Monday, February 11, 2008

Johnson Control's embrace of green markets: an alternative to low-wage production

Johnson Controls’ new contract to make lithium-ion batteries for hybrid cars demonstrates that manufacturing companies can successfully compete at the high end of the global economy by embracing green markets, high performance technologies, advanced manufacturing, quality and service.

As David Haynes, Milwaukee Journal Sentinel deputy editorial page editor, wrote: "Johnson Controls' new contract …is another example of how a Milwaukee company with cutting-edge technology is competing globally with a portfolio of new ideas. Johnson Controls will make up to 5,000 battery packs a year for us in Mercedes-Benz S-class luxury hybrids, the Journal Sentinel's Thomas Content reports. It also proves again how much green there is in 'clean and green' technologies."

Johnson Controls' expansion into green markets contrasts with Briggs and Stratton's response to California's effort to increase clean air standards in 2006.

Rather than embrace enhanced regulations designed to tighten emission requirements for small engines, cutting 22 tons of smog-forming chemicals from the California air daily, or the equivalent of more than 800,000 cars a day, Briggs' management fought them.

Briggs, which dominants the small engine market, joined forces with a powerful Republican Senator, Christopher S. Bond, from Missouri where it has two plants employing almost over 1,750 employees. Together they opposed the measure that would have required small engines to have catalytic converters which pull smog-forming chemicals and carbon monoxide out of the exhaust.

Briggs argued that the converters could add a dangerous amount of heat to already hot engines, creating a fire hazard. It was an argument similar to one U.S. automakers made before the government required the devices three decades ago. But four small-engine makers said that their engineers have figured out how to meet the pollution standards safely, with or without the devices.

Briggs' failure to grasp the economic potential of California's clean air initiative was a byproduct of the firm's inflexible commitment to a high-volume. low-cost production strategy which led the firm to demand major concessions from its Milwaukee employees and eventually move almost 10,000 family supporting jobs from Southeastern Wisconsin over the past two decades.

The New York Times wrote: "Senator Bond and Briggs & Stratton are making an enormous mistake. Their resistance to California's new standards — and to the adoption of catalytic converters — makes them look troglodytic. What's worse is that they're missing an enormous opportunity. Americans do love their lawns. But at the moment, we're trapped in something of a paradox: to keep the grass trimmed we depend on heavily polluting engines. The manufacturer that offers an environmentally sound mower will almost certainly find a nation of willing buyers."

Unlike Briggs, Johnson Controls has recognized that emerging green markets have significant growth potential.

And instead of sourcing the production of hybrid batteries to low-wage China, this joint venture will sell them there- to the Chinese automaker Chery in China.

Unfortunately, the batteries won't be produced in Milwaukee. They will be produced in a new $22.2 million Johnson Controls-Saft factory in Nersac, France. French manufacturing compensation costs are $4 more an hour ($33.73) than in the US ($29.60), demonstrating that firms can pay family supporting wages and compete in the global economy.

Taxes are also significantly steeper, additional evidence that business location decisions are not determined by tax rates.

Johnson Controls' joint venture demonstrates that firms can sucessfully compete through high road strategies based on innovation, advanced technologies, quality, and service -that there is an alternative to reducing wages and benefits and outsourcing jobs and production!

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