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Michael Hiltzik: How Boeing exported jobs and imported headaches

February 15, 2011 |  5:52 pm

The ever-proliferating studies on outsourcing almost always treat the phenomenon as a corporate cost-cutting strategy. That reduces the argument against it to one of morality, not economics or proper corporate management.

As my Wednesday column reports, the most potent argument against outsourcing is that it doesn't save money, but can drive up costs instead.

How did this elementary fact escape the notice of corporate executives who plunged wholeheartedly into outsourcing over the last couple of decades? Simple: They judged it against a business metric known as "return on net assets," or RONA. The idea is that if you bring in the same profits while reducing your assets, you raise your RONA, and huzzah!

What was missed in the RONA frenzy is that not all assets are created equal, and that sometimes reducing assets by outsourcing work while shutting down facilities and laying off employees simply creates costs elsewhere in the corporate ledger -- and overall.

The 787 is the ultimate reproach against RONA. Unfortunately, up to now that hasn't been widely known except in places like Seattle, where Seattle Times reporter Dominic Gates has been all over the story.

The column begins below.

The biggest mistake people make when talking about the outsourcing of U.S. jobs by U.S. companies is to treat it as a moral issue.

Sure, it's immoral to abandon your loyal American workers in search of cheap labor overseas. But the real problem with outsourcing, if you don't think it through, is that it can wreck your business and cost you a bundle.

Case in point: Boeing Co. and its 787 Dreamliner.

The next-generation airliner is billions of dollars over budget and about three years late; the first paying passengers won't be boarding until this fall, if then. Some of the delay stems from the plane's advances in design, engineering and material, which made it harder to build.

But much of the blame belongs to the company's quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China and South Korea.

Read the whole column.

--Michael Hiltzik

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