Speaker 1: When we abandoned the policy of America. First, we started
Speaker 1: rebuilding other countries instead of our own. The skyscrapers went
Speaker 1: up in Beijing and many other cities around the world,
Speaker 1: while the factories and neighborhoods crumbled right here in Detroit.
Speaker 1: In August, Donald Trump, then still accountidate, laid out his
Speaker 1: economic agenda in a major speech. In it, he pledged
Speaker 1: to generate more manufacturing jobs for Americans, and he couldn't
Speaker 1: have chosen a more appropriate location. Detroit, the poster child
Speaker 1: for post industrial decline. It did redounded sense of wanting
Speaker 1: to bring back Detroit. In the audience was a twenty
Speaker 1: six year old Detroit native, A. K. Bennett. We've heard it,
Speaker 1: you know, a few times, you know, from multiple politicians. UM.
Speaker 1: And there still hasn't been that true push to really
Speaker 1: bring things back, um in terms of manufacturing. But as president,
Speaker 1: Donald Trump has made a US manufacturing revival one of
Speaker 1: his biggest priorities in terms of spurring new manufacturing and industry. Um.
Speaker 1: There has not been a lot of outside help, not
Speaker 1: a lot of outside help yet, but there is a
Speaker 1: chance that could be about to change. Just one month
Speaker 1: after Trump's November elections, came the first promise to return
Speaker 1: significant jobs to US shores. We're gonna get things coming.
Speaker 1: We're gonna get Apple to start building their damn computers
Speaker 1: and things in this country instead of in other countries.
Speaker 1: It's not Apple, but a company that works very closely
Speaker 1: with it. Fox Con is a Taiwanese company which makes
Speaker 1: the iPhone for Apple and the Xbox for Microsoft. It
Speaker 1: has promised to invest seven billion dollars in the US
Speaker 1: and generate as many as fifty new jobs in the process. Hi.
Speaker 1: I'm Brad Stone, and I'm Alex Wet and this week
Speaker 1: I'm Decrypted. We'll take a very close look at Fox
Speaker 1: Comp's plan and whether it really will create those good
Speaker 1: American factory jobs that President Trump is calling for. This
Speaker 1: is our third episode in a series looking at the
Speaker 1: impact that automation could have on our jobs. If you
Speaker 1: have a story to share, send it to Decrypted at
Speaker 1: bloomberg dot net. Advances an industrial automation are making it
Speaker 1: cheaper than ever to bring manufacturing jobs back to the US,
Speaker 1: But by its very nature, that's because it would require
Speaker 1: fewer workers on the factory floor. We'll see whether those
Speaker 1: jobs could still give a boost to communities in the
Speaker 1: heartland and we'll find out what's in it for fox
Speaker 1: Con stay with us. So, Alex, were you surpris eyes
Speaker 1: by fox cons announcement that it was going to build
Speaker 1: a factory in the US. Yeah. I've been looking really
Speaker 1: closely at like the costs of making iPhones and any
Speaker 1: other electronic device, and it's the labor costs which make
Speaker 1: a huge difference between China and the US, and that's
Speaker 1: why they do this stuff in in in the cities
Speaker 1: around China. There's so much theater right now around companies
Speaker 1: saying they're going to bring jobs back to the U S.
Speaker 1: How real is this and when when do we think
Speaker 1: we'll see a fox complant in the United States? It
Speaker 1: clearly takes a while to build these things up, but
Speaker 1: it could be, you know, next year that we see
Speaker 1: something that The question is when they bring jobs back
Speaker 1: quite how many jobs will come and what kind of
Speaker 1: a boost does this give to potentially rest belt cities. A. K.
Speaker 1: Bennett comes from a family of auto workers on both
Speaker 1: sides of both my mother and father's side. I would
Speaker 1: say about were employed in the by the Big Three.
Speaker 1: The so called Big three means they work for General motors,
Speaker 1: Ford and Chrysler, you know, through the fifties, sixties, seventies,
Speaker 1: and eighties. But grandparents, uh, two of my four grandparents
Speaker 1: were multiple and uncles, cousins. The post war Haiti I
Speaker 1: motor city, it was kind of like a golden age
Speaker 1: for American manufacturing. There are still some cousins and to
Speaker 1: the day that are working for the auto industry, whether
Speaker 1: it be for a supplier or one of the Big Three.
Speaker 1: But of course it's not just Detroit. The whole Rust
Speaker 1: Belt was booming with industrial activity for much of the
Speaker 1: twentieth century. Ohio typically ranked second only to Indiana in
Speaker 1: the US in steel production. Wisconsin meanwhile, fed that metallurgy
Speaker 1: industry with foundry and metal working equipment, which were a
Speaker 1: staple of its economy. Donald Trump is quick to evoke
Speaker 1: those times when he talks about manufacturing what you have
Speaker 1: in mind, or the jobs from the nineteen seventies of
Speaker 1: people kind of standing on an assembly line, being able
Speaker 1: to go from high school into uh good job that
Speaker 1: enables you to buy a house, in a car and
Speaker 1: have a pretty good life. That's Caroline Freud from the
Speaker 1: Pizson Institute, a DC based economics think tank, and those
Speaker 1: jobs frankly don't exist anymore. There's a few issues of
Speaker 1: play here. One big problem has been the cost of
Speaker 1: full time employment. American workers are more expensive than workers
Speaker 1: in China or other parts of the world. A factory
Speaker 1: worker here can cost close to forty when you take
Speaker 1: into account health, insurance and other costs. He accounts bought
Speaker 1: in China cost just one tenth of that. But cheaper
Speaker 1: still are robots, which offer the tantalizing prospect of a
Speaker 1: US manufacturing resurgence. The snag is that with robots doing
Speaker 1: a lot of the work, they probably won't bring back
Speaker 1: the millions of jobs that Trump is looking for. The
Speaker 1: number of Americans and manufacturing jobs has fallen from a
Speaker 1: ninety nine peak of almost twenty million to about twelve
Speaker 1: point four million today, but industrial output in that time
Speaker 1: has gone up because factories are increasingly automated. That also
Speaker 1: helps explain why labor costs in the US are higher.
Speaker 1: Rather than assembling components manually, these workers operate complex machinery,
Speaker 1: doing work that would otherwise be done by several people.
Speaker 1: If you look at manufacturing, there's a big increase in
Speaker 1: managerial work, or work that requires computer or engineering skills
Speaker 1: and a decline in the production worker because robots can
Speaker 1: do those kind of routine tasks more efficiently. Back in Detroit,
Speaker 1: Ak works as a project manager in the construction industry. Now,
Speaker 1: a K says he's not a Trump supporter, but he
Speaker 1: went to see Trump layout his economic plan, and Detroit
Speaker 1: was also one of the final three locations that fox
Speaker 1: Con is considering for a mega factory in the US.
Speaker 1: Detroit is up against Racine, Wisconsin, and Columbus, Ohio to
Speaker 1: win the plant, according to people familiar with the matter,
Speaker 1: which means A K is in a pretty good place
Speaker 1: of a huge industrial building project comes to his town.
Speaker 1: This would be a massive project. Uh that would you know?
Speaker 1: There's there'd be thousands of trades persons on site. But
Speaker 1: let's break this down. When fox Con talks about creating
Speaker 1: fifty jobs in the US, it doesn't mean the factory
Speaker 1: will have fifty workers. That number also includes the people
Speaker 1: who build the plant and then work in the extended
Speaker 1: supply chain feeding it with components. The plant would be
Speaker 1: huge in terms of construction jobs, design jobs, engineering jobs,
Speaker 1: and then um going forward for an additional logistics and
Speaker 1: other suppliers. Potentially, my understanding is from talking to sources
Speaker 1: that the factory could employ close to ten thousand people
Speaker 1: in the long term, and that fox could build other
Speaker 1: satellite plants elsewhere in the US and alex What will
Speaker 1: they be making there. The idea would be that this
Speaker 1: main plant would make large l c D display panels
Speaker 1: which would then be shipped to these other factories to
Speaker 1: make things like computer and TV screens, And these are
Speaker 1: the factories that Foxconn is thinking about building, So not
Speaker 1: the famous iPhone, right. It still requires a lot of
Speaker 1: manual labor to put an iPhone together, so the iPhone
Speaker 1: isn't the ideal project to build in a highly automated
Speaker 1: factory in the U S. L c D screens have
Speaker 1: been built by robots for years, so what specifically is
Speaker 1: holding back the iPhone from being produced or at least
Speaker 1: assembled in the US. So a lot of the components
Speaker 1: which go into an iPhone can be built by robots,
Speaker 1: but actually that final process of sticking all these bits
Speaker 1: together can require some really fiddly screws to piece it
Speaker 1: all together, and that's not something that's very easy for
Speaker 1: robots to do, right. Those fiddly screws are difficult for
Speaker 1: robots and tasks like printing silicon chips that's far better
Speaker 1: suited for automation, which is why there is still so
Speaker 1: much semiconductor manufacturing in the US right. Intel is building plans,
Speaker 1: particularly in Arizona, to processors. Well, there's a somewhat morbid
Speaker 1: joke that the fact of the future will just to
Speaker 1: have two employees, a human and a dog. That's Eric Brynjolfson.
Speaker 1: He's a professor the m I. T. Sloan School of
Speaker 1: Management and the co author of the influential book The
Speaker 1: Second Machine Age, Work, Progress and Prosperity In a time
Speaker 1: of brilliant technologies, the humans job will be to feed
Speaker 1: the dog, and the dog's job will be to keep
Speaker 1: the human from touching any of the equipment. Although I
Speaker 1: should say we're probably not at the dog and human
Speaker 1: stage yet. But one thing Eric did emphasize to me
Speaker 1: is that for all the rhetoric we hear from politicians
Speaker 1: about how manufacturing will bring back jobs for companies like
Speaker 1: Fox Com, this really isn't about jobs at all. You know,
Speaker 1: if you walk around a lot of American factories that
Speaker 1: virtually lights out with very few humans, and the few
Speaker 1: humans who are there, you know they're paid pretty good wages,
Speaker 1: but it's not the thousands or millions of jobs we
Speaker 1: used to have in that kind of work. It's really
Speaker 1: the to establish good relations with the Trump administration that
Speaker 1: it's driving fox Kin here and automation is what's making
Speaker 1: it possible. Will dig into that some more later in
Speaker 1: the show. Companies usually employ consultants who help them find
Speaker 1: potential sites for new factories. It always starts with sitting
Speaker 1: down with them and defining what exactly they need to
Speaker 1: be successful. I chatted with Darren Budau. He's based in
Speaker 1: Chicago and leads Deloitte site selection practice. We call those
Speaker 1: critical location factors. We really want to understand what makes
Speaker 1: them tick and what makes this new deployment of their's successful.
Speaker 1: It's a process of elimination. We will be reviewing potential sites,
Speaker 1: actual actual properties, whether they're existing buildings or land sites
Speaker 1: that have what the client needs. The consultants have a
Speaker 1: list of criteria, things like labor costs, transport links, proximity
Speaker 1: to key suppliers and customers. From there, there's always a
Speaker 1: due diligence process of conducting additional analysis and study on
Speaker 1: the labor market. On the the technical aspects of the
Speaker 1: site itself from a from a utilities and infrastructure perspective,
Speaker 1: we want to identify any possible risks before negotiations. With
Speaker 1: their shortlist of sites ready, the company then approaches the
Speaker 1: local government authorities to see what sweeten is they can offer.
Speaker 1: Those can come in three main forms. Tax incentives and rebates,
Speaker 1: infrastructure improvements like new bus and subway stations, and labor incentives,
Speaker 1: usually education programs to train staff. Incentive packages can sometimes
Speaker 1: stretch into the hundreds and millions of dollars. Fox Con
Speaker 1: is being advised by e Y, the consultant we probably
Speaker 1: know as Ernst and Young, which is helping it get
Speaker 1: the best possible deal. We said earlier in the show.
Speaker 1: Our sources tell us that e Y has whittled the
Speaker 1: shortlist down to Detroit, New Michigan, We're seeing in Wisconsin
Speaker 1: and Columbus in Ohio. But there's still one nagging question, Alex,
Speaker 1: what is in it for fox Com? Hi? Everyone? Every week,
Speaker 1: our team here at Bloomberg Technology spends so much work
Speaker 1: making sure that this show is great, and we have
Speaker 1: a special request to ask of you. If you like
Speaker 1: the show, um, please help us get the word out
Speaker 1: so more people can find us. Maybe you have a
Speaker 1: friend who likes technology a lot who's never listened to
Speaker 1: a podcast before, or if you listen on Apple podcasts,
Speaker 1: you can leave us a rating and a review. To
Speaker 1: do that, just search for Decrypted then hit write a
Speaker 1: review inside the reviews tab. Thanks so much for supporting
Speaker 1: our show. We spend ages puzzling out of this all.
Speaker 1: I will take your word for that. Seriously. I spoke
Speaker 1: to like tons of people over the course of several
Speaker 1: weeks trying to work out what exactly is the business
Speaker 1: appeal of Wisconsin or Michigan in particular. They don't check
Speaker 1: obvious boxes like having really good transport links which could
Speaker 1: allow equipment to be shipped to Asia for final assembly,
Speaker 1: or even proximity to customers. Well what about proximity to
Speaker 1: car makers? I mean, all these automobile manufacturers now need
Speaker 1: new technology, and the suppliers like Fox kind of help
Speaker 1: them put screens and digital technologies into their cars. Yeah.
Speaker 1: I did think about that, because autonomous cars will give
Speaker 1: drivers more time to serve the web and watch films
Speaker 1: because they don't have to pay as much attention to
Speaker 1: the road. But if that were the case, they wanted
Speaker 1: to be near those customers. The South would probably make
Speaker 1: more sense. There are more luxury car makers there who
Speaker 1: are going to be perhaps the first to have the
Speaker 1: autonomous cars, and the labor costs they are lower. Well,
Speaker 1: lots of declining industry in the Midwest. Is there something
Speaker 1: to the to the kind of labor base and the
Speaker 1: availability of possible workers in you know, former steel factories,
Speaker 1: former chemical factories that makes us appealing to fox Camp. Well, actually,
Speaker 1: the chemical factory idea we thought might be that you
Speaker 1: need chemicals to make l C D and so proximity
Speaker 1: to those guys would help. And of course Detroit has
Speaker 1: a legacy workforce from the automotive industry, but it's still
Speaker 1: a very different kind of skill set you need to
Speaker 1: run an electronics factory. From all my conversations, it increasingly
Speaker 1: seemed like there could be another motivation at play. If
Speaker 1: you look at the hun plan and there's a plant
Speaker 1: in the states that they're considering, Um, it didn't surprise
Speaker 1: me that so many of them happened to be swing states.
Speaker 1: That's Caroline the economist we heard from earlier. That's a
Speaker 1: good point. In Wisconsin. Trump won with a marchin of
Speaker 1: twenty three thou votes and had just eleven thousand more
Speaker 1: votes in Hillary Clinton in the state of Michigan. In Ohio,
Speaker 1: my home state, Trump had a more substantial victory, but
Speaker 1: it has long been considered a swing state. The sheer
Speaker 1: dollars are significant, I think for any state. David Welch
Speaker 1: is the Bloomberg Bureau chief in Detroit. He's been keeping
Speaker 1: his air close to the ground as FOTS gone whittles
Speaker 1: down its shortness. I asked him how significant an investment
Speaker 1: the plant would be for the region. But this would
Speaker 1: really tower, and it's important for for southeastern Michigan because
Speaker 1: the state has been trying to wean itself off of
Speaker 1: its master reliance on the auto industry for a long time,
Speaker 1: with with not a lot of success. The two other
Speaker 1: sites in the running have a similar story to tell.
Speaker 1: In Racine, politicians have worked hard to reduce unemployment from
Speaker 1: a two thousand ten peak of eighteen by bringing in
Speaker 1: new investment. It now stands at about five. Columbus is
Speaker 1: perhaps the town that needs the investment the least, but
Speaker 1: that also means it already has a strong labor force,
Speaker 1: which would suit Foxcount's needs. Any governor trying to attract
Speaker 1: a new manufacturing project has to negotiate a delicate balance
Speaker 1: between trying to attract projects that will create jobs but
Speaker 1: without appearing to plan it a big business. Here's what
Speaker 1: David said about Michigan's Republican governor Rix Nida Governor Snider
Speaker 1: has not been a big fan of just handing money
Speaker 1: to companies. He's been more interested in building infrastructure, giving
Speaker 1: training grants and and and sort of facilitating um as
Speaker 1: opposed to throwing money at people. Are companies? And what
Speaker 1: about the political calculation? Alex Trump wont all three states
Speaker 1: in the last election, but the wins in Michigan and
Speaker 1: Wisconsin were both unexpected and critical. If it really is
Speaker 1: a political calculation, Michigan and Wisconsin have got to be
Speaker 1: favorites because they had had such a narrow margin of
Speaker 1: victory for the Republicans last time around. But whichever state
Speaker 1: eventually wins the Megaplan, Trump will likely be able to
Speaker 1: stay credit for it. And Trump is going to be telling,
Speaker 1: you know, in a couple of years, he's gonna be
Speaker 1: telling the people in this area, hey, look, you know
Speaker 1: I got you some particularly it's Michigan, I got you
Speaker 1: a huge plant that's that's not automotive. I brought you
Speaker 1: something else, and we're talking about a few thousand workers,
Speaker 1: So it's it's it's a pretty big deal, no question. Okay.
Speaker 1: So even if fox CON's megaplant is going to be
Speaker 1: very highly automated, it's still going to create an investment
Speaker 1: to give a boost to a city like Detroit. So
Speaker 1: there's a clear advantage to Trump and building a plant here.
Speaker 1: But what's in it for fox Con? The short on
Speaker 1: SWA is that having a factory in the US could
Speaker 1: make life easier for false Cone when it tries to
Speaker 1: import iPhones made in China. Okay, so I think I
Speaker 1: get it. If fox Kind builds a plant or even
Speaker 1: several plants, employing thousands of workers in the US, it
Speaker 1: could convince Trump not to slap import duties on iPhones
Speaker 1: made in China and ship to the States, exactly because
Speaker 1: fos Cone could fairly say it's already bringing jobs here
Speaker 1: and bringing iPhone manufacturing to the U. S would be
Speaker 1: a far more involved prospect, Yes, because replicating the rich
Speaker 1: ecosystem of supplies that exist around these main manufacturing hubs
Speaker 1: in China would be incredibly complicated, right, And as we
Speaker 1: discussed earlier. iPhone production is just much harder to automate
Speaker 1: than making displays. In a sense, you could say that
Speaker 1: Scone is buying a stay of execution for its Chinese
Speaker 1: iPhone making business. Okay, So, in the sense we're seeing
Speaker 1: three tiers of manufacturing. You have basic repetitive tasks which
Speaker 1: can be done by robots, more complex tasks which are
Speaker 1: present need a lot of manpower, and a high level
Speaker 1: automation which will requires small numbers of staff and their
Speaker 1: dogs who might even need engineering degrees. Deloitte has one
Speaker 1: foecust showing the US could be more competitive than China
Speaker 1: as soon as because of this. And while it's not
Speaker 1: yet clear who will win the race when it comes
Speaker 1: to attracting high tech manufacturing projects, the bleak reality facing
Speaker 1: many American workers is the possibility that large scale manufacturing
Speaker 1: is unlikely ever to return douled automation. You know, you
Speaker 1: may have a job for five years, but then five
Speaker 1: years a job could be gone to a robot. And
Speaker 1: that's it for this week's Decrypted. Thanks for listening. We
Speaker 1: always like to hear what you think of the show.
Speaker 1: Record a voice message and send it to Decrypted at
Speaker 1: Bloomberg dot net or I'm on Twitter at a TB
Speaker 1: web and I'm at brad Stone. If you haven't already,
Speaker 1: please subscribe to our show wherever you get your podcast.
Speaker 1: While you're there, please leave us at reading and a review.
Speaker 1: It really helps more listeners find the show. This episode
Speaker 1: was produced by Pierre Gadkari, Liz Smith, and Magnus Hendrickson.
Speaker 1: Thanks to Isabel Gottlieb for her help on today's show,
Speaker 1: as well as David Welch and Detroit and John McCormick
Speaker 1: in Chicago for their tireless hounding of the story. In
Speaker 1: Michigan and Wisconsin. Aliceabar edited my print story about box
Speaker 1: cons Megaplant, which you can read at Bloomberg dot com,
Speaker 1: Forward slash Tech. Alec McCabe is head of Bloomberg Podcasts.
Speaker 1: We'll see you next week.