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Tuesday, March 11, 2014

North American Energy Revolution And Opportunities In The South

Over the weekend, I posted/linked a story on Electrolux; the company may shut down a factory in Italy due to high payroll costs, but did not mention anything about the extraordinarily high price of electricity in Italy.

Yesterday, Electrolux was in the news again. In this case, Electrolux did, in fact, close an Electrolux plant, the one in Montreal, Canada:
Stockholm-based Electrolux AB (ELUXB), the maker of Frigidaire ovens, is moving production from a factory near Montreal, where it employed 1,300 workers, to Memphis as part of efforts to consolidate its operations in Tennessee, where it is receiving financial assistance. Factory workers in Tennessee earned almost 10 percent less in 2012 than the U.S. average, according to Bureau of Labor Statistics data.
The Electrolux story is buried deeply in a story highlighting the fact that Warren Buffett closed a Heinz ketchup factory in Canada. Although the story focuses on this particularly Canadian factory, in fact, Warren Buffett closed two other plants, also, in the United States. Buffett said:
"The tomatoes are going to go to the plants that have the low production costs," Buffett said in November at an event in Detroit. "It's really a question of having an unprofitable plant and concentrating production in a more profitable plant." 
In addition:
The job cuts have come despite a pick-up in global growth and a 13 percent drop in the Canadian dollar since September 2012, raising concern that Canadian factories will struggle to compete with plants in China, Mexico, and even the U.S., where the much-touted manufacturing renaissance has been fueled by declines in real wages and two-tier pay scales that mean less money for new employees.
There are a couple of interesting story lines here that circle back to the problems in Italy, reflected by the first linked article on Electolux. Cheap energy in the United States is only of the story lines.

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