catholic Online (https://www.catholic.org)
6/3/2014 (3 years ago)

Published in Business & Economics

Keywords: News, Europe, Germany


LOS ANGELES, CA (Catholic Online) - The U.S. is the new global standard for low-cost manufacturing says Peter Huntsman, chief executive of Wacker Chemie, a company which produces a wide range of products including ingredients for chewing gum and polysilicon crystals used in solar cells.

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Huntsman is rapidly closing plants in Europe, spending hundreds of millions of dollars to expand his company in the U.S., where it is estimated that a modern petrochemical plant is $125 million cheaper to run per year.

Supplying power to Wacker's main factory in Burghausen has helped push his company's power bill up 70% to nearly half a billion Euros in the last five years.

In Louisiana, it is a different story, and chemical makers are paying 22% less for power than they did seven years ago.

Part of this problem is Germany's decision to shift towards green energy, which as a direct result, causes their companies to pay some of the highest power prices in the world. According to the European Union's statistics agency Eurostat, a German company pays about $0.21 per kilowatt-hour. In contrast, the U.S. Energy Information Administration reports that industrial electricity prices in Louisiana are just $0.055 per kilowatt-hour, and still falling.

"It's not a question of whether other countries are competitive or not," said Huntsman. "They're not."

Low average labor costs are another powerful reason America has become an attractive choice for manufacturers again. Worker productivity is far higher in the U.S. and when the cost of shipping goods from Asia is taken into account, average labor costs remain low.

This reversal is rapid, as just three years ago politicians in Washington were discussing how to copy Germany's success.

The energy policies of German Chancellor Angela Merkel are a large part of the reversal. Policies, which were designed to boost the amount of renewable energy sources in Germany, stop climate change through regulations and cut dependence on foreign gas and oil.

These policies have hurt German industry, as half of the country's industrial companies believe their global competitiveness is threatened by these new policies. Nearly a quarter of these companies are shifting production abroad or are considering doing so, and the U.S. is a prime destination.

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