Thread: In a twist , Houstons Farouk Systems shifts jobs from china

May 17, 2008, 12:14AM
In a twist, Houston's Farouk Systems shifts jobs from China to US
For years, manufacturing jobs have gone overseas, but a hair care company is now switching shores


By DAVID IVANOVICH
Copyright 2008 Houston Chronicle

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Hair care products maker Farouk Shami wants to turn on its head the old story about manufacturing jobs migrating to cheap labor markets.

Shami's privately held Houston company, Farouk Systems, manufactures hairstyling appliances in China and South Korea.

Shami, worried about the lead paint discovered in Chinese-made toys and about maintaining the reputation of his company's products, is planning to move 1,000 to 2,000 manufacturing jobs from Asia to Houston over the next year or so.

"People want 'Made in the U.S.A.' " on the products they buy, Shami said. "I want 'Made in the U.S.A.' "

For years, American jobs have migrated overseas as manufacturers sought out cheaper labor markets. Over the last 10 years, about 4 million U.S. manufacturing jobs have been lost, said Robert E. Scott, senior international economist for the Washington-based Economic Policy Institute.

According to the Labor Department, more than 930,000 American workers received pink slips last year, caught up in 5,170 mass layoffs. Manufacturing accounted for more than a quarter of those layoffs.

But examples of manufacturing jobs moving from foreign shores to these are a real rarity.

Overseas manufacturing can carry significant cost advantages, said Cheryl Abbot, regional economist for the U.S. Bureau of Labor Statistics in Dallas. "I wasn't sure anyone would decide that advantage alone wasn't enough."

Robert "Bill" Gilmer with the Federal Reserve Bank of Dallas said he had heard of some companies returning to Mexico after relocating to China but not to the United States.

But Shami hopes to be at the head of a trend of bringing manufacturing jobs back to America. "And it will be soon," he said.

Born in suburban Jerusalem in what was then British-controlled Palestine, Shami immigrated to the United States in the 1965 and went to work as a hairdresser. He moved to Houston in 1978.

Shami found he was allergic to the ammonia in hair dye. So in 1986 he developed an ammonia-free hair lightening and color system and launched Farouk Systems.


Shipping costs increase

Over the years, Farouk Systems developed a number of other hair care products, including shampoos, conditioners, blow-dryers and its line of CHI ceramic flat irons.

Last year, Farouk Systems racked up $1 billion in sales. The company employs about 2,000 worldwide, including about 600 in Houston.

The company produces its shampoos and conditioners in Houston, its irons and blow-dryers in Asia.

Farouk Systems ships its hairstyling tools to market by air. But the company's shipping costs have nearly doubled over the last year, Shami said, as air carriers raised fares in response to rising fuel costs.

Shami also is concerned about his products' reputation. He fears that reputation could be compromised by counterfeit products coming out of China.

So, Shami decided to move his tools' manufacturing to a Houston site adjacent to the company's facility on Richey Road. Shami said he is working with an accounting firm to apply for tax breaks for moving manufacturing jobs here.

The company has begun hiring and is designing the parts that will be made in the United States.

Shami believes that through greater automation, the company can reduce the number of workers needed while boosting quality control.

An item that would take 70 workers in China and 20 minutes to produce can be built with five workers in about five minutes in Houston, Shami said.

Increased automation can also cut down on defects, thereby reducing the number of customer returns.


Hoping to offset costs
With the lower costs, absence of import duties and greater sales from a "made-in-the-USA" label, Shami expects Farouk Systems can offset most of the higher labor costs of building the tools in Houston.

"It sounds like there may be a silver lining to the incredible oil prices," said Richard Shaw, secretary treasurer of the Harris County AFL-CIO, in response to Farouk Systems' plans.

"I say, 'More power to him,' " Shaw said. "Welcome to Houston."

david.ivanovich@chron.com


http://www.chron.com/disp/story.mpl/front/5786834.html

Made in the U.S.A.--lovely ring to those words.

"People want 'Made in the U.S.A.' " on the products they buy, Shami said. "I want 'Made in the U.S.A.' "

This is absolutely true. It's about time we heard from a smart business. I'll buy that.