Am I Next? Rackspace outsourced 125 employees to Tech Mahindra.

San Antonio-based Rackspace Hosting, a cloud development, hosting, and management company owned by private equity firm Apollo Global Management, continues its restructuring/repositioning by transferring 125 quality assurance and support employees to Pune, India-based Tech Mahindra, a business process outsourcer and consultancy, as part of a strategic partnership that appears to be able to compete with Amazon AWS and Microsoft Azure. Since being acquired and taken private by Apollo in 2016 for approximately $4.3 billion, there have been three layoffs of approximately 600 employees. It was rumored that Apollo was looking to take the company public in once again in 2018 to spread the risk and reduce their capital investment.

One cannot help but wonder if these employees will be replaced with Indian counterparts in the coming year?

According to a company spokesperson, “Our partnership with Tech Mahindra is a powerful combination. Their understanding of innovative and customer-centric IT experiences is uniquely complimentary to how Rackspace provides a Fanatical Experience. We believe that this will help generate industry leading technology services and platforms. With 121,000+ associates, working across 90 countries and helping 938 global customers, including Fortune 500 companies, this partnership will allow us to drive far more business impact for our customers.”

Change is coming. There will always be a tomorrow, no matter how much you may try to ignore it. There are no guarantees in life, or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere. No one is guaranteed to wake up tomorrow and still have a job by evening. Are you now wondering, Am I Next?


The Politics of Tariffs

First, no matter what the think tanks, pundits, and the government may say, we do not have multi-national or even national free trade or fair trade in this nation. 

What is a tariff?

Technically, a tariff is a government-imposed regulatory device meant to regulate transactions between two parties when some real or imagined inequality or inequity occurs. Therefore, a tariff is nothing more than a tax or fee to be paid on a particular class of imports or exports. 

In reality, a tariff is a tax on the end user who knowingly or unknowingly finds that any tax burden imposed on their purchases is included in the final cost of their purchase. Thus, while tariffs are applied to corporations, they ultimately are paid by the consumer.

Am I Next? Politics of Tariffs

In addition to tariffs as taxes, quotas and tax-free shopping may be considered as another type of tariff with more subtle effects. The goal is to create artificial scarcity and drive the price of the foreign product upward to advantage the domestic producers.and

Why do we use tariffs?

Tariffs are a political device that artificially restricts the importation of goods purchased from foreign (non-domestic) producers with the goal of making these goods less price-attractive to corporations and consumers to convey an advantage o the domestic producer. This advantage can be neutral to achieve equivalence with foreign pricing or advantageous to convey supremacy to the domestic producer.

One, tariffs are imposed nationally or internationally to regulate trade so that one party cannot exert systemic supremacy over another. 

Two, tariffs are imposed to redress currency manipulation where one nation maintains an artificially low currency conversion rate to encourage consumers and corporations to buy goods which appear cheaper than those offered domestically. 

Three, tariffs might be imposed to redress the systemic institutional theft of intellectual property which allows manufacturers to avoid the tremendous costs of research and development and pass the cost savings along to consumers as lower prices.

Some examples: 

A primary example would be goods manufactured in a nation with low labor costs and sold for at a lower price in a nation with higher labor costs. Since the higher-cost producer cannot effectively compete in the marketplace, they are forced to innovate new products, reduce their labor costs through automation, expert systems, and robotics; outsource production; or go out of business. 

Another example would be a nation subsidizing some portion of manufacturing, labor, or currency translation costs of a  manufacturer which allows the manufacturer to dump their goods in another nation at a substantially lower price, thus forcing domestic producers to take affirmative action to remain competitive.

Sometimes domestic tariffs are used to protect obsolete and failing business models from legitimate competition. Hence we see commodity goods such as telephone and cable services being sold at premium prices by deliberately designed complexity which creates confusion in the packaging (bundling) of services which permits higher prices.

And, then there is the government's desire to impose taxes on the population in such a manner as to hide them from those taxed. If the government did not collect these taxes in small increments in utility taxes, at the gas pump, or embedded in large luxury purchases, and presented a tax bill at the end of the year -- the populace would revolt and throw most of the politicians out of office.

The current situation.

There is no doubt in my mind that China is a low-cost labor source, having a 900 million person workforce (compared with approximately 140 million in the United States)that works at what Americans might consider slave-labor wages. 

There is no doubt in my mind that China manipulates their currency to ensure that Chinese purchases are cheaper than their corresponding American counterparts.

There is no doubt in my mind that China engages in both governmental and commercial espionage to gain an unfair advantage for their military and commercial ventures.

The possibilities of a trade war?

If one nation retaliates against another, it is most likely the response will be tariffs imposed on that nation's goods; resulting in a death-spiral of tariffs and quotas that may benefit domestic producers in the short- and medium-term, but may be overly oppressive to the consumer who may shop in big-box stores like Walmart, Costco, etc. and have come to rely on lower prices.

Who is hurt?

While the case is made that domestic producers (and their employees) benefit from tariffs and quotas, it is the end consumer that always pays the price. With a disproportionate impact on the poor who have managed their meager budgets using the lower costs goods available in the marketplace.

The Retail Council of Canada claims that an increase in the duty-free allowance for cross-border shopping from $20 to $800 would lead to hundreds of thousands of job losses and cut billions of dollars from the Canadian economy. In this case, common sense reveals that is not so much about jobs since most of the purchases come from sources in the United States, but a loss of tax revenue for a cash-strapped government. <Source>

Am I Next? Jobs Lost to Tariff on China Solar Products

Another example comes from the Trump Administration's decision to redress artificially low-priced Chinese solar panels, components, and electronics by imposing a 30% tariff on solar products. According to various sources, this may cost the solar industry approximately 23,000 jobs and slow the adoption of clean green energy. Little is being said about the costs to consumers or the government tax revenue windfall.  

Ironically, the second thing subject to the Administration's tariffs was large washing machines. South Korea and Mexico may be among the biggest losers from the tariffs because those countries export the bulk of washers to the United States. Much of the washer production in the two countries comes from Samsung and LG, both South Korean companies. 

Bottom line ...

Tariffs drive political corruption, more massive administrative bureaucracies, and the automation of the workforce. There are no real winners as self-correcting market forces are abridged and inefficient and ineffective government central planning reigns supreme.

Something to watch as an employee if your company operates in tariff-covered industries or depends on lower foreign material and production costs to maintain profit margins.


Am I Next? Dematic, Moving to Mexico, Plant Closure, Layoffs

After claiming they have satisfied the initial terms and conditions of a job-related Michigan tax break, Dematic, a makers of automated machinery for industrial applications, appears to be continuing their planned layoffs and a transition to a production facility based in Monterrey, Mexico. In a WARN (Worker Adjustment and Retraining Notice) filed with the State of Michigan, the company announced its intentions to lay off another 60 production workers, most in manufacturing and many represented by the United Auto Workers union, in the firsts months of 2018. 

At risk are additional number of workers that might be affected by the transition as Dematic has told the union that their Grand Rapids manufacturing facility will be substantially closed by mid-2018 and completely shut down by the end of 2018. 

As we have seen before, problems can arise from union contracts which do not well represent the realities between loss of business, increasing competition, global logistics, wages, benefits, and the necessity of increasing production while lowering costs. Looking at the type of workers scheduled for layoff, (welders, mechanics, electronics technicians, machine operators) is consistent with the decline in manufacturing jobs within the United States. 

Safe for the time being are the administrative and engineering staff in similarly located in Grand Rapids, Michigan. According to a company spokesperson, “This move will help to further increase our global competitiveness and secure highly-skilled engineering jobs based in Grand Rapids.” 

To be noted, this is the type of industrial operation that changes ownership as the global poohbahs play Monopoly with real companies and real money. According to UAW local President Scott Wahlfeldt, “in 1980, the company was acquired by Lear Siegler Corporation and exchanged hands four times until 2006, when it was acquired by Triton, a private equity firm from Siemens. It was sold to KION, a German maker of forklift trucks and automated material handling equipment for $2.1 billion in 2016. 

Am I Next? Dematic - Mexico

Translation: Welcome to Dematic Mexico ...

"Dematic designs, develops and delivers solutions that optimize your supply chain, improve productivity and increase the performance of your system in your manufacturing area and within the four walls of your warehouse or distribution center, in addition to providing support and technical assistance throughout the life cycle of its logistics solutions."

Are you asking yourself, Am I Next?