By Jessica DiNapoli
NEW YORK (Reuters) - Sharpie pen maker Newell Brands is moving some production of kitchen appliances out of China and has relocated manufacturing for its writing business to Tennessee as it faces "uncertainty" on tariffs ahead of the U.S. presidential election, Newell CEO Chris Peterson said in an interview with Reuters.
Peterson specified in the interview the supply-chain changes are not a response to Republican presidential candidate Donald Trump's campaign pledge to further increase tariffs on Chinese-made goods and many others if he wins.
“Trump is talking about very large tariffs on China imports,” said Peterson, adding that Democrats are discussing keeping those that are already in place, originally from Trump's first term as U.S. President and expanded this year. “There's a lot of uncertainty. We just want to reduce our exposure regardless of the outcome.
"It's hard to move supply chains on a real-time basis," he added.
Newell is automating its U.S. manufacturing to make the higher wages in the United States work, he said, adding that moving production to the country also saves on time and volatile freight costs.
"If you have a plant that is automated enough, the economics work," he said. "That's our sweet spot."
U.S. companies importing goods from Asia have faced a series of crises over the last several years, including tariffs, delays and skyrocketing costs during the pandemic, and, most recently, Houthi rebels attacking container ships passing through the Suez canal.
Peterson, a former Procter & Gamble (NYSE:PG) executive who became the CEO of Newell last year, is a member of the Business Roundtable, an influential group of CEOs who met with Trump and President Biden's chief of staff in June. Peterson was present, a spokesperson for Newell said.
He added that, as a consumer-products maker whose pens, infant car seats and food storage containers are found in 95% of U.S. households, "we don't believe it's our place to advocate for one political ideology."
Newell already manufactures most of the products that make up its writing business including Paper Mate pens, Expo markers and Elmer's Glue at its factory in Maryville, Tennessee, a small city south of Knoxville, Peterson said. The company earlier this year repatriated more manufacturing of its writing division from China and South Korea to Tennessee because the plant can be expanded, he said.
The company also has projects "in flight" to move its kitchen appliance manufacturing from China to Vietnam, Thailand, Indonesia and elsewhere, Peterson said, adding that Newell is not exiting China but "reducing our dependence."
Newell acquired Jarden Corp, the maker of Crockpots, Oster blenders and Mr. Coffee coffee makers, in a $16 billion mega deal in 2016 aimed at better negotiating prices with its biggest customer, Walmart (NYSE:WMT). But Newell has struggled as inflation-weary consumers cut back on anything other than essential purchases.
Newell was dropped from the S&P 500 index last year as its market share crumbled. So far this year, its shares are down 6%, compared with a nearly 10% gain in the S&P index.
The Atlanta-based company this year accelerated its earlier efforts to slash its dependence on China for manufacturing, Peterson said on a July 26 conference call with investors. Newell expects to have less than 10% of the company's U.S. business exposed to Chinese manufacturing by the end of next year, versus about 15% currently, Peterson said. Five years ago, the figure was around 35%, he said.
Outside of China, Newell has found it difficult to find factories that make finished products near those that manufacture the component parts, Peterson said.
"The ecosystem is very well set-up in China, of both the finished good assembly as well as the component parts," he said. "Raw material production is also in China, and so, it's hard to move when you have that dynamic."
The company is in the midst of a productivity initiative, including automating manufacturing, that is aimed at turning the business around and boosting its margins.
"We're moving to jobs where people are managing the robots and managing the automation," he said, adding that the change is leading the company to pay higher wages.
The average wage for Newell's jobs at its Maryville, Tennessee plant is currently above $20 per hour, he said.
"My objective is to get our average wage in our manufacturing plant up significantly, by transitioning our workforce away from manual labor into more skilled labor," he said. "If we do that well, we can repatriate more manufacturing back to the U.S."
Repatriating the additional writing business earlier this year added about 70 jobs at the Maryville factory, a spokesperson said. (This story has been corrected to clarify that Newell is moving some kitchen appliance production out of China in paragraph 1)