David Farr, CEO of Emerson Electric Co., has reversed his 2009 assertion that the company would avoid U.S. hiring and prioritize offshoring, announcing plans to build at least three new domestic facilities by 2021. The shift reflects evolving trade dynamics and corporate strategies amid rising protectionism.
Farr’s 2009 remarks about moving operations to India and China contrast with his current focus on "best-cost U.S. locations," as revealed in an interview at the company’s Missouri headquarters. He cited political realignments against free trade policies, accelerated by Donald Trump’s election, as key drivers of the strategy change.
Emerson has committed $250 million for U.S. projects through 2021, with $425 million planned for 2021 alone. The company’s 2018 U.S. capital spending reached $407 million, a 38% increase from 2017, and included a $22 million investment in Iowa’s industrial valve division. Farr’s 2000 leadership era saw Asia account for 8% of sales, a figure that rose to 22% by 2018.
Trade Policy and Industry Trends ¶
The reversal aligns with broader manufacturing shifts, as 31% of U.S. firms surveyed by UBS in 2018 moved or planned to move production to avoid tariffs. Emerson’s industrial valve division aims to boost U.S. production from 50% to 90% by 2021, with two new Texas facilities expected to transfer capacity from Europe and China.
Political and economic factors underpin the move, including rising Chinese labor costs, intellectual property concerns, and automation advancements. McKinsey data shows global goods trade share fell from 28% in 2007 to 22.5% by 2017, reflecting reduced reliance on offshore manufacturing.
Corporate Strategy Adjustments ¶
Farr’s 2016 task force reevaluated global investments amid trade policy uncertainty, leading to a revised focus on domestic expansion. Emerson’s 2018 tax savings of $189 million from U.S. reforms enabled wage increases and improved benefits, though the company remains cautious about a pending U.S.-Mexico-Canada trade agreement affecting its Mexican factory plans.
