Randy Tucker
Dayton Daily News

After years of outsourcing production, U.S. manufacturers are beginning to step up jobs at home in response to rising costs in foreign markets and the productivity of American workers.

Added factory work that would have otherwise gone overseas could generate up to 5 million U.S. manufacturing jobs by the end of the decade, according to a recent report from the Boston Consulting Group.

The trend, known as “reshoring,” has already taken root in Ohio and could help sustain the state’s already robust recovery in manufacturing employment, which has rebounded from a loss of about 147,000 jobs during the 2007-09 recession to a gain of 50,000 jobs since the recovery began, the latest government jobs figures show.

The revitalization of the auto industry — which accounts for an estimated one in eight manufacturing jobs in Ohio — has been largely responsible for manufacturing’s resurgence in the Buckeye State.

But falling energy and material costs, coupled with increasingly competitive wages, is expected to boost demand for U.S. exports of such items as machinery, transportation equipment, electrical equipment, appliances and other goods that promise to boost hiring at a variety of Ohio manufacturers.

“Right now, [reshoring] is still only a trickle,” said Hal Sirkin, a senior partner at Boston Consulting and lead author of the Made in America, Again research report. “What we’re seeing now is companies thinking about it; some starting to make plans to build plants in the U.S.

“Two years ago, no one even thought about that because it didn’t make any sense,” he said. “But after years of wages growing at 15 to 20 percent a year in China, it starts to make sense.”

While wages in China and India have been growing faster than those in the United States in recent years, those countries still have a decided advantage when it comes to compensation costs that are still only 4 to 5 percent of the wages paid to American workers.

But the gap in wages and other costs, including energy and materials, is narrower in other countries. By 2015, the cost of U.S. exports will be between 5 and 25 percent cheaper than exports from Italy, France, the United Kingdom, Japan, and even Germany, according to Sirkin.

He said average manufacturing costs in China will be only about 7 percent lower than in the U.S.

But wages are only part of the equation.

In addition to compensation costs, U.S. workers are more than three times more productive than Chinese workers, for example, and energy, raw material and transportation costs are less expensive in the United States. Sirkin said, “You’re getting a lot more productivity for the dollar in the U.S.”

The U.S. is also more stable politically and economically, which are big factors to consider when deciding where to move production, said Marvin Cunningham, who heads up Asian operations for the family-owned metal stamping and fabrication company, Long-Stanton Manufacturing in West Chester, Ohio.

Cunningham said his company recently brought two product lines back to Ohio — one from China and one from France — in part to hedge against unexpected events, such as a recent riot by more than 2,000 workers at a plant in northern China that makes Apple iPhone covers. The riot halted production for more than 24 hours.

Several automakers, still the backbone of Ohio’s economic recovery, have begun ramping up production in Ohio and neighboring states.

Tokyo-based Honda is investing $2 billion in new manufacturing capabilities in North America at plants in Indiana, Ohio and Alabama, and a new plant in Mexico.

The investment in Ohio includes $166 million in the East Liberty auto plant for a 195,000-square foot expansion, and $64 million at the Marysville auto plant for a 24,000-square foot expansion.

The expansions are part of a long-term plan to increase capacity in North America in response to changing market conditions, said Ron Lietzke, a spokesman for Honda in Ohio.

“Cost, exchange rates, changing market conditions are among many factors,” said Lietzke, who said Honda wants to produce in North America more than 95 percent of its vehicles sold in North America.

“At the same time, Honda is using its growing production capacity in North America to increase exports of vehicles produced in North America to customers in other regions of the world,” he said. “The fact that we are doing this is a testament to the growing capabilities of Honda’s manufacturing operations in Ohio and the North American region.”