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787 Dreamliner teaches Boeing costly lesson on outsourcing
787 Dreamliner teaches Boeing costly lesson on outsourcing
The airliner is billions of dollars over budget and about three years late. Much of the blame belongs to the company's farming out work to suppliers around the nation and in foreign countries.
Read more...
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
^^^ However, Boeing management and stockholders have to consider which option is actually the worst of the evils ...
A. Boeing making the outsourcing decisions it did, resulting in a competitively priced new airplane, that comes to market late and has a slightly smaller than expected profit margin, or
B. Boeing designs and builds a totally American product, resulting in price levels well above the outsourced version. Market pricing cannot successfully compete versus ( also outsourced ) Airbus, thus Boeing is unable to sell as many new planes, is unable to recover R&D costs, Boeing's profit margin and stock price declines, foreign competitors gain a bigger foothold in the worldwide aircraft market, existing US Boeing jobs are still lost, and US taxpayers wind up paying far higher prices for the military version of this new plane ( with the US gov't being about the only customer who is willing to pay the significantly higher price to purchase from Boeing ) !
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
Melonie
^^^ However, Boeing management and stockholders have to consider which option is actually the worst of the evils ...
A. Boeing making the outsourcing decisions it did, resulting in a competitively priced new airplane, that comes to market late and has a slightly smaller than expected profit margin, or
The airliner is billions of dollars over budget. That's billions of dollars less profit.
Quote:
Originally Posted by
Melonie
B. Boeing designs and builds a totally American product, resulting in price levels well above the outsourced version. Market pricing cannot successfully compete versus ( also outsourced ) Airbus, thus Boeing is unable to sell as many new planes, is unable to recover R&D costs, Boeing's profit margin and stock price declines, foreign competitors gain a bigger foothold in the worldwide aircraft market, existing US Boeing jobs are still lost, and US taxpayers wind up paying far higher prices for the military version of this new plane ( with the US gov't being about the only customer who is willing to pay the significantly higher price to purchase from Boeing ) !
Boeing has no problem competing in the world market with its airliners that were fully designed and built in the US.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
then you haven't been following a few important details ...
total Boeing 2007 orders = 1413
total Boeing 2009 orders = 142
total Boeing 2010 orders = 530
In other words, sales levels returning to a figure of <40% of their 2007 peak is not highly indicative of a supplier that is 'free' of competition.
Boeing's current major seller BY FAR is the 737 ... which is an older design where essentially all of the R&D costs have already been amortized. This 737 model is popular with US airlines because it is smaller sized thus more fuel efficient when used to replace larger ships with empty seats when fewer tickets are now being sold to air travellers on many routes. However, the performance and technology of this older design aircraft is increasingly vulnerable to competition even though the 737 production is already using 'outsourcing' to lower cost US states and foreign countries in order to reduce production costs.
(snip)"Boeing will not need to cut the price of its 737 to compete against increasingly efficient rivals, a company executive told Dow Jones Monday.
Airbus announced last month that it will outfit its single-aisle A320 family with new, more-efficient engines to better compete against upstart aircraft such as the Bombardier CSeries, Comac C919 and United Aircraft Corp. MS-21.
Boeing executives have said they are more likely to opt for a replacement aircraft that would enter service around 2019 or 2020. This has fed speculation that Boeing might have to cut 737 prices to continue to sell the aircraft until the replacement arrives."(snip) from
The reason of course is that ... (snip)"However not all of the 737 is built at Renton. For example, since 1983 the fuselage including nose and tailcone has been built at [ lower wage cost - sic ] Wichita and brought to Renton by train. Also much of the sub-assembly work is outsourced beyond Boeing (snip) i.e. vastly lower cost Asia.
Thus the 737's cost structure is already far lower than other Boeing aircraft built entirely in Washington using union labor i.e. the 747 ... of which Boeing sold ZERO last year !
Boeing's 767's 'only hope' for continued sales is reportedly a 'favorite son' contract from the US military for air tanker duty ... otherwise the A330 Airbus beats it on the basis of pure price / performance.
Boeing is selling just a handful of larger, newer 777's which are built in Washington ... current production level is 6 per month.
Thus it is overwhelmingly the already 'outsourced' 737 that is almost singlehandedly keeping Boeing's aircraft division out of bankruptcy !
And circling back to the 787, it would arguably be unsellable versus foreign competition at the price necessary to 'break even' if constructed in Washington ! With the price for the 'outsourced' 787 in the $150-$200 million dollar each range, and with thousands of potential 787 sales over the useful life of the new plane, being a few billion dollars over budget at the onset is relatively 'small potatoes'.
facts from
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
I always laugh at the idea that outsourcing saves money. This is a lie and in fact if this was the case we wouldn't be paying as much as we are for most things. Sneakers would be $5 or so and iPods would be $50 or cheaper. The only thing outsourcing saves is salaries for the average worker so the CEO can be paid more money. Btw, I would be willing to pay more money knowing a product was designed in a first world country versus a thrid world country, especially one with slave labor.
Anyone defending outsourcing to me is a traitor.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
Melonie
^^^ However, Boeing management and stockholders have to consider which option is actually the worst of the evils ...
A. Boeing making the outsourcing decisions it did, resulting in a competitively priced new airplane, that comes to market late and has a slightly smaller than expected profit margin, or
B. Boeing designs and builds a totally American product, resulting in price levels well above the outsourced version. Market pricing cannot successfully compete versus ( also outsourced ) Airbus, thus Boeing is unable to sell as many new planes, is unable to recover R&D costs, Boeing's profit margin and stock price declines, foreign competitors gain a bigger foothold in the worldwide aircraft market, existing US Boeing jobs are still lost, and US taxpayers wind up paying far higher prices for the military version of this new plane ( with the US gov't being about the only customer who is willing to pay the significantly higher price to purchase from Boeing ) !
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Or, how about a more realistic in- between scenario: Boeing builds more of the 787 "in-house", keeping out-sourcing percentage to levels more like 737, 777 series (all Previous Boeing products have been outsourced to a certain extent), and actually builds 787 close to schedule and budget.
You mention product pricing concern as though Boeing were GM concerned with fighting off the onslaught of Ford, Chrysler, Honda, Nissan, Toyota, Hyundai, Volvo, Saab, BMW, et al on their market share. Reality: Airliner manufacturing > than 125 seats is a monopoly market- Its either Boeing or Airbus product. Airlines (or leasing cos.) wishing to buy the newest aircraft must buy from them, or not fly at all. Going further, airlines wishing to fly must buy fuel from a handful of oil companies, or not fly at all. Thus, I'd say airline manufacturers concern for product price competition would be somewhere closer to oil companies concern (lack may be a more apt description here) for price competition than that of automobile manufacturers.
A recent Seattle paper article quoted Boeing executive as admitting the mistake of excessive outsourcing of the 787. Article further stated that some components for the stretch 787-9 series would be built in house. Analyst estimate the cost of outsourcing to be $12B- $18B on top of the $5B that Boeing had figured on the outsourcing costs to be. Given that Boeings latest annual revenue ~ $64B, I'd say that's more than a minor screwup.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Lol
Don't even get me started on what Boeing has done to our beloved communication satellite business once they acquired us from good ole' Hughes Aircraft :(.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
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Originally Posted by
Kellydancer
I always laugh at the idea that outsourcing saves money. This is a lie and in fact if this was the case we wouldn't be paying as much as we are for most things. Sneakers would be $5 or so and iPods would be $50 or cheaper. The only thing outsourcing saves is salaries for the average worker so the CEO can be paid more money. Btw, I would be willing to pay more money knowing a product was designed in a first world country versus a thrid world country, especially one with slave labor.
Anyone defending outsourcing to me is a traitor.
So, how much is Steve Jobs really worth? I guess anyone can do his job right? So, why is the market fretting over his health?
If being a CEO is so easy, why don't you become one? (Steve Jobs didn't exactly inherit his job)
Finally, Economics 101
You make stuff that is cheap and trade surpluses...that is how wealth is created over thousands of years.
If USA were to build every little thing that it consumed, you wouldn't be consuming much. Sure, you would have had a job, but you would have spend 90% on your salary on food, shelter and electricity. And you could have only dreamt of iPod and Nike which could have cost you $1000+
But, don't let facts get in the way of your little rant
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
eagle2
787 Dreamliner teaches Boeing costly lesson on outsourcing
The airliner is billions of dollars over budget and about three years late. Much of the blame belongs to the company's farming out work to suppliers around the nation and in foreign countries.
Read more...
Two words....Boston Dig
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
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Originally Posted by
xanfiles1
So, how much is Steve Jobs really worth? I guess anyone can do his job right? So, why is the market fretting over his health?
If being a CEO is so easy, why don't you become one? (Steve Jobs didn't exactly inherit his job)
What does any of this have to do with Kelly's comments about outsourcing?
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Originally Posted by
xanfiles1
Finally, Economics 101
You make stuff that is cheap and trade surpluses...that is how wealth is created over thousands of years.
You're greatly oversimplifying things.
Quote:
Originally Posted by
xanfiles1
If USA were to build every little thing that it consumed, you wouldn't be consuming much. Sure, you would have had a job, but you would have spend 90% on your salary on food, shelter and electricity.
For most people living in the US, their food, shelter, and electricity does come from the USA.
Quote:
Originally Posted by
xanfiles1
And you could have only dreamt of iPod and Nike which could have cost you $1000+
But, don't let facts get in the way of your little rant
and where do you get your "facts" from? New Balance makes sneakers in the US and they don't cost $1,000. They're probably cheaper than Nikes.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
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Originally Posted by
xanfiles1
Two words....Boston Dig
What does the Boston dig have to do with the 787?
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
^^^ US union labor, I presume ! The Big Dig holds the dubious record of being the most 'over budget, behind schedule' major project of all time !
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Airliner manufacturing > than 125 seats is a monopoly market- Its either Boeing or Airbus product. Airlines (or leasing cos.) wishing to buy the newest aircraft must buy from them, or not fly at all.
ummm ... that was the conventional line of thinking, until ...
(snip)At a recent air show in Zhuhai, China, two women in red flight attendant uniforms welcomed visitors to a mock-up of a new narrowbody jet that will seat up to 150 people and have its maiden flight in 2014. The plane is the C919, designed by state-owned Commercial Aircraft Corp. of China (Comac) to grab a piece of the passenger jet market from Airbus and Boeing (BA). "The interior is clean and bright, not a bad feel," says Jennifer Huo, a 34-year-old public-relations executive from Shanghai. "I feel proud that China can come up with such a plane."
One reason that China can come up with such a plane is that the companies that supply Boeing and Airbus are working with Comac as well. CFM International, a venture of General Electric (GE) and France's Snecma, is supplying all of the C919's engines. GE Capital Aviation Services (Gecas), the world's largest airplane leasing company, says it will buy as many as 10 of the new planes. "The decision to add C919s to the Gecas fleet shows our confidence in the commercial prospects for the aircraft and strengthens the relationship with our Chinese partners," Mark Norbom, president & chief executive officer of GE China, said in a statement.
Other suppliers include United Technologies (UTX) and Honeywell (HON). China's aviation industry today is at a similar stage as Airbus in its early days, says Tim Mahoney, president and CEO of Honeywell Aerospace. That's when it was a state venture with seemingly little prospect of taking on Boeing. Honeywell's four joint ventures with Chinese partners will supply parts to China's aircraft projects. One partnership focuses on flight controls, another on wheels and brakes. Honeywell also plans to expand its design center in Shanghai. "We are not just here to build an aircraft," says Bob Smith, chief technology officer of Honeywell Aerospace. "We are here to build an industry."
One goal is for the C919 to compete with the Airbus A320 and the Boeing 737. Another is "to spur the whole aviation industry," says Zhang Xinguo, vice-president at Aviation Industry Corp. of China (AVIC), a state-owned company that is helping build the airplane. The government wants to see jumbo jets, regional planes, business jets, propeller planes, and helicopters all made in China by Chinese companies. (snip)
from
If I remember correctly, the stated price of this new Chinese airliner is 15% less than competing models from Boeing and Airbus. I'm not sure of the actual status of orders, but the Chinese gov't reportedly mandated that Chinese airlines place orders for 100 new C919's to get mass production off the ground ... which at the very least means 100 airliners that Boeing and Airbus won't sell.
Economics 2011 - Virtually every US registered major corporation has already taken steps to take advantage of the 'Apple Business Model' i.e. keeping corporate management, research, engineering, accounting etc. in the US while outsourcing production of components overseas. This happened sooner for sneaker manufacturing, took a bit longer for appliance manufacturing, and is now starting to happen for aircraft component manufacturing.
The 'gold foil hat' crowd will tell you that the MAJOR worry from these joint US ventures with Chinese companies is the inevitable transfer of superior US technology to the Chinese. They'll also tell you that high US corporate tax rates, and the ability of US corporations to indefinitely defer US taxes on the profits of 'foreign' operations, continues to provide a strong incentive for US registered major corporations to expand 'offshore' production operations while allowing domestic production to wither and eventually die.
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If USA were to build every little thing that it consumed, you wouldn't be consuming much. Sure, you would have had a job, but you would have spend 90% on your salary on food, shelter and electricity. And you could have only dreamt of iPod and Nike which could have cost you $1000+
There is indeed a fair amount of truth behind this statement. Ultimately, if every product sold in the USA were to include the mandated US costs of labor and benefits, of environmental compliance, of worker safety, of product liability etc. as is required for products actually produced in the USA, then every product would be 27% more expensive on the average ( based on a survey done for the US congress re proposed China tariffs ). This would indeed cause a major 'hit' to the typical US standard of living. And that doesn't include the issue that USA production would also be subject to full US corporate tax rates.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
eagle2
What does the Boston dig have to do with the 787?
Correlation...Causation and all those fun stuff.
Any sufficiently large complex project will always run over-budget and over-time. Nothing to do with Outsourcing.
But, it fits in nicely with any anti-trade story you want to run and stories like above prove the point.
For every 1 outsourcing failure there are 100s that are very successful (Apple, Intel, Dell ).
To blame outsourcing for your poor project execution is stupid thinking
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
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Originally Posted by
eagle2
What does any of this have to do with Kelly's comments about outsourcing?
You're greatly oversimplifying things.
For most people living in the US, their food, shelter, and electricity does come from the USA.
and where do you get your "facts" from? New Balance makes sneakers in the US and they don't cost $1,000. They're probably cheaper than Nikes.
I don't even know where to begin for your last two points.
Do you really know where the raw materials for the food, shelter, electricity and New Balance shoes come from?
Do you know where the tools that are required to make and produce those items come from?.
Do you know the tools that made those tools came from?
or how about the vast array of computers that is used to design, manufacture, market, distribute, sell these items?
How many operate on the theories put forth by the British Newtonian, or the German Einstein or the revolutionary concepts of Guass or Euclid or Da Vinci or Maxwell or Turing or the millions of non-american contribution to the world?
Made in USA is a stupid concept used to by companies to pander to idiots who are mostly clueless about economics(i dare say mostly liberals), supply chain and other real concepts which results in culmination of making products like even a single paper clip. The world is wealthier because of the combined Human Endeavors all over the world.
I don't think any firm can even claim 'assembled in USA' let alone 'made in USA'.
To dismiss outsourcing or the global efforts that goes into producing every single minutia for such a f***ing low price is frankly unpatriotic and goes against the founding father's principles of an individual's right to life, liberty and the pursuit of happiness (mainly through exchange of ideas and goods/services)
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
xanfiles1
So, how much is Steve Jobs really worth? I guess anyone can do his job right? So, why is the market fretting over his health?
I don't know or care how much he is worth since I do not know him. I'm not sure what his health has to do with it.
Quote:
Originally Posted by
xanfiles1
If being a CEO is so easy, why don't you become one? (Steve Jobs didn't exactly inherit his job)
To answer your wacko questions, sure I could become a CEO, many people could if given the chance. However most never get that chance because most people don't know the right people to become CEOs.
Quote:
Originally Posted by
xanfiles1
Finally, Economics 101
You make stuff that is cheap and trade surpluses...that is how wealth is created over thousands of years.
Yes wealth so the wealthy can become wealthier. When you buy cheap it doesn't last as long.
Quote:
Originally Posted by
xanfiles1
If USA were to build every little thing that it consumed, you wouldn't be consuming much. Sure, you would have had a job, but you would have spend 90% on your salary on food, shelter and electricity. And you could have only dreamt of iPod and Nike which could have cost you $1000+
If these things were made here we could all afford to spend more money and buy better products. Forgive my ignorance for thinking I'd rather see people working and spending more money on goods than not working at all and not buying anything. You do know that when people don't have money they can't buy anything right? You are aware that there is a huge unemployment right now partly because of this right?
Quote:
Originally Posted by
xanfiles1
But, don't let facts get in the way of your little rant
Oh, like the rich deserve to become wealthy while the middle class disappears? I don't want to live in a world like that, do you? Do you want to live in a country where people die on the street from starvation due to unemployment? That is happening courtesy of outsourcing CEOs.
And yes if you feel outsourcing is perfectly fine, then that does make you a traitor and anti American. I'd rather spend more on products knowing they were made in the USA (or countries in Europe) than slave labor countries like China. I'd rather talk to an American about a bill than an Indian knowing they have a job calling people late on their bills because those AMERICANS lost jobs to them.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
eagle2
What does any of this have to do with Kelly's comments about outsourcing?
You're greatly oversimplifying things.
For most people living in the US, their food, shelter, and electricity does come from the USA.
and where do you get your "facts" from? New Balance makes sneakers in the US and they don't cost $1,000. They're probably cheaper than Nikes.
Eagle, I think this guy is a nut. That fact that any American (I presume) would defend this is outrageous and downright cruel. More than likely one of those spoiled brat rich boys who don't tip at strip clubs either. Hmm, maybe it's former president George W Bush.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Kellydancer, becoming a CEO of a major corporation is not all about "knowing the right people." If you are so blindly against outsourcing, then you are, by definition, not qualified to be a CEO. If you are in charge of a publicly traded company, you have an obligation to your stockholders to profit as much as possible. Blindly being anti-outsourcing is proving you are not qualified. You qualify people as nuts without responding to their questions.
Outsourcing does make things cheaper... there isn't really an arguement there, it's a fact.
And you should do your research on China... they have the 2nd fastest growing economy in the world, and Chinese standard of living is skyrocketing.
Americans have a very high opinion of themselves, and we as a people feel we are worth more than we really are. The jobs being outsourced are not skilled jobs. The jobs being outsourced are by and large minimum wage jobs. Are you saying that bringing back an 8 dollar an hour tech-support job will save the middle class?
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Why am I not surprised you followed me into this thread? You seem obsessed and it's bordering on creepy. I find it funny that you call yourself liberal except that you are for outsourcing because I am against it. Just look at the CEOs and see how they got their jobs. Almost all knew someone and many were relatives.
To answer your questions they are outsourcing all jobs, not just low level. Walgreens is outsourcing accountant jobs overseas. Lawyer jobs are also being outsourced. Neither of those jobs are low skilled jobs.
Even if some products are cheaper, so what, not all are cheaper. I'd still rather give my money to an American than to a Chinese. After all China is a COMMUNIST country and they could use the money to attack us.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Nobody followed you to the thread, get over yourself. Cite your sources for your CEO facts please... name some who were relatives. What lawyer jobs are outsourced? Sources? China is not going to attack us, you are just playing a scare card... it makes you look foolish saying that. China and the US are allies now, and have been for quite some time.
And for the record, I am not FOR outsourcing. Nor am I against it. It is just a fact of the world economy. When somebody will do the job for a cheaper price, the job goes to that person. In a global economy, these are the rules. All things being equal, I would rather give my money to an American as well... but things are NOT equal, so I would rather have a comparable product for a cheaper price.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
I will post my sources when you cite sources that jobs being outsourced AREN'T middle class ones. I have articles about all of it and they are easily found online.
Oh really China won't attack? How do you know? China is a communist country.
Because I am right here's onestory about this:
Here's another:
Now where are your sources?
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
http://hmcasia.org/documents/2008Sen...ing%20Jobs.pdf
So communist countries are more likely to attack the US? Based on what? How do you know Canada won't attack? Canada has socialist policies... also, by being against outsourcing, you are advocating a kind of socialism yourself. In a free market economy, outsourcing is a viable option. You say you've read plenty of articles.... please post them.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
I'm not posting anymore articles until you post a reliable article, not someone's research paper. You are just trying to start a fight and I am not taking your bait.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
1. Not trying to start a fight... you did it when you said "anybody who supported outsourcing is a traitor.
2. It is the research paper of a postgrad at Cambridge who did his undergrad at Harvard that was found in a scholorly journal... hardly a common research paper.
3. You have posted no evidence at all, just stories about what you've seen or heard.
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
If these things were made here we could all afford to spend more money and buy better products. Forgive my ignorance for thinking I'd rather see people working and spending more money on goods than not working at all and not buying anything. You do know that when people don't have money they can't buy anything right? You are aware that there is a huge unemployment right now partly because of this right?
Actually if things were produced COMPETITIVELY in the USA , no we could NOT afford to spend more money or to buy better products. Again going back to basic global economics, if making products in the USA means having to pay mandatory ~15% employee benefits plus ~15% environmental / worker safety / green energy costs that foreign manufacturers do NOT have to pay, then US products by definition must be ~30% more expensive than imported products that do not have to bear these costs. If the US company tries to 'eat' that 30% cost differential they will not remain profitable, not survive, not continue to employ US workers. If the US company tries to float a 30% price increase to cover the 30% cost differential they will not be able to sell a significant volume, thus will not remain profitable, not survive, not continue to employ US workers. Now if the US company could cut employee wages and benefits by 30% ( or lay off every third worker and force the remaining two workers to pick up the slack ) then they stand a chance of remaining profitable ... however this is usually unacceptable either by law ( minimum wage ) or by the simple fact that US workers are unlikely to remain productive at a 50% increase in workload for the same paycheck.
The laws of economics unfortunately overrides 'hope' ... well they do unless the gov't decides to print up money and spend it paying above market prices for certain US company products ( in this case Boeing 767's ) or subsidizing certain US corporations !
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Re: 787 Dreamliner teaches Boeing costly lesson on outsourcing
Quote:
Originally Posted by
nelly33
1. Not trying to start a fight... you did it when you said "anybody who supported outsourcing is a traitor.
2. It is the research paper of a postgrad at Cambridge who did his undergrad at Harvard that was found in a scholorly journal... hardly a common research paper.
3. You have posted no evidence at all, just stories about what you've seen or heard.
I have posted more evidence than you. I posted articles about it (and there are many more available). Anyone can write a research paper that's not proof.
Now, please stop stalking me.