back to article USA! USA! ... Aw, screw it. Motorola to close Texas smartphone plant

Motorola Mobility's adventure in stateside manufacturing is coming to an end, with the Google subsidiary announcing that it plans to close its Fort Worth, Texas factory less than a year after launching its vaunted Moto X smartphone. The plant opened in May 2013 specifically to assemble the Moto X for US customers, but The Wall …

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The problem is...

Smartphones have turned into a commodity. They are more or less interchangeable. There is no advantage in having a Motorola touchscreen phone over a Samsung touchscreen phone. They are, for all practical intends and purposes, identical.

Unfortunately they are still profitable enough to continue, however the entry barrier to the market is to high to allow for any new and innovative companies entering it.

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The problem is... also...

down to the 'carriers'.

If smartphone vendors are to evolve then I think they need to break free and sell their products independently from mobile and data tariffs.

You don't buy a TV because it comes with a Sky or HBO subscription.

Hardware has nothing to do with minutes/data usage. If you separate the hardware then I strongly believe you will massive change in purchasing behaviour. No longer would you be restricted to carrier x's cherry picked handsets that go with tarrif y.

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Anonymous Coward

Great Thinking

The road to the New Non-Economy: we don't make anything anymore. We just bullshit on social media sites about what other countries make, export and sell to us. We buy their crap on credit with interest rates of at least 20%/year, because we can't afford to pay cash. We can't afford to pay cash because of thirty+ years of wage-suppressing policies.

And this is supposed to be our (US) long-term sustainable strategy for rising general-population wealth and standards of living.

Let's hear it for Milton Friedman, The Chicago School and their toxic ideology that put the US on the path to self-destruction.

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Thumb Up

Re: Great Thinking

Look up Elizabeth Warren on YouTube, she's one of the few honest and straight forward persons in the US and she knows what she is talking about. Similar problems in many other countries of course.

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Re: Great Thinking

Dante:

Per ch'una gente impera e l'altra langue,

seguendo lo giudicio di costei,

che è occulto come in erba l'angue.

Sometimes one country rules and another declines according to the judgement of the one who is concealed like a snake in the grass (i.e. fate).

Athens, the Roman Empire, the Persian Empire, the British Empire - all managed to decline without the help of Milton Friedman. Academics come up with loony ideas all the time, what matters is when businessmen and politicians select winners to suit themselves, and then follow them blindly.

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Re: Great Thinking

You could always try the UK approach - turn yourselves into an international tax haven.

( I see that as a result of the latest tax changes Vodafone are now applying for a GBP 17 billion, sorry BEEELION, tax rebate )

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Re: Great Thinking

a news anchor who gets it and then loses it.

https://www.youtube.com/watch?v=A3BHujm3cpY

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Re: Great Thinking

Except you are wrong. There is a ton of manufacturing returning to the US. Why?

A. The cost of energy.

1. It costs money to ship stuff 1/2 around the world

2. Energy to run highly automated factories is far cheaper in the US (see natural gas)

B. Time to market

1. Consumer products have ever faster turn arounds, being closer to markets is a huge advantage.

2. Less distance means less unmonetizable inventory.

C. Maker revolution

1. Far cheaper automated production is the leading edge of a whole new series of hyper-local businesses

2. People value a connection with the makers more than ever.

3. The great recession has pushed a whole class of (creative) people to be more creative about monetizing their skills

4. The internet has enabled companies to reach a far larger audience than ever very quickly (see James&James).

It's easy to be negative from behind your computer - if you really want to change things, you need to go out and do something, not just complain about it....

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Anonymous Coward

Re: Great Thinking

I scanned through your reply and couldn't help but notice that it is written in Management-Consultantese. That's when I stopped reading.

Has it ever occurred to you - Consultant Types - that you sound exactly like the USSR Politburo from the '70's and '80's? You appear to have convinced yourselves that you can solve any major and complex problem by blurting out cheery-sounding, canned and braindead platitudes. That's exactly what the Soviet Politburo believed as well, and that is precisely what the Politburo offered as solutions to the USSR's economic problems.

Do you honestly believe that you contribute anything of value to this discussion - or to any discussion for that matter - with statements such as:

- Far cheaper automated production is the leading edge of a whole new series of hyper-local businesses

- People value a connection with the makers more than ever.

- The great recession has pushed a whole class of (creative) people to be more creative about monetizing their skills

What do any of these statements mean?

Heed your own advice: if you really want to change things, go out and do something. My take is that, as a Management Consultant, you don't really want to change anything, because, as a Management Consultant, you can only make serious dough when things are broken. So, you waste other people's time by making them listen to this meaningless tripe, while convincing yourself that you are a deep and profound Thought Leader at the same time.

Unlike you, I actually build things while earning a pay: I write compilers. Do you do anything besides Powerpoint? Can you do anything besides Powerpoint?

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Re: Great Thinking

Much as I loath Milton Friedman, the main reasons for falling wages is the constant devaluation of the dollar versus other currencies which hides the falling wages. This has been a fed policy since nearly Nixons time. Increased productivity was not replaced with better wages, just more unemployment and jobs that used to be done by humans now automated. Oh, and the capital leeches at the top syphoning off more and more of the wealth for doing nothing - rent capitalists.

I recommend "Currency Wars" and "The second machine age" - the two books together spell out why we are in this wage spiral of decline.

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Re: Great Thinking

a news anchor who gets it and then loses it.

But, he 'gets' the problem, but 'loses it' in his passionate attempt to drive the point home!

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Anonymous Coward

Re: Great Thinking

The same ignorant comments.

Please understand that that the way capitalism works. Now unlike planned stubborn economics, like socialism, capitalism is based on reality.

Yes, there is no way on earth that we can compete in all types of industries. The Chinese and Koreans can built phones and many other things cheaply and that’s that. Try it and you will fail –

So now I hear.. Its not fair bla bla Low wages…

So listen and shut up:

There is NOITHING you can do, and you DO NOT WANT TO.

The only way to change that, and keep our jobs and wages, is through tariffs. Burt what do you think will happen? It we add tariffs to artificially make Korean phones more expensive, say, you will make people buy American phones right? Yes – But

1) You can only make captive the American market, the rest of the world will keep buying and sending billions to China / korea, the industry will never be as big and

2) With captive market there is no competition, American phones will lower their quality until they are so bad that you will still buy the Chinese/ Korean even more expensive.

3) Tariffs = You are paying a more expensive phone, and as Chinese and Korean lower their prices the price in US will only increase. Remember – you pay the tariff.

Don’t believe me, ask Argentina and Venezuela –

According to some reports the controlled prices in Venezuela had let to closing 80% of companies, an unstoppable smuggling to external markets.

And then, what - Even if you put tariffs and keep the market here, that’s workforce that could have been used in something where we had the advantage, making the economy even more inefficient –

So that’s why we CANT do it - Theres 200 years of people trying socialism and communism and controlled economy and IT DOES NOT WORK – Let the Chinese do stooped phones and lets make here airplanes and stuff that really matters.

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Anonymous Coward

Re: Great Thinking

They make airplanes in Europe too, but note that they also do so in Canada and Brazil and several other places. I would suggest you look at commercial aviation production in China as it stands now. It will not be too long before Boeing and the western manufacturers will be out-competed by the Chinese in almost all markets.

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Re: Great Thinking

"Now unlike planned stubborn economics, like socialism, capitalism is based on reality"

Decades ago it may have been the case, but modern oligopolies are wildly different beasts. It's exactly these 'planned stubborn economics' at play, hidden under layers of rhetorics and bullshit. Reality is heavily frowned upon, because it invariably interferes with the most precious plans and processes.

Previous poster was quite right - Politburo is back with the vengeance.

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Re: Great Thinking

I've built and sold four companies, what have you done? In fact, the first company I ever started (a European company) is still around after almost 20 years....

Unlike most people in this thread, and I'm guessing including you, I've actually done it.

Given the downvotes on my post, it seems that having an optimistic, positive outlook on the US is not well received on a British website.

Unfortunately for you all and the rest of Europe, it's just going to get worse as the US gets more competitive.

http://news.yahoo.com/special-report-fracking-helps-america-beat-german-industry-060932663.html

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One trick pony

The problem here seems to be the fact that this facility existed solely for the purpose of producing a mildly interesting, under-powered phone (relative to the competition) with a few quirky features and customization options that didn't really catch on.

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Re: One trick pony

It's working for BMW with the Mini.

Motorola's problem was the same as that of BlackBerry, HTC and to a lesser extent WP: US carriers who control access to the market.

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WRONG

Apple managed to break in without any existing carrier relationships. Samsung had a far smaller market share when the first Galaxy was released, and they managed to get the required carrier relationships.

Blaming it on the carriers is just an excuse, and incorrect to boot. Want to know why Apple and Samsung did so much better? They're willing to advertise, because despite what the engineers at Google may think, you don't just build a great product and have people show up to buy it because its great. That may work for selling to the geeks who research and compare feature lists and benchmarks endlessly, but not for the far more numerous "average person" took smartphones from a niche product for geeks and PHBs only pre iPhone/Android to today's mass market success. Average people buy a Samsung over a Motorola because they see Samsung ads all the time.

Motorola had some initial success with their Droid products because they were heavily advertised, but when Google bought them the ads disappeared overnight, and they started bleeding market share as a result. Google let Samsung take over the market in the US. Their fault, not the carriers.

Why do you think McDonalds and Coca Cola advertise so much, when everyone has heard of them?

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Re: WRONG

@DougS,

I agree, it is strange that an advertising company is shy when it comes to advertising it's own products.

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Re: One trick pony

Yes, a less than popular product generally isn't great for the financial health of a factory, but that's not the only factor here. It's nearly impossible for a factory to produce a single product and make it worthwhile.

There are a few factories that produce a single product, but they tend to be at the extremes of manufacturing: Super specialized or making extremely simple products. That middle ground of manufacturing, where smartphones live, doesnt really support single product foundations. The equipment is so expensive and works so quickly that you end up with weird schedules were nobody except management and sales have any reason to be at work.

The solution is obvious, you start making additional things with all that excess capacity. This entire experiment has all the earmarks of a project proposed by an over exuberant golden child employe who is given enough rope to hang himself. It's shotloads cheaper to do that and let a person find their own maximum capacities earlier than it is to put that person in a position of real power and have them scuttle the entire ship with emotion and exuberance.

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Gracias

Thanks, workforce. Good luck with finding something else. Rough for people who had hoped that, with Motorola, they might have a future.

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Re: Gracias

It does suck, but I can absolutely assure you that closing the operation is the very last thing a company wants to do. Everybody would much rather have the factory operate successfully and make lots of money. But sometimes a fight just can't be won. You can throw billions into something and forestall the inevitable for a while, but money isn't the problem. If your core is broken there's just no point in pouring more money in.

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Anonymous Coward

@Don Jefe - Re: Gracias

Aaww! You're warming my heart speaking about poor corporations caring about their employees.

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Anonymous Coward

Re: Gracias

> [ ... ] I can absolutely assure you that closing the operation is the very last thing a company wants to do [ ... ]

Riiiight. Especially when said operation is transferred to some developing country with wages 1/20th of US or EU wages, and no environmental or workplace protections. Not to mention the obscene bonuses senior management would have paid themselves for eliminating redundancies and identifying efficient synergies of scale.

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Re: Gracias

Jesus... You don't get bonuses or promotions for failing to make something work. That's simply not how those things work. You get bonuses for things like revenue growth and cost controls. This isn't a revenue creating or a cost control exercise, you understand that right? This is the elimination of revenue being done in the most expensive way possible. It's chopping off a finger to save the hand.

Furthermore, the costs of closing a plant are unbelievably high. You don't just lock the doors and wall away, at least not until you've paid all the penalties for contract termination with your parts vendors, the city you're in, the power company, the water company (which probably isn't significant here) and million and millions worth of other things.

Based just on what's publicly available, it's going to take three plus years of the plant employees combined salaries to just equal the costs of closing the plant. Three fucking years. Then you've got the enormous costs of moving the operation to another county. You just don't go hand them a box of shit and tell them you want them to make phones, you've still got to reconfigure every bit of the supply and logistics chain after you negotiate the new production deal. The list goes on and on and on.

This entire exercise is rework with a 3x multiplier. Nobody gets bonuses, margins take a hit and revenue is gone. It's a fucking disaster that's accomplished the exact opposite of what it was supposed to be doing. It isn't about me having pity on the workers, it's about me understanding how closing facilities actually impacts a company.

You lot are waving the banner of the proles and have no actual idea how companies work. Where do you get this stuff. I know with 100% certainty you aren't getting it from experience. Whatever information source it is that you're using it's time for a change. You're being mislead and allowing yourselves to be made fools of.

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Re: Gracias

> closing the operation is the very last thing a company wants to do

True, right upto the point where the tax breaks or "inward investment incentive

runs out. I'm betting that a local of state tax money went into this operation and the deal just finished

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Re: Gracias

Yes, those incentives can make a big difference in a company's siting decisions, but those deals are rarely as short as a single year. Those deals are usually spread out over many years, or even decades. They have to be because no city can deliver one year incentives big enough to sway a major investment decision.

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Anonymous Coward

Re: Gracias

> You don't get bonuses or promotions for failing to make something work.

Really????

AIG paid itself USD $218 Million in bonuses in March 2009, whie it was a Ward of the State - having been bailed out to the tune of USD $185 Billions - and being 85% owned by the US Department of the Treasury.

Citibank paid itself USD $5.3 Billion in bonuses in March 2009, according to the New York State Attorney General at the time - Andrew M. Cuomo:

http://www.reuters.com/article/2010/01/15/us-citigroup-pay-idUSTRE60E08J20100115

<QUOTE>

According to a July report from New York Attorney General Andrew Cuomo, Citigroup as a whole paid $5.3 billion of bonuses for 2008.

</QUOTE>

Citibank needed more than USD $1 Trillion in US government support just to stay afloat and not disintegrate after September 15, 2008.

Morgan Stanley and Goldman Sachs paid themselves USD $18 Billions in bonuses for 2008 - they year they both crashed and burned:

http://www.nytimes.com/2009/07/31/business/31pay.html?_r=0

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHURVoSUqpho

Merrill Lynch paid itself USD $3.6 Billions in bonuses for 2008, according to the same report by Andrew Cuomo:

http://www.nytimes.com/2009/02/12/business/12merrill.html

Merrill Lynch was shotgun-married to Bank Of America on September 14, 2008, for the sole purpose of hiding systemic securities fraud and pervasive securities laws violations. Not that Merrill Lynch hadn't been fined before, in 2002, by New York State Attorney General Eliot Spitzer, for securities fraud and securities laws violations.

Bank of America paid USD $3.3 Billions in bonuses for 2008, while receiving USD $90 Billions in US Government support in 2008 and 2009.

Should I continue? This farce posing as Capitalism isn't limited to banks. The Federal Reserve Board of Governors authorized 21,000 private lender loans to private entities and individuals - not banks - in 2008, totalling USD $3.3 Trillion:

http://www.huffingtonpost.com/robert-auerbach/the-federal-reserves-33-t_b_794155.html

Has anything changed since then? No. It's actually gotten worse than before September 15, 2008.

But, you go ahead and cheerlead to your heart's content, Don Jefe.

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FAIL

Re: Gracias

Did you just compare a manufacturing operation to financial institutions? Double checking. Yep, that's what you did. Look! I can ridiculous comparisons too! Oranges taste more like donuts less than they ever have before.

Come back when you've fully developed your business acumen. That's going to take a while I suspect. You've been following me around for a year and are still no less useless than you were then. You sir, are far, far out of your depth.

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Correction?

If I remember right, that "Moto Maker" thing wasn't just limited to US customers. It was limited to just AT&T customers.

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Anonymous Coward

The last Motorola phone I had was over 15 years ago; their quality went south and stayed there so I left only to never look back. They had the RAZR and they kept trying to milk that until they couldn't. They just seem to make a successful product and just can't follow up until it is almost dead.

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Deja Vu

Motorola did a similar move in Harvard Illinois (USA) around 2001 or so. Built a huge sparkly plant, used it for about 2 years, then left. Very funky ghost building on a edge of a small town in the middle of corn fields.

Per Chicago Trib..."Employment at the plant soared to 5,000 workers by early 2001, before Motorola, in a bid to rein in costs and eliminate excess manufacturing capacity, decided to cease production in Harvard in favor of lower-cost facilities abroad."

https://www.google.com/maps/@42.4375941,-88.6024009,1510m/data=!3m1!1e3

and

http://www.harvardmainline.com/content/empty-feeling

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It is not Motorola's fault.

This stinking mess lies at the feet of our politicians. They have passed laws that makes it impossible to get anything done with American labor. Texas is the most business friendly state in the whole of the Union. If you cannot make it there, then you cannot make it anywhere else in the US.

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Re: It is not Motorola's fault.

Apparently, you've either never started a business in the US and almost certainly never started one outside the US. I've started a bunch of businesses in the US and one in another developed, 'business friendly', Western country (never again).

US laws are far more friendly to businesses than almost anywhere in the world, there is nothing keeping anyone from starting a business here and US labor is among the cheapest in the world (if you use productivity as a measure). You could argue that corporate taxes are a bit high, but with so many loopholes, you'd be an idiot if you actually paid the full rate (same with personal taxes, BTW).

Plus we have a legal system that's largely free of corruption and cronyism (at least compared with most of the rest of the world). Yeah, there are some onerous environmental laws for certain types of business, but I'd rather have that than this kind of smog: http://www.dailymail.co.uk/news/article-2540955/Beijing-clouded-smog-way-sunrise-watch-giant-commercial-screens-Tiananmen-Square.html - yeah, that's right, the government puts up TV screens to simulate sunrise 'cause the polution is so bad....

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Anonymous Coward

Re: It is not Motorola's fault.

Er, it kinda *is* Motorola fault. Any analysis of the history of mobile phone sales shows that it's just not worth making something for only the USA market. It's just too small a market to be worth focusing on in isolation.

For example, consider Apple and their iPhone. The first one was GSM only. Why? Because that was the only phone standard that worked world wide. It was not realistic at three time to produce a 3G phone that worked the US (which had CDMA2000) and also the rest of the world (which had opted for the European UTMS). So they plumped for aiming at both markets. When they did do a 3G phone it was UMTS, which by that time AT&T had started rolling out across the country. At every point Apple have avoided doing anything exclusive to the US market until it became technologically trivial to do a CDMA2000 handset.

And prior to the smartphone revolution US phones were always behind phones everywhere else because the likes of Nokia concentrated on the larger world wide market ahead of the comparatively small US market.

Fortunately for the USA they've chosen to follow the rest of the world for 4G so this won't happen again. But those episodes illustrate what happens when you focus a complex and expensive manufacturing process on the US market alone, and Motorola should have known that.

What Motorola *should* have done is manufacture for the whole worldwide market in Texas. That at least would have brought them economies of scale.

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Re: It is not Motorola's fault.

Texas is a horrible fucking place to do business. It's worse than California or Vermont. The only thing positive about the business climate there is the fact they've got a decent port and they're centrally located. Good for logistics, bad for anything else. Over the years I've purchased two companies that had facilities there and moving them out of Texas was a first order of business. It's less corrupt here in DC than it is anywhere in Texas. Even the wildlife in Texas is blatantly open to bribery.

Texas is flat, featureless and boring as a warning for visitors not to stop there. Texas is a horrible place. Why do think we gave it back to the Mexicans? If only we had done that earlier.

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Coat

Re: It is not Motorola's fault.

"Nokia concentrated on the larger world wide market", that is true but at the same time the mantra at Nokia was always that if a smartphone does not succeed in the USA then it will not succeed anywhere else either.

Perhaps that is true too, who knows.

However this was about Motorola moving the production abroad and Google selling the whole company to China. These moves has been going on for quite some time, and in the EU too. Multinationals have "no" homeland, money has no boarders. A multinational would be very happy if they had absolutely no homeland at all as they could then stop paying tax. Production is moved abroad because it will increase profit and because everybody else is doing it too. The downside is that the ability and technology to produce anything moves silently in the shadow too. That has already happened.

What annoys me is when some Americans are so vocal about China ripping them off, stealing and flooding the market with shit. That is a stupid smoke screen. You are destroyed from the inside no outside help is needed nor offered. To cheer you up look at this guy who has been so vocal about China and who wanted to become the President.

https://www.youtube.com/watch?v=SYoOPgeTMQc

Chinese guys study all around the globe, they are dedicated, industrious and set to succeed, and they don't spend half of their time in university on sports.

It's of course also true that the more international business and us becomes the less the chance for a world wide catastrophe. And do not mix in Russia or Russians into this, it's all about Putin and his immense ego, the fact that he has not yes shown his dick on the Internet is amazing, of course there could be some small reason for that.

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Anonymous Coward

Re: It is not Motorola's fault.

"And prior to the smartphone revolution US phones were always behind phones everywhere else because the likes of Nokia concentrated on the larger world wide market ahead of the comparatively small US market."

And when NOKIA hired a US executive and concentrated on the US, they imploded

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Re: It is not Motorola's fault.

There's noting 'wrong' with the way US companies do business. The problem with it is that it can't support balance. Everything is to one extreme or another and you can't plug extreme elements into a balanced business. It's like running a 250 gallon flash fryer at home when you're just wanting some fries with your burger. A house fire where everybody escapes alive is about the best you can hope for.

The opposite doesn't work either. You can't take a horizontally integrated company and plug it into an unstable, high demand environment. Using the fryer example, if you try to feed fries to 5,000 people on demand, with no warning, you're still going to have a fire, but not before you've had plenty of time to evacuate. Once the insulation melts off the wires you've still got time to run (as did Nokia). Either way you do it is perfectly fine, you just can't cross the streams.

I'm in no way saying either of the most prevalent business philosophies in the US or that in Europe is superior over another. I'm saying they're radically different and really can't be compared. It's like when people compare the business models of Samsung and Apple, you don't get anything useful. It's pointless to compare completely different things.

At any rate, I'll never be convinced Elop didn't intentionally sabotage Nokia. I've seen several businesses scuttled and I know how it is done. Elop betrayed his employer and was likely sent there with that mission. Business philosophies are irrelevant if you're being led by a modern Judas.

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Anonymous Coward

Nothing to do with manufacturing in the U.S.

The downfall is low sales not manufacturing in the U.S. Naturally the UK and U.S. are at a manufacturing disadvantage to using Chinese slaves to produce goods as Apple, Acer, Microsoft and many other folks do so that their executive staff and CEOs can get $700 Million in annual compensation from using Chinese slaves. All goods imported from China should have a 10,000% import tariff on them to level the economic playing field. It's unscrupulous to allow these products to be produced in China and sold in the UK and U.S. when they could be made cost effectively without using slaves.

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Re: Nothing to do with manufacturing in the U.S.

Yeah, I'm going to go ahead and say that massive tariffs on goods imported from China isn't going to work out like you think. It's possible that might have worked 25 years ago, but now everything is too interconnected.

Tariffs on consumer tech go up and about 16 weeks later nobody can afford clothes. You can't strong arm somebody when both parties require the success of the others to have success themselves. None of this is new ground. In the mid-80's people were running around in a panic because the tracks for the Orient Express had been laid and everybody knew it was impossible to stop. The pros and cons of business in China haven't changed a jot, even the arguments are nearly word for word identical to the arguments in the 1980's.

Everybody calmed down though as they the symbiotic relationship was quite possibly the greatest diplomatic gambit ever undertaken. You can't really go to war with the country that props up your economy and I've got to admit, no war with the Chinese has been nice.

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Moto Maker still US only(?)

I'm pretty sure that Moto Maker is still US only. I haven't seen any option to buy it with custom covers in the UK despite it supposedly coming to Europe.

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FAIL

Foxconn

Let's face it: it's hard to beat Foxconn when they're using 11 year old girls as slave labor to build Apple iPhones.

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Re: Foxconn

Curious that you'd single Apple out from Foxconn's customer list. You realize that Foxconn is the largest EMS operation on Earth and they make stuff for everybody. What ever device you used to publish your comment was made with the same labor force that makes Apple products.

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Re: Turns out it really is hard to make things in the US, after all

I turned in expecting to find some insight into cost or regulatory issues which make it more difficult to manufacture things here in the US. What I read instead was a laundry list of EPIC FAIL from Motorola:

On launch, the Moto Maker store – one of the Moto X's key selling points – was available only in the US. British and European customers weren't able to order custom versions of the device until almost a year later.

What's more, some customization options such as phone back pieces made out of real wood weren't even available to US customers until months after the phone launched.

...but added a number of unique, user-friendly features, such as pervasive voice control and a "contextually aware" lock screen that reacts to sensors.

You can't sell product if your supply chain isn't up and running when you start selling things. You can't sell to people who can't access the website. This whole damn thing looks like it was setup to fail, or at best take advantage of some national short term tax write offs and maybe some bennies given by Texas.

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