It is hard to discern if this is an uplifting story, or a rather depressing story about regaining lost basic manufacturing process skills. Any and all countries should be able to make basic and essential things.
Newell Brands stock price fell sharply during the first Trump administration from $53 and is now at $5.40.
Marketing this as a success story of U.S. manufacturing is insane. If the WSJ honestly thinks the outlook is better now, it should at least provide the history and say why (and who provided the investments for automation given that Trump is a sharpie user).
You make a good point, I did a little digging and it looks like the historical share price drop around 2018 is superficially explained by a big decrease in revenue and a big drop in EBIT, and those two changes are explained by Newell restructuring and divesting a bunch of non core brands, and also by accounting fraud.
I’m having trouble figuring out from the body of the article what the way mentioned in its title actually was.
There’s a list of nice business steps the company took (and I can’t imagine starting work on the problem in 2018 hurt either), but I don’t expect they were the only ones to take any specific one, so why did Sharpie in particular succeed? What’s the recipe? Automate the crap out of your assembly line and promote (a lucky few among) your former assembly-line workers (who you definitely did not fire when you got high on automation) to technicians? I can’t imagine that’s a rare thought; yet this seems to be a rare success story.
Beautiful. Sounds like they’re doing with pens in Maryville what Tesla did with the Model S in Fremont.
> Peterson […] found that the factory could use robots to do an increasing share of the packing. But he decided to keep the employees who knew the company and convert their jobs to roles such as automation engineering. In that case, an employee would fix a robot instead of packing a box. Peterson estimates the average wage at its Maryville facility, which employs 550 staff, has gone up some 50% over the past five years—without a change in head count.
The Model S was an expensive car with a bad reputation for quality. Then in 2017 they introduced the Model 3 and their "Alien Dreadnought" automation. That significantly delayed mass production of the Model 3 and almost bankrupted the company.
Tesla turned things around by building a factory in Shanghai, and learning how to build a car from the Chinese. They then basically copied the Shanghai factory to Germany.
>Sounds like they’re doing with pens in Maryville what Tesla did with the Model S in Fremont.
Hopefully without all the illegal toxic waste dumping, forcing people to work during quarantine and ignoring crazy homophobic / racist environments and suing/harassing whistleblowers. The Fremont plant is not something to strive for in any way other than "it's a plant that manufactures things in the US".
I suspect there is quite profit margin in Sharpies compared to other similar markers from the global market. Exactly what a tariff would do by insulating them from a global market pricing, allowing flexibility in rearranging their costs. *even considering quality issues.
> Newcomb joined the company 20 years ago as a packer of chair mats, which the facility made at the time. He took on new roles as years went by. When he reached a point where he wanted a leadership position, Newell’s human-resources department said the company would give him the job, but he would need an undergraduate degree, the cost of which the company would cover.
> Mike Newcomb now leads the molding department.
Newcomb obtained a business degree from a local college and now leads the molding department, overseeing production of the 4.3 billion pen barrels and caps the facility makes each year.
My question is always, why? Why was the degree required for this? He has 20 years of experience. Send him to a 4 week management training course or something. I went to business school for undergrad and it prepared me very little to run a molding department. I think this guys experience was already his biggest asset and this investment could have been significantly less expensive.
Amazing that made in USA with competive price to if made in China
Manufacturing in China is at wxpwnxw of worker conditions and more lax OHS lays and more lax environmental and worker rights, working longer hours and more days.
It is insanely hard to build basic things in the US anymore, even if there is a market, even if the market will pay your prices, even if you have the capital to start, and even if you can hire reliable workers. And those are all HUGE ifs.
The biggest problem is that the base underlying our manufacturing capability has almost completely evaporated. You need tool and die companies to build parts for your manufacturing machines, but almost none are left. There are only a few plastic injection manufacturing companies left, and they are either fully booked or on the path to shutting down. (No, you can't 3D print products for the mass market, it's way too slow and expensive.) Young people think of trades and manufacturing jobs as fall-backs that only drop-outs who couldn't hack college get into. You will make many times more money as a salescritter convincing people to buy things they don't need than using decades of engineering experience to build the things they do.
It's a popular misconception that China's manufacturing advantage is cheaper labor. This was _maybe_ true for a while, their advantage right now is that they have all the things mentioned above: they have the tool and die shops, they have the supply chains, and they have workforce. They can go from product idea to shipping in a week. I do not celebrate the Chinese government for much, but making sure they had a robust manufacturing base from top to bottom was the biggest and most important thing they have ever done. The US government let ours wither and die. Which has made our economy remarkably fragile and essentially decimated the whole idea of a blue-collar middle class.
Destin from Smarter Every Day encountered all of this when he tried to make a better grill brush using only a handful of parts and _still_ did not manage to make the whole thing using only US-originated parts. It's a fascinating window into how hard it is to make anything at all here: https://www.youtube.com/watch?v=3ZTGwcHQfLY
Lot of issues... but it all should have been prevented in the first place. It's not likely that manufacturing will ever really return to US like it once was. We have had administration policies that literally handed our manufacturing away and signed their death certificates for them. Policies and regulations have been the downfall. And, will continue to be, because the way our government is designed and politics handled; the same mistakes are repeated with every administration and party shift. It's just a pendulum that swings back and forth every few years.
No matter what changes and policies are put in place by an administration, international business knows it's only a few years till it changes. Thus, another huge win for China. Their changes actually last and stick around for the long haul to show improvement.
In the US and other places policies just keep shifting. One party is eager to just rip out and undo everything that was put in place by the previous. And setup policies to be a pita for the next. It's really quite counter-productive, even embarassing.
It makes sense that this is possible. It's a very high volume item, with limited parts. The raw materials are not unique to any one location. If you have the capital to invest in a highly automated production line (which I'm sure cost many million USD), you will eventually get the ROI and the costs will be similar in many locations around the world. Labor costs are a small portion of the COGS (cost of goods sold). If most of the market is in the US, then shipping cost savings probably outweigh the higher labor and real estate costs. Energy costs and raw materials are likely similar enough to be a wash.
Contrast this with consumer electronics, especially new products. Those have huge benefits from the concentration of the supply chain and the agility of the supply chain in Southern China. That doesn't exist in the US.
A few people are discussing Newell Brands Inc (NWL)'s poor stock performance over the last decade, and how that makes it hard to sell as a success story. As bgwalter points out, there was a large drop of NWL's share price, particularly between june 2017 ($53.35 / share) and june 2019 ($15.36 USD).
Looking at historical financial metrics [1] over this period provides some insight about the stock price drop:
Their revenue had been growing, then in 2018 their revenue dropped by around 40%, breaking the trend of "increasing revenue" and "increasing EBIT margin". So that explains why we might expect a large decrease in share price, if investor narratives changed from a "growth company" story to a "declining company" story. Reported earnings were negative for 2018, 2019 and 2020.
A Forbes article from 2019 [2] provides some context that may explain large revenue drop:
> Over the last year or so, the company has offloaded many non-core businesses (such as sporting goods maker Rawlings, packaging manufacturer Waddington, and Pure Fishing – a maker of fishing equipment) to trim its portfolio and cut costs. Moreover, the asset sales have helped the company prune down its debt, which stood at about $6.7 billion at the end of June, down from close to $11 billion two years ago.
Aha: searching for "Newell restated financials" dug up this interesting gem [3]. In 2023 the SEC charged Newell and the former CEO Michael Polk with misleading investors:
> The SEC’s order finds that, in 2016 and 2017, Newell and Polk took actions that increased the company’s publicly disclosed core sales growth in ways that were out of step with Newell’s actual but undisclosed sales trends, allowing the company to announce “strong” or “solid” results in quarters it internally described as disappointing due to shortfalls in sales. According to the order, Newell pulled sales forward into earlier quarters without adequate disclosure and engaged in accounting practices that were inconsistent with GAAP, while overriding its internal accounting controls. Collectively, these measures gave the misleading appearance that Newell had achieved core sales growth in line with its targets and deprived investors of information relevant to an accurate and complete understanding of Newell’s actual sales trends.
So former CEO Polk engaged in financial shenanigans during 2016 and 2017 to cook the books and make sales growth appear better to investors than they actually were, shaping NWL as a growth story. They weren't able to maintain the charade in 2018.
One thing that China has, that the US does not is a marketplace like Alibaba. It's simply incredible how you can place an order for any component with a quantity slider that goes from "three" to "three full train-cars a day".
When starting a hardware product, it's so easy to buy small quantities at commercial prices, no questions asked.
In the US, it seems all sales is relationship-based. I need to fill out forms on bad websites, wait for emails from sales reps, who sniff out immediately that I only want a small order. The overhead for processing an order isn't deemed worth the time, and any US-based small-time project ends there.
In fact, if you search on Amazon, the cheapest option is $0.75 per count. Similarly, on Alibaba, it costs <$0.08 per unit, and on Chinese websites, it is $0.03 per unit (with free shipping within China mainland). This means the price at retail terminals is at least 10 times higher. https://imgur.com/a/pUCliyo
23 comments
[ 23.1 ms ] story [ 259 ms ] threadMarketing this as a success story of U.S. manufacturing is insane. If the WSJ honestly thinks the outlook is better now, it should at least provide the history and say why (and who provided the investments for automation given that Trump is a sharpie user).
There’s a list of nice business steps the company took (and I can’t imagine starting work on the problem in 2018 hurt either), but I don’t expect they were the only ones to take any specific one, so why did Sharpie in particular succeed? What’s the recipe? Automate the crap out of your assembly line and promote (a lucky few among) your former assembly-line workers (who you definitely did not fire when you got high on automation) to technicians? I can’t imagine that’s a rare thought; yet this seems to be a rare success story.
> Peterson […] found that the factory could use robots to do an increasing share of the packing. But he decided to keep the employees who knew the company and convert their jobs to roles such as automation engineering. In that case, an employee would fix a robot instead of packing a box. Peterson estimates the average wage at its Maryville facility, which employs 550 staff, has gone up some 50% over the past five years—without a change in head count.
The Model S was an expensive car with a bad reputation for quality. Then in 2017 they introduced the Model 3 and their "Alien Dreadnought" automation. That significantly delayed mass production of the Model 3 and almost bankrupted the company.
Tesla turned things around by building a factory in Shanghai, and learning how to build a car from the Chinese. They then basically copied the Shanghai factory to Germany.
Hopefully without all the illegal toxic waste dumping, forcing people to work during quarantine and ignoring crazy homophobic / racist environments and suing/harassing whistleblowers. The Fremont plant is not something to strive for in any way other than "it's a plant that manufactures things in the US".
> Mike Newcomb now leads the molding department. Newcomb obtained a business degree from a local college and now leads the molding department, overseeing production of the 4.3 billion pen barrels and caps the facility makes each year.
My question is always, why? Why was the degree required for this? He has 20 years of experience. Send him to a 4 week management training course or something. I went to business school for undergrad and it prepared me very little to run a molding department. I think this guys experience was already his biggest asset and this investment could have been significantly less expensive.
The biggest problem is that the base underlying our manufacturing capability has almost completely evaporated. You need tool and die companies to build parts for your manufacturing machines, but almost none are left. There are only a few plastic injection manufacturing companies left, and they are either fully booked or on the path to shutting down. (No, you can't 3D print products for the mass market, it's way too slow and expensive.) Young people think of trades and manufacturing jobs as fall-backs that only drop-outs who couldn't hack college get into. You will make many times more money as a salescritter convincing people to buy things they don't need than using decades of engineering experience to build the things they do.
It's a popular misconception that China's manufacturing advantage is cheaper labor. This was _maybe_ true for a while, their advantage right now is that they have all the things mentioned above: they have the tool and die shops, they have the supply chains, and they have workforce. They can go from product idea to shipping in a week. I do not celebrate the Chinese government for much, but making sure they had a robust manufacturing base from top to bottom was the biggest and most important thing they have ever done. The US government let ours wither and die. Which has made our economy remarkably fragile and essentially decimated the whole idea of a blue-collar middle class.
Destin from Smarter Every Day encountered all of this when he tried to make a better grill brush using only a handful of parts and _still_ did not manage to make the whole thing using only US-originated parts. It's a fascinating window into how hard it is to make anything at all here: https://www.youtube.com/watch?v=3ZTGwcHQfLY
In the US and other places policies just keep shifting. One party is eager to just rip out and undo everything that was put in place by the previous. And setup policies to be a pita for the next. It's really quite counter-productive, even embarassing.
Contrast this with consumer electronics, especially new products. Those have huge benefits from the concentration of the supply chain and the agility of the supply chain in Southern China. That doesn't exist in the US.
Looking at historical financial metrics [1] over this period provides some insight about the stock price drop:
Their revenue had been growing, then in 2018 their revenue dropped by around 40%, breaking the trend of "increasing revenue" and "increasing EBIT margin". So that explains why we might expect a large decrease in share price, if investor narratives changed from a "growth company" story to a "declining company" story. Reported earnings were negative for 2018, 2019 and 2020.A Forbes article from 2019 [2] provides some context that may explain large revenue drop:
> Over the last year or so, the company has offloaded many non-core businesses (such as sporting goods maker Rawlings, packaging manufacturer Waddington, and Pure Fishing – a maker of fishing equipment) to trim its portfolio and cut costs. Moreover, the asset sales have helped the company prune down its debt, which stood at about $6.7 billion at the end of June, down from close to $11 billion two years ago.
Aha: searching for "Newell restated financials" dug up this interesting gem [3]. In 2023 the SEC charged Newell and the former CEO Michael Polk with misleading investors:
> The SEC’s order finds that, in 2016 and 2017, Newell and Polk took actions that increased the company’s publicly disclosed core sales growth in ways that were out of step with Newell’s actual but undisclosed sales trends, allowing the company to announce “strong” or “solid” results in quarters it internally described as disappointing due to shortfalls in sales. According to the order, Newell pulled sales forward into earlier quarters without adequate disclosure and engaged in accounting practices that were inconsistent with GAAP, while overriding its internal accounting controls. Collectively, these measures gave the misleading appearance that Newell had achieved core sales growth in line with its targets and deprived investors of information relevant to an accurate and complete understanding of Newell’s actual sales trends.
So former CEO Polk engaged in financial shenanigans during 2016 and 2017 to cook the books and make sales growth appear better to investors than they actually were, shaping NWL as a growth story. They weren't able to maintain the charade in 2018.
[1] https://www.morningstar.com/stocks/xnas/nwl/key-metrics
[2] https://www.forbes.com/sites/greatspeculations/2019/10/24/ho...
[3] https://www.sec.gov/newsroom/press-releases/2023-210
When starting a hardware product, it's so easy to buy small quantities at commercial prices, no questions asked.
In the US, it seems all sales is relationship-based. I need to fill out forms on bad websites, wait for emails from sales reps, who sniff out immediately that I only want a small order. The overhead for processing an order isn't deemed worth the time, and any US-based small-time project ends there.