American dads are cheering… New Balance is proud to be the sneaker brand “worn by supermodels in London and dads in Ohio.” Now those cushy kicks are coming closer to home. Last week, Wall Street icon Larry Fink said that the war in Ukraine could cause US companies to “deglobalize” and shift production stateside. Right on cue: yesterday New Balance opened a new factory in its home state of Massachusetts.
- New jobs in New England: New Balance is aiming to have 200 workers at the space by year’s end to help produce an extra 750K pairs of sneakers/year.
- Old jobs in New England: NB already had four factories in the Northeast, and it has long advertised its line of “New Balance Made” sneakers that are at least 70% US-manufactured. In total, it will now employ about 1K workers in the US.
“Made in America” was a marketing classic… When US manufacturing powerhouses like GE moved production offshore in the ’70s to lower costs, businesses learned that consumers cared more about low prices than USA labels. That’s why Nike makes most of its shoes in Vietnam, where workers earn 13X less than in the US.
- But the overseas calculus has been shifting as shortages plague supply chains and foreign shipping costs eat into profit.
- NB boosted production at US factories during the pandemic to reduce overseas reliance, and its sales actually grew faster than Nike’s last year (as supply issues hurt Nike’s inventory).
There’s a New Balance of power in global manufacturing… And companies may “onshore” production for the same reason they offshored it: to cut costs. It used to be cheaper for US companies to manufacture products in China and ship them home, but that process got pricier recently as Chinese wages rose and trade disagreements multiplied. Now that shipping costs have soared — first from Covid, then from war — the most cost-effective choice may be manufacturing in the US.