Reshoring: What it Takes to Build a New Factory

Or why we won't see a rush of manufacturing returning to US shores

As readers know, I’ve already looked at the labor challenge of reshoring: jobs aren’t scarce, so more manufacturing means other industries must shrink. Ours is a service economy, so what services are you willing to give up?

But there’s a practical side, in addition to recruiting workers who might not really want a job in manufacturing, and are often unsuited to such jobs in education and work history, and may lack the physical stamina to spend hours on their feet. What does it take to build a new plant? That’s hard enough in normal times. It’s much harder when everyone else is trying to do so. It’s even harder if you actually want to start hiring before January 2029.

I’m not great at humor, but it’s so ridiculous I feel compelled to be tongue in cheek.

Barriers to Building a New Plant: What your firm’s Executive Committee will ask

There are a lot of steps to building a new facility. So let’s walk through the sort of questions you as the VP for Finance at your company might face. After all, a new plant entails spending serious cash.

Finding a location

Helmut, Your CEO: OK, Weichu. Walk me through the process of building a new plant in the US.

1. VP Finance Weichu:

   1. Since we’ll be moving part of our production from Shanghai and part from Windsor, we have an idea of the footprint we’ll need and the number of people we’ll need to hire. We’ll need a 12-acre site, zoned industrial, that is in an area where we can hire 300 people for a multi-shift operation.

   2. Helmut. So have you tested the waters?

   3. Weichu Unfortunately we didn’t plan on expansion, we were focused on Mexico, so we can’t add to our current location. I called the state economic development office in Michigan, where we have our sales office and our one US plant, but they said that for an operation as small as ours, the first appointment they had was in Fall 2025. We’re on our own.

      I did talk to two commercial real estate brokers, they too are really busy, and they said that if we move fast, we might be able to get a site for only 20% over list price. Everyone is shopping. Or at least window shopping – and they weren’t last fall. They also cautioned that can’t realistically expect to find an existing facility for sale that meets our needs. So we have to go greenfield.

      Of course, we can expand our search to a nearby state, but unfortunately we can no longer consider Ontario, where we did a preliminary search 2 years ago.

From location to facility

Helmut: So let’s say you find land zoned industrial, and not so rural that we can’t find workers. What’s next?

1. Weichu Again, I’ve talked to our plant managers, and have the basic requirements. One hitch is that we draw a lot of power, so we would likely need the local utility to upgrade their closest substation. I talked to the one that supplies our existing plant, they currently face a 2 year wait for big transformers, and if we don’t move quickly, they will have a full year’s worth of orders ahead of ours. That pushes completing construction into 2028, and possibly well into 2029.

2. Helmut Other than power, we don’t have unusually heavy equipment. So at least construction of the structure should be straightforward.

3. Weichu Of course we have to get local civil engineers to plan out the site, including power lines and foundations and such. I called the one we used for our current plant, they are too busy to set up a meeting until summer.

   I got the same response from the construction firm we used for site preparation. Plus they’ve lost multiple experienced employees to ICE, so they’re not sure they will be able to accept new business. If we have to find a new contractor, that will add 6 months to the process. Plus they’ll face the same problem fielding a crew.

From facility to operations

1. Helmut So let’s assume that for enough money, you can obtain a site and break ground. How soon could you commence production?

   1. Weichu That’s hard to say. We need our capacity in China, so we can’t use their machines. A lot of what we have there is quite specialized, we have equipment from the US, from Germany, from Slovakia, from Sweden, from Thailand, from Korea, and of course from China. It’s really a global smorgasbord. Until we actually try to source, we won’t know lead times. Right now, we don’t know whether we will be able to import from China, we have to assume not. That means turning to vendors who have never built a machine to our specifications.

      Of course, if we have to go greenfield, we’d like to make a bunch of improvements. We know we can automate a couple operations, and use the next generation of machine tools for a couple more. We’d lay the plant out differently. But that would mean hiring US consulting engineers, and a design shop for the tools and jigs for a new production line design. Rushing that process doesn’t work, and all the people we talk to are already busy.

2. Helmut So if you have to order before the end of the year, what are lead times like?

   1. Weichu We don’t know. All of our machine tool suppliers use special alloys, and their castings come from all over the world, depending on who’s best for those castings and who has machining capability. Right now everyone is asking them for quotes … they won’t talk lead times on a hypothetical basis. They don’t know price.

3. Helmut So what about tooling?

   1. Weichu Well, normally all of our plastic injection tools come from China, at present those will cost us more than double. We do have a vendor in Windsor, there are some very good tool-and-die people there, but we have none in the US. Nil, zero. Normally we’d have at least one person from our vendors on-site during setup, to fine-tune the dies. Normally our Windsor tool shop would send someone over a couple days a week, and they’re good enough that they might be able to work on the dies we get from China as we don’t know though whether our normal Chinese machinist can get a visa. Windsor though is swamped with orders, and they’re all small operations.

      Lead times are really problematic. After all, we’re not the only industry trying to set up a local manufacturing facility.

4. Helmut What about the printed circuit boards we use? Those come from somewhere near Grand Rapids, right?

   1. Weichu Bad news there, too. Sure, our vendor there has a pick-and-place line, and they’re top-notch on quality control. But the chips they use come from all over the place, and their board supplier uses specialty resins that aren’t available in the US. They also have capacity issues – their board supplier, that is.

5. Helmut What else is problematic?

   1. Weichu Pretty much everything. We’d need a plant manager, we can’t promote one of our experienced people from our Chinese or Mexican operations, they won’t be able to get a visa. And frankly, we asked and they don’t want to come, they view the US as a hostile environment for them and their families.

      We’d normally go to one of three grad schools, but all their Federal grants got cancelled, so they are only taking a couple new students next year, and most of their graduating class needs visas. It’s grim. All their good US-born candidates end up going finance track, that’s where the money is for someone who can do math. Engineers aren’t poorly paid, but anyone bright enough and hard working enough to get into an engineering graduate program has options. We get those who simply love engineering, but we can’t rely on finding such people. So mostly we end up with those who are too bad with English or with people skills to survive elsewhere. I’m sure you heard how I was once incoherent and treated those around me like shit. I matured, but not everyone does in the way we need for managers.

6. Helmut So opening a plant here doesn’t sound realistic.

   1. Weichu Well, I would love to oversee building a new facility that would push the frontier in our niche. Doing so now, though, would be a nightmare. And while I have my Green Card, I have to start looking at backup plans. Plus there’s a recession coming, the timing just isn’t good.

7. Helmut Well, thanks for being honest with me. It sound like the US is a no-go. There may be some opportunities in Europe. If things continue as they are, the US will become a high-cost place to make anything. We’re starting to explore new markets that we expect will open up, our R&D facilities have been able to headhunt a couple good researchers from the US, and we think we can expand our technology portfolio. Would your family consider moving to Europe, instead of returning to Asia?

   Oh, and we’re only brainstorming, but we have the cash to make an acquisition in Mexico, they have an FTA with Europe and most of South America. There will be factories closing left and right now that the US market is out of reach. You’d have to build the business almost from scratch, but good engineers and factory managers and workers won’t be a problem. How’d you like to be your own boss?

8. Weichu I’ll get back to you, soon. I got into this business to make things, not to fret over which good worker to let go. I’ll have to work harder than ever before, just to lose less money. Europe would be fine, but Mexico might be really interesting, I like the Puebla area. I don’t have the contacts to do a start-up, but setting up a new subsidiary.

   Can you tell a couple people on your team that I’d love 30 minutes of their time to start brainstorming – I’m happy to zoom at 4 am to meet their time zone.