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Firms' shifting of technical work to Mexico and China to cut costs bodes ill for many laid-off Americans.


For more than a century, Emerson Electric Co. rode the business cycle, expanding when sales were high and cutting jobs when revenue went south.

That is still the strategy as the U.S. economy is poised to turn the corner, but there is a twist: The St. Louis-based multinational won't be hiring at its rural Mississippi plant--that facility is shutting down. Instead, it expects to be hiring in China, the Philippines or Mexico. And it won't just be assembly-line jobs going offshore. Emerson hopes to move at least half of its engineering work to China and India.

Emerson's example bodes ill for millions of laid-off Americans, who may never see their jobs return with the economic recovery.

The increased flow of trade and investment across borders played a large role in the economic expansion of the last decade. Now, during an economic contraction, the flip side of globalization is apparent: U.S. firms are finding cheaper places to do business where they also can sell their goods. Along with computer chips and airplanes, it is jobs and investment dollars sailing offshore.

"We want to make sure when we come out of this recession we'll be ready," David Farr, Emerson's chief executive, told analysts recently. "When we finish this calendar year 2002, 70% of our manufacturing will be in low-cost countries. That's a significant change from where we were before."

In recent months, Emerson announced the closure of its plant in Oxford, Miss., and cutbacks in Montreal. A factory in Monterrey, Mexico, is closing and some of the work is being shifted to China. By the end of this year, the company will have shuttered 50 facilities and cut its work force by 10%.

"We've got to get the same amount of output, the same level of technology without spending as much capital," Farr said.

Others are close behind. Black & Decker Corp., the nation's largest power tool manufacturer, has announced the closure of three plants, including a 400-employee Pacoima facility, and a shift of that production to Mexico, China and Eastern Europe. Battery maker Evercel Inc. is closing plants in Connecticut and Virginia and moving assembly work to a joint-venture plant in Xiamen, China. Lear Corp., the world's fifth-largest auto parts maker, said it will eliminate 6,500 jobs and close 21 facilities, nearly two-thirds in the higher-cost regions of the U.S., Canada and Europe. The company would not provide a breakdown of where the jobs would be lost.

Lear Chief Executive Bob Rossiter said the restructuring represents "tough decisions to right size our company for future success."

Emerson's decision to move the work of its Oxford plant to Mexico and China means that 500 jobs--a quarter of the town's manufacturing base--will disappear.

When Max Hipp, executive director of the Oxford-Lafayette County Economic Development Foundation, first heard the bad news, he tried to persuade the town's largest private employer to stay. But Oxford, a town of 11,756 where the median income is $20,383, already offers some of the cheapest labor and operating costs in the United States.

"We talked about ways to save it, but with something of this magnitude and the type of competition we face, there's really nothing we can do," the Oxford native said. "If we eliminated their [Emerson's] entire tax burden, that wouldn't make a difference."

Labor leaders and other globalization critics had hoped the airport shutdowns and lengthy border delays that followed the Sept. 11 attacks would prompt U.S. firms to keep work at home.

"Certainly we hope that American companies will be feeling patriotic and they will have some commitment to their communities and their workers and will address their cost pressures in some other way than by outsourcing," said Thea Lee, an assistant director for international economics with the AFL-CIO in Washington.

"With profits at the lowest percentage of corporate revenues in the postwar period, firms are being forced to reevaluate their business models and figure out whether or not things can be done more efficiently," said Ross DeVol, director of regional studies at the Santa Monica-based Milken Institute. "The recession just accelerates that trend."

Manufacturing jobs historically have been the most vulnerable to global competition, but the latest round of outsourcing also is hitting telephone operators, graphic designers, accountants and engineers.

Trade experts argue that this global repositioning is healthy, simply stepping up the shift of the U.S. economy toward a more high-tech provider of services and more sophisticated products. By taking advantage of lower costs abroad, U.S. firms can retain their competitive edge and gain inroads in fast-growing markets in Asia and Latin America.

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