It all starts with costs: How do you get the lowest cost, still turn out a quality product, and yet deliver it properly to the customer.
This is the mantra of the free trade movement that has turned the global manufacturing structure topsy-turvy in recent years. Just like any basic manufacturing industry-and a growing number of non-manufacturing fields-the rubber business is global, so a company in Passaic, N.J., has to compete with one in Shandong, China. Or go belly up.
That's how the rubber industry operates today. But, in a sense, is it any different than what has occurred in the U.S. since the 1970s? At that time the rubber industry, led by tire companies, contributed to the creation of the ``Rust Belt.'' Instead of reinvesting in the higher-cost manufacturing areas of the Midwest and East Coast, they took their investments to the lower-cost, non-union regions of the South.
The movement of manufacturing overseas gets the headlines today, and rightfully so. In some circumstances, even the South isn't cost-competitive enough compared to overseas sites. But the shifting of rubber production to the South from higher-cost U.S. locales certainly hasn't ended.
The latest example is Accurate Elastomer Products Inc. For more than 60 years the company operated in San Diego, making small, commercial grade molded parts for automotive, appliances and other industries.
California is the bellwether state for many economic, environmental and social issues in the U.S. AEP found itself in a situation a number of its peers have gone through-try to survive in an environment where workmen's compensation, utilities and other costs are out of control, or move.
AEP moved, to the business-friendly environment of Elgin, Texas. As it is, the location is closer to most of its customers. It was a tough decision for AEP, but the company had no real choice.
For other manufacturers, the decision often hinges in a large part on how many financial incentives state and local governments are willing to cough up. The smart company takes advantage of that competition.
And the city and states that lose out? Welcome to free trade-or cannibalism.