Cree

http://www.futureofcapitalism.com/2011/06/cree

President Obama earlier this week spoke at a meeting of his Jobs and Competitiveness Council, the one led by GE CEO Jeffrey Immelt. The event was held in North Carolina, at Cree, a company in the light-emitting diode business. Mr. Obama, in his remarks, made one of his classic ads for an individual company:

I know that one of the things that people may be wondering about, at least the press who've traveled with me as opposed to the folks who have been down here for the last day, is why are we here at Cree? This is an example of the kind of company that I think all of us want to see being promoted all across the country. This is a company that is specializing in LED lighting, has been extraordinarily effective in driving down the costs of high-efficiency lighting that is, over time, I think going to make a huge difference, not just for businesses who use the technology, but also for a country that needs to figure out how do we operate in a more energy-efficient way.

They've been adding jobs. They have trained their workers. They've got a terrific relationship with the surrounding community, as well as the institutions of higher learning in the area. And so this is a good example of entrepreneurship focused on technologies of the future, linking up with training American workers for those jobs. And my understanding is not only are we focused on the domestic market, but we're also focused on the export market and competing internationally, which is going to be extraordinarily important.

I was curious about this, so I did some research on Cree. Is it manufacturing with non-union employees in right-to-work North Carolina?

From the most recent Cree 10-K filed with the SEC:

We are continually taking steps to address our manufacturing capacity needs for our products. For example, we purchased a 565,000-square-foot facility in Huizhou, Guangdong Province, China to support LED chip and future LED component production....

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In some instances, we have been provided and may continue to receive competing incentives from foreign governments to encourage our investment in certain countries, regions, or areas outside of the United States. In particular, we have received and may continue to receive such incentives in connection with our operations in China, as the Chinese national and local governments seek to encourage the development of the technology industry in China. Government incentives may include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to us due to our foreign operations. Any of these incentives could be reduced or eliminated by governmental authorities at any time. Any reduction or elimination of incentives currently provided to our operations could adversely affect our business and results of operations.

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Changes in federal budget priorities could adversely affect our contract revenue. Historically, government agencies have funded a significant portion of our research and development activities. When the government changes budget priorities, such as in times of war or financial crisis, our funding has the risk of being redirected to other programs.

Got that? A company receiving incentives from the Chinese government for its 565,000-square-foot factory in China and "a significant portion" of whose R & D is funded by the American government is what the president, at a meeting of his Council on Jobs and Competitiveness, calls "an example of the kind of company that I think all of us want to see being promoted all across the country."

Oh, and the company's stock price has fallen to about $37 a share from a high of about $82 in April 2010. As President Obama says, ""an example of the kind of company that I think all of us want to see being promoted all across the country."

To be clear, I have nothing against this company, and nothing against manufacturing in China. Plenty of American companies have created plenty of American jobs while manufacturing in China — Apple is one example. But as a sustainable strategy for American jobs and competitiveness, milking the Chinese government for subsidies to build factories in Communist China while the American taxpayers subsidize the research and development costs doesn't exactly seem like a slam dunk.

by Ira Stoll  |  Jun 14, 2011 at 9:59 pm Related Topics:  China, Energy, General Electric, President Obama, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list