ManufacturingopportunityA Deloitte serieson makingAmerica stronger
Manufacturing OpportunityAbout the author            Craig A. Giffi            Craig Giffi is a vice chairman and the lead...
A Deloitte series on making America strongerContentsExecutive summary | 2Introduction | 5A crisis of confidence | 6The ele...
Manufacturing OpportunityExecutive summary            A     merican manufacturing is a world of                  paradoxes...
A Deloitte series on making America strongerspur—or inhibit—more innovation. A healthy         among many other recommenda...
Manufacturing Opportunity            additional 60 cents in economic activity.            United States should invest more...
A Deloitte series on making America strongerIntroductionI n March 2011, a major economic milestone  attracted relatively l...
Manufacturing OpportunityA crisis of confidence           M       anufacturing has been a major                   contribu...
A Deloitte series on making America strongerAmericans indicated they wanted those jobs to      Figure 2. Percentage of res...
Manufacturing Opportunity            pessimistic about the ability of government or                   serious concerns abo...
A Deloitte series on making America strongerResearch Methodology and Background for this ReportFor several years, Deloitte...
Manufacturing OpportunityThe elements ofcompetitiveness            T    o explore how the global manufactur-              ...
A Deloitte series on making America strongerFigure 5. Manufacturing opportunity in the United States                      ...
Manufacturing Opportunity            Talent                                               new and complex problems with in...
A Deloitte series on making America strongercombination of trade, tax, labor, energy, educa-                 qualitative f...
Manufacturing OpportunityMaking America amore attractive placeto conduct business:Action stepsfor policymakers            ...
A Deloitte series on making America strongerEducation and workforce                            can’t be filled today becau...
Manufacturing Opportunity            Education leaders should be aligning educational            pathways in degree progra...
A Deloitte series on making America strongerRecommendations: educated workforceParticipants in the Ignite series offered t...
Manufacturing Opportunity            Innovation                                          national laboratories and other p...
A Deloitte series on making America strongerFigure 7. Policy advantages and disadvantages (percent indicating advantage or...
Manufacturing Opportunity            investments in the areas of science, technology,      government support for sector-s...
A Deloitte series on making America strongerEconomic, trade, financial,                          concerns the research and...
Manufacturing Opportunity            by Deloitte and the Council support recent             in producing finished products...
A Deloitte series on making America stronger    America’s competitors understand the               traditional energy sour...
Manufacturing OpportunityConclusion            T     he stakeholders participating in the joint                  efforts b...
A Deloitte series on making America strongerAppendix A:The World Economic ForumFuture of Manufacturing projectI n January ...
Manufacturing OpportunityAppendix B:The U.S. ManufacturingCompetitiveness Initiative           S     ince 2009, Deloitte h...
A Deloitte series on making America strongerAppendix C:Understanding Americanperceptions of manufacturingand tackling the ...
The American Manufacturing Opportunity
The American Manufacturing Opportunity
The American Manufacturing Opportunity
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The American Manufacturing Opportunity

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Manufacturing is experiencing a crisis of confidence in the United States. Americans view the manufacturing sector in the U.S. as fragile and unstable.

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The American Manufacturing Opportunity

  1. 1. ManufacturingopportunityA Deloitte serieson makingAmerica stronger
  2. 2. Manufacturing OpportunityAbout the author Craig A. Giffi Craig Giffi is a vice chairman and the leader for the U.S. Consumer & Industrial Products Industry practice spanning the Aerospace & Defense, Automotive, Process, Industrials, Consumer Business and Retail Industry prac- tices for Deloitte LLP. Craig is also the chairman of the global manufactur- ing industry practice of Deloitte Touche Tohmatsu Limited (DTTL). In addition to his U.S. Consumer & Industrial Products Industry practice respon- sibilities, Craig has primary responsibility for Deloitte’s day-to-day activities as a member of the Council on Competitiveness working with industry CEOs, university presidents and labor leaders to shape the debate on competitiveness. He is also a Trustee of The Manufacturing Institute helping to drive thought leadership regarding manufacturing talent, innovation and contributions to the American economy and participates as a subject matter expert regarding manufacturing competitiveness with the National Association of Manufacturers (NAM) on their efforts to shape the debate on the issues impacting manufacturers in the United States and around the globe. Currently, Craig is leading a multi-year Global Competitiveness in Manufacturing initiative in partnership with the Council on Competitiveness with the objec- tives of establishing a global competitiveness index defining both critical drivers of competitiveness for nations and companies and the ranking of countries based on manufacturing CEO input from around the world. This research is help- ing uncover the new models for success for the 21st century being adopted by the most capable and competitive global manufacturers today. Craig is also leading Deloitte’s manufacturing research efforts with the World Economic Forum; having recently co-authored the report The Future of Manufacturing for the Forum. Craig assisted with the release of this report and helped facilitate CEO, government leader, and academic leader discussion regarding the reports key findings at the Forum’s annual meeting in Davos, Switzerland in January 2012. Craig is currently leading Deloitte’s collaboration with the World Economic Forum on their Manufacturing for Growth project effort intended to be completed in time for Davos 2013. Craig is the co-author of the book Competing in World Class Manufacturing – America’s Twenty First Century Challenge and has been a guest lecturer at the GE Whitney Symposium, the Council on Competitiveness, the Global Federation of Council’s on Competitiveness, at the World Economic Forum’s annual session in Davos Switzerland and the Woodrow Wilson International Center for Scholars on the topic of manufacturing competitiveness. More recently, Mr. Giffi was asked to testify before the U.S. Congress on Deloitte’s manufacturing competitiveness research.
  3. 3. A Deloitte series on making America strongerContentsExecutive summary | 2Introduction | 5A crisis of confidence | 6The elements of competitiveness | 10Making America a more attractive place to conduct business:Action steps for policymakers | 14Conclusion | 24Appendix A:The World Economic Forum Future of Manufacturing project | 25Appendix B:The U.S. Manufacturing Competitiveness Initiative  | 26Appendix C:Understanding American perceptions of manufacturing and tackling thegrowing skills gaps in the United States | 27Endnotes | 28 1
  4. 4. Manufacturing OpportunityExecutive summary A merican manufacturing is a world of paradoxes. In the past decade, America has lost 6 million manufacturing jobs; yet about the long-term stability of manufacturing employment. They also fear that manufactur- ing jobs will inevitably be moved to workers today, 600,000 jobs can’t be filled in America in other countries, and they appear to have because manufacturers can’t find people with doubts about our leaders’ ability to prevent the right skills. this. These views have remained consistent When Americans are asked how they would year after year. create a thousand new jobs in their communi- The United States is at a crossroads. Low- ties with a new business facility, manufacturing cost basic manufacturing is unlikely to ever is their first choice. Yet 18– to 24–year–olds recover its former importance in our economy. rank manufacturing dead last among indus- However, this doesn’t mean further decline is tries in which they would actually choose to inevitable. New pathways to manufacturing start a career.1 opportunity in America are both available and Similarly, 79 percent of Americans believe achievable. And public policy has a major role a strong manufacturing base should be a to play in supporting these directions. national priority. However, when it comes to The first pathway lies in advanced technolo- the future of manufacturing, Americans are gies and innovation. If America is to regain its very pessimistic: Only 7 percent believe that position as a global leader in manufacturing U.S. manufacturing competitiveness is likely and revive economic prosperity, we must look to get stronger, while 55 percent say it will to increasingly complex and emerging tech- become weaker. nologies, and to America’s ability to lead the In short, manufacturing is experiencing development of such breakthroughs. a crisis in confidence in the United States. Across the spectrum of policy, from the tax Americans view the manufacturing sector code to the direct incubation of small busi- as fragile and unstable. They are concerned nesses, government policy can either help2
  5. 5. A Deloitte series on making America strongerspur—or inhibit—more innovation. A healthy among many other recommendations can helpmanufacturing base drives emerging technol- prepare talent better. As a country, we needogy development and will help propel the to arm students with the right technical andUnited States into the future. Strengthening problem-solving skills through flexible educa-manufacturing today will play an integral part tion pathways that lead to advanced degreesin determining where America will be techno- or certifications.logically in 20 years. Government could help The third pathway to greater competi-establish consortiums between businesses, tiveness is to reform taxes and regulations.universities, and labor and political leaders to For example, 69 percent of Americans agreedevelop long-term U.S. manufacturing goals that tax cuts for businesses and individu-and form a new innovation strategy. als create jobs, while 65 percent support tax The second pathway is enhancing talent. incentives for manufacturing. In 2011, theCEOs agree that talent trumps all other fac- United States had the highest corporate taxtors gauging manufacturing competiveness. rate among OECD nations. And the UnitedIn fact, 67 percent of manufacturers reported States is the only G8 member that does notthat moderate to severe shortages of available, employ a territorial tax policy, which taxesqualified workers exist. And 56 percent antici- only income earned inside the nation’s borders.pate that these shortages will only grow worse Improvements in intellectual property reformin the next three to five years. The workers are also needed. This report’s recommenda-hardest to find are machinists, operators, craft tions, if implemented, would make it moreworkers, and technicians. There are numerous attractive for manufacturers to improve andways to center policy on enhancing skills to increase their activities in the United States.meet today’s advanced manufacturing needs. Fourth, the need to invest in infrastruc-A focus on performance-based education and ture development is paramount. Every dol-building government-to-industry partnerships lar of infrastructure spending generates an 3
  6. 6. Manufacturing Opportunity additional 60 cents in economic activity. United States should invest more into manu- China, for example, recently devoted 9 percent facturing. Why? The linkage between manufac- of its GDP to infrastructure development, turing capabilities and economic prosperity is while the United States has let much of its a much stronger predictor of a vibrant, suc- infrastructure deteriorate. cessful, and growing economy than any other Lastly is the issue of America’s energy policy measure typically used by economists. Simply and its impact on manufacturing. Competitive put: manufacturing matters. energy policies could ensure reliable energy This study looks at the manufacturing supplies to literally fuel manufacturing. sector and the challenges it faces. It pro- In short, while policymakers mention poses a series of recommendations that, if manufacturing all the time, most Americans implemented, would help the United States don’t believe enough is being done to support climb back into the driver’s seat in global it. Eighty percent of Americans think that the manufacturing competitiveness.4
  7. 7. A Deloitte series on making America strongerIntroductionI n March 2011, a major economic milestone attracted relatively little notice in the nationalpress. Economic consultants from IHS Global which pioneered innovations and technologi- cal advancements, has also steadily eroded—as has its economic prosperity.Insight reported that in 2010, China had sur- But U.S. policymakers are beginning topassed the United States. to become the world’s recognize the vital importance of a strongleading manufacturing nation, with a 19.8 per- industrial base as emerging economies seizecent share of global output, compared to 19.4 upon the economic benefits of manufacturing,percent for the United States. China’s share of and key developed nations such as Germanyworld manufacturing output had tripled in just demonstrate the resiliency and strength manu-10 years.2 facturing adds to the mix. In addition to reviv- Perhaps the most surprising thing about ing America’s once prosperous middle class,this announcement was how unsurprising a competitive manufacturing sector would beit was. a critical catalyst for innovation, providing Manufacturing competitiveness and the essential support for sectors including financialrelative importance of manufacturing to the services, infrastructure development, cus-economy are issues that have been debated for tomer support, logistics, information systems,decades, and hundreds of premature obituar- healthcare, education, real estate and more.ies for U.S. manufacturing have been written. Manufacturing typically generates 2.5 jobs inSpurring these obituaries has been the undeni- related industries for each one created directly.6ably long and steady decline in the importance This report relies on collaborative effortsof manufacturing within America’s overall eco- with a number of organizations working onnomic mix. In 1947, for instance, 26 percent of important issues affecting the manufacturingnominal U.S. GDP came from manufacturing. industry, as well as surveys of American citi-By 2011, that figure had fallen to less than zens, business and labor leaders, and university11 percent.3 and national laboratory executives. It presents This decline has been accompanied by a case for optimism—and for hard work. Itsustained job losses. America has lost about 6 examines some of the main challenges facingmillion manufacturing jobs since 2002, 2 mil- any attempt to cultivate an American manu-lion since 2008 alone,4 including 28 percent of facturing renaissance, and highlights recom-its high-technology manufacturing jobs in the mendations that could help the United Stateslast decade as reported by the National Science overcome these roadblocks.Board.5 As a result, America’s middle class, 5
  8. 8. Manufacturing OpportunityA crisis of confidence M anufacturing has been a major contributor to the U.S. economy for more than a century and a half, and Americans released in September 2011, suggest that despite frequent swings of public opinion on a wide range of topics, Americans have remained retain a consistently high regard for its impor- steadfast in their commitment to a strong and tance both in terms of its economic contribu- globally competitive U.S. manufacturing sector. tions and our global standing. They fully understand the importance of For nearly five years, Deloitte* has been manufacturing in job creation; 86 percent working with the Manufacturing Institute agree that manufacturing is directly linked to investigate the average American’s view to our standard of living (see figure 1), and of manufacturing in the United States. 77 percent believe it is very important for Unwavering Commitment: The Public’s View of our national security. Americans’ support for the Manufacturing Industry Today reports the manufacturing carries over into the topic of results of an annual research program gauging job creation as well. When asked how they the American public’s perspectives on manu- would prefer to create 1,000 new jobs in their facturing. Findings of the latest annual survey, communities with any new business facility, Figure 1. Percentage of respondents who believe that... THE MANUFACTURING INDUSTRY THE U.S. NEEDS A MORE IS VERY IMPORTANT TO: STRATEGIC APPROACH TO Economic prosperity THE DEVELOPMENT OF ITS MANUFACTURING BASE 83% 86% THE U.S. SHOULD Standard of living FURTHER INVEST IN THE 80% 85% MANUFACTURING INDUSTRY DEVELOPING A STRONG National security MANUFACTURING BASE 77% SHOULD BE A NATIONAL PRIORITY 79% Source: Unwavering Commitment: The Publics View of the Manufacturing Industry Today * As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.6
  9. 9. A Deloitte series on making America strongerAmericans indicated they wanted those jobs to Figure 2. Percentage of respondents who agree or stronglybe in the manufacturing sector—more so than agree with each statementany other industry choice.8 Agree / Strongly Agree Despite their embrace of manufacturing, MANUFACTURING JOBS AREAmericans do not believe enough is beingdone to support it. About 83 percent believe FIRST TO BE MOVED TO OTHER COUNTRIES 78%the United States needs a more strategicapproach to the development of its manufac-turing base, 80 percent think the nation should MANUFACTURING JOBS AREinvest more in manufacturing; and 79 percentbelieve a strong manufacturing base should HIGHER PAYING THAN JOBS IN OTHER INDUSTRIES 44%be a national priority. We also found that themanufacturing industry has several significantchallenges in the area of public perception (see CAREERS/JOBS IN MANUFACTURINGfigure 2). While Americans generally hold strong ARE STABLE AND SECURE RELATIVE TO JOBS IN OTHER INDUSTRIES 37%views on the importance of manufactur-ing, they hold negative views about itsfuture in the United Staets. Americanswant stronger policies to support manu- MANUFACTURING JOBS ARE AVAILABLE AND ACCESSIBLE 26%facturing and better leadership to supportmanufacturing competitiveness. Source: Unwavering Commitment: The Publics View of the Manufacturing Recent economic data have yielded mod- Industry Todayest reasons for optimism. In 2011, the numberof U.S. manufacturing jobs actually rose by2.05 percent,9 the first increase in more than a Figure 3. Respondents’ views on the longer-term outlook for the manufacturing sectordecade. But nurturing this growth will requirebold and effective policy decisions—and thosedecisions will be made more difficult by a pro- 7% STRENGTHENfound loss of confidence in our leaders’ abilityin this arena. Today, Americans view the manufactur- 27% STAY THE SAMEing sector as fragile and unstable. They areconcerned about the long-term stability ofmanufacturing employment, and are equallyworried that these jobs are less accessible thanthey should be. They also fear that manufactur-ing jobs will inevitably be moved to workersin other countries, and they appear to havedoubts about our leaders’ ability to prevent 55% WEAKENthis. These views have remained consistentyear after year. Many Americans, in fact, believe that wehave already lost the manufacturing race.Only 7 percent believe that U.S. manufactur-ing competitiveness is likely to get stronger, 11% DON’T KNOWwhile 55 percent say it is becoming weaker (see Source: Unwavering Commitment: The Publics View of the Manufacturingfigure 3).10 And unfortunately, they are solidly Industry Today 7
  10. 10. Manufacturing Opportunity pessimistic about the ability of government or serious concerns about U.S. manufacturing business leaders to reverse this trend. competitiveness. According to the Global Most Americans agree, for instance, that Manufacturing Competitiveness Index devel- the federal government should play an impor- oped by Deloitte and the Council, the United tant role in building and sustaining a healthy States is the fourth most-competitive manu- environment for manufacturing. But only 26 facturing nation and is expected slide to fifth percent believe that it is doing so. place within five years (see figure 4). CEOs fare only a little better. “Less than In less than a decade, tectonic shifts in half of Americans believe that current business regional manufacturing competence have leaders are creating a competitive advantage created a “new world order” for manufactur- for the U.S.”11 ing competitiveness. Asia is the world’s most competitive location for manufacturing—and will be for the foreseeable future, barring CEOs and the American significant macroeconomic shocks such as public agree war, economic collapse, natural catastrophe or T hese views are shared by business leaders. A Deloitte global survey of manufactur- ing CEOs conducted in conjunction with the major government interventions.12 Regional implications will arise as North America, South America, Europe, and Asia U.S. Council on Competitiveness also found challenge one another for dominance in Figure 4. Expected change in manufacturing competitiveness in five years Sliding DOWN From To Moving UP From To United States of America 4th î 5th Brazil 5th ì 4th Japan 6th î 7th Mexico 7th ì 6th Singapore 9th î 11th Poland 10th ì 9th Czech Republic 11th î 12th Thailand 12th ì 10th Netherlands 16th î 17th Spain 19th ì 16th Switzerland 14th î 18th Russia 20th ì 14th United Kingdom 17th î 20th South Africa 22nd ì 19th Ireland 18th î 21st Argentina 25th ì 24th italy 21st î 22nd Saudi Arabia 26th ì 25th Belgium 24th î 26th Source: Deloitte and U.S. Council on Competitiveness, 2010 Global Manufacturing Competitiveness Index8
  11. 11. A Deloitte series on making America strongerResearch Methodology and Background for this ReportFor several years, Deloitte has had the privilege of working with a number of global and nationalorganizations to study the complex linkages between manufacturing and economic prosperity andto understand what nations can do to reap the benefits of globally competitive manufacturingcapabilities. Working in collaboration with the World Economic Forum (“the Forum”), the U.S.Council on Competitiveness (“the Council”), and the Manufacturing Institute, Deloitte has collectedinput directly from policymakers and business, labor, academic, and scientific leaders fromaround the world to identify ways in which public-private sector collaborations enable economicgrowth, create jobs, and drive innovation and talent development within manufacturing.The results of these efforts have included a number of in-depth research reports that havebeen shared with business leaders and policymakers at important venues on the national andglobal stage, including the 2012 World Economic Forum Annual Meeting in Davos, Switzerlandand several sessions with policymakers representing Congress and the administration. Whilethe project identified many common assessments and recommendations for improvingU.S. manufacturing competitiveness, each report also delivered unique perspectives criticalto this important debate. The results of these initiatives form the basis for the analysis andrecommendations in this study. Summaries of each initiative can be found in the appendix.manufacturing. Many rising countries appear regions, are aggressively competing fordestined to be important only within select manufacturing dominance.manufacturing sectors, while others pos- Nations sliding down in competitive-sess the breadth and depth of resources and ness, moreover, are losing a core economiccapabilities to be dominant global players. strength, a key link in the innovation equa-One thing is certain: government policies tion of: research, design, manufacture, afterwithin these regions will play an impor- sales. These factors are synergistic, and with-tant role—for good or bad—in each coun- out the manufacturing step, much know-howtry’s competitiveness. is lost. China, India and Korea are aware of this and their public policies further their competitive advantage.Public policy and the Regardless of a nation’s economic or politi-competitive paradox cal system, however, manufacturing can playT he Competitiveness Index leads us to another striking finding. Manufacturingis declining in Western countries with more a key role in its prosperity. Economies based primarily on services could become second tier in the absence of a vibrant manufacturing sec-“enlightened” social and environmental tor and the commercial ecosystem that growspolicies and rising in emerging markets with from it.large governmental interventions for manu- But manufacturers cannot go it alone.facturing. Within these developing countries, Governments must play their part by develop-some manufacturers are even government- ing policy and national manufacturing strate-owned. Clearly, a new model is emerging. gies that are collaborative, integrated, focused,Many governments, especially in emerging and effective. 9
  12. 12. Manufacturing OpportunityThe elements ofcompetitiveness T o explore how the global manufactur- ing ecosystem is evolving, the World Economic Forum, along with manufactur- of knowledge creation, innovation, capability development, and economic prosperity. The more advanced the manufactured product, ing specialists from Deloitte, embarked on a the greater the prosperity of the nation. The project called The Future of Manufacturing linkage between manufacturing capabilities to identify the factors most likely to shape the and economic prosperity is a much stron- future of competition for both countries and ger predictor of a vibrant, successful, and companies. The key findings of this study were growing economy than any other measure released at the Forum’s 2012 annual meet- typically used by economists. Simply put: ing in Davos, including a critical finding for manufacturing matters.13 policymakers concerned with job creation and Deloitte’s research with the Forum and economic growth. the Council also concluded that the future Based on recent research at the Harvard of manufacturing—separating winners from Kennedy School and the MIT Media Lab, the losers—would be driven primarily by the fol- project concluded that manufacturing, or the lowing factors: talent, innovation, energy, and “ability to make things,” is an essential driver government policy. The linkage between manufacturing capabilities and economic prosperity is a much stronger predictor of a vibrant, successful, and growing economy than any other measure typically used by economists.10
  13. 13. A Deloitte series on making America strongerFigure 5. Manufacturing opportunity in the United States 6,000, 000 MA N UFACT URING JOBS L 26% O ST SIN C E 2002 1947 of GDP 11% of GDP 2011 DRIVERS THAT MAKE THE UNITED STATES AN ATTRACTIVE MANUFACTURING DESTINATION Cooling World Class High Labor Asian Universities Productivity Economy and National Large Quality Laboratories Middle Class Healthcare Consumer Strong R&D Base Capabilities Strong Intellectual Strong Established Property Economic Supplier Protection Headwinds Rising Network Labor & Adequate Policies in Europe Other Costs Infrastructure in Asia Decline in unemployment rate600,000 + 500,000 + 2,750,000 = 3,850,000 UNFILLED POTENTIAL NEW NEW JOBS CREATED IN POTENTIAL JOBS MANUFACTURING JOBS FROM RELATED INDUSTRIES DRIVEN BY JOBS IN THE MANUFACTURING MANUFACTURING UNITED STATES DUE TO SKILLS SHORTAGE GROWTH [ 1 manufacturing job generates 2.5 jobs ]Sources:Uday Karmarkar, “The Increase in U.S. Manufacturing Jobs Is Nothing to Cheer About,” Harvard Business Review (January 20, 2011),http://blogs.hbr.org/cs/2011/01/why_the_increase_in_us_manufac.html.http://www.themanufacturinginstitute.org/~/media/A07730B2A798437D98501E798C2E13AA.ashxDeutsche Bank Group/DB Advisors, The Decline of U.S. Manufacturing: Fact or Fiction? (Frankfurt am Main, March 2011), p. 1,https://www.dbadvisors.com/content/_media/DAM466_CloserLook0311.pdf.Economic Policy Institute, Updated Employment Multipliers for the U.S. Economy, by Josh Bivens (August 2003), http://www.epi.org/page/-/old/workingpapers/epi_wp_268.pdf.U.S. Bureau of Labor and Statistics, Department of Labor, http://www.bls.gov/news.release/pdf/empsit.pdf. 11
  14. 14. Manufacturing Opportunity Talent new and complex problems with innovative products and services will be all-important. Talented human capital will be a critical dif- ferentiator for the prosperity of countries and companies. Millions of manufacturing jobs Energy around the world can’t be filled today due to a Affordable clean energy strategies and growing skills gap. In the United States, more effective energy policies will be a top priority than 600,000 such jobs can’t be filled due to for manufacturers and policymakers, and they skills shortages.14 Despite high unemployment serve as another important differentiator of rates in most developed economies, companies highly competitive countries and companies. are struggling to fill The demand for and manufacturing jobs the cost of energy will with the right talent. And emerging nations With the prosperity only increase with future population can’t increase their growth without more of nations hanging growth and industrial- ization. Environmental talent. Access to tal- ent will only become in the balance, and sustainability concerns will demand more important and more competitive. policymakers must that nations respond effectively and respon- Companies and coun- tries that can attract, actively seek the sibly to the energy challenge. All nations develop and retain the highest-skilled tal- right combination will seek competi- tive energy policies ent—from scientists, researchers, and engi- of trade, tax, labor, that ensure affordable and reliable energy neers to technicians and skilled production energy, education, supplies for manu- facturing, and will be workers—will be bet- ter positioned to come science, technology, forced to seek new ways of manufacturing out on top. and industrial policy from energy-efficient product designs to Innovation levers to generate the energy-efficient opera- tions and logistics. The ability to inno- vate quickly and effec- best possible future Collaboration between company leaders and tively will be another important factor in the for their citizens. policymakers will be an imperative in solv- success of countries ing the energy puzzle. and companies in the future, as measured by growth in GDP, mar- ket share, and profitability. Companies must Government policy innovate to stay ahead of competition, and Finally, the strategic use of public policy to they must be supported by infrastructure and further economic development will become policies that support breakthroughs in science increasingly important, placing a premium on and technology as well as dedicated investment collaboration between governments and busi- budgets that permit long-term pursuits. In the ness leaders to create win-win outcomes. With 21st century manufacturing environment, the the prosperity of nations hanging in the bal- ability to develop creative ideas that address ance, policymakers must actively seek the right12
  15. 15. A Deloitte series on making America strongercombination of trade, tax, labor, energy, educa- qualitative factors (see figure 6) that influencetion, science, technology, and industrial policy American competitiveness:levers to generate the best possible future for • education and workforce preparationtheir citizens. In a complex and interdependentglobal economy, governments must pull the • innovationright levers at the right time while remain- • economic, trade, financial and tax issuesing mindful of unintended consequences. • infrastructure andCompanies, in turn, must become more • energy policysophisticated and engaged in their interactionswith policymakers to help strike the balanced Each factor plays an important role inapproach necessary to enable success for all. determining manufacturing competitiveness. The Competitiveness Index developed Government is more central to some than oth-with the Council provides further evidence ers; in matters of trade, regulation and taxa-supporting these findings. While manufactur- tion, obviously, it is central. But governmenting competitiveness traditionally has been has a role to play in each—a role that will helpjudged by labor, materials, and energy costs,15 determine whether U.S. manufacturing cantoday’s manufacturing executives note other remain competitive in the future.Figure 6. Drivers of manufacturing competitiveness (global vs. the United States and Canada) RANK Global United States and Canada 1 Talent-driven innovation Talent-driven innovation 2 Cost of labor and materials Cost of labor and materials 3 Energy cost and policies Economic, trade, financial, and tax systems 4 Economic, trade, financial, and tax systems Energy cost and policies 5 Quality of physical infrastructure Legal and regulatory system Government investments in 6 manufacturing and innovation Quality of physical infrastructure Government investments in 7 Legal and regulatory system manufacturing and innovation 8 Supplier network Supplier network 9 Local business dynamics Local business dynamics 10 Quality and availability of healthcare Quality and availability of healthcareSource: Deloitte and U.S. Council on Competitiveness, 2010 Global Manufacturing Competitiveness Index 13
  16. 16. Manufacturing OpportunityMaking America amore attractive placeto conduct business:Action stepsfor policymakers T o develop specific recommendations regarding U.S. competitiveness, Deloitte and the U.S. Council on Competitiveness In particular, many suggested that this uncer- tainty affects critical cost and competitiveness variables. University presidents and national sought the input of CEOs, university presi- laboratory leaders noted uncertainties tied to dents, leaders of U.S. national laboratories, funding stability and the consistency of pro- and labor union leaders. Deloitte conducted grams centered on education and R&D. one-on-one interviews with dozens of rep- Participants cited issues such as the clarity resentatives from these constituent groups and permanency of R&D tax credits, com- across America and then distilled the recom- petitive tax rates, the ratification of free trade mendations. These interviews are documented agreements, tort reform, financial reform, and in the Council’s Ignite series of reports, which policies affecting health care, labor, innova- form the basis for the recommendations tion, energy, and carbon regulation, as well presented here. as long-term funding for important research. An overarching concern consistently and Clear and stable competitive policies in these almost unanimously expressed by executives, areas would generate tremendous opportuni- university presidents and national laboratory ties for American manufacturers and make the leaders was policy, legislative and regulatory United States an attractive place to invest and uncertainty. Participants suggested that this conduct business. uncertainty directly affects both short- and It is important to note that these recom- long-term decision making. Business leaders mendations were not entirely consistent among emphasized that they routinely develop strate- stakeholders. While many agreed on a number gic business plans and supporting investments of topics, there were some differences among with 10– to 15–year horizons, but they must the stakeholder groups; the following recom- work under government policies that do not mendations are culled from those outlined in provide similar long-term clarity or stability. one or more of the Ignite reports.14
  17. 17. A Deloitte series on making America strongerEducation and workforce can’t be filled today because employers can’t find people with the right skills. Seventy-fourpreparation percent indicated that employee shortages orM anufacturing CEOs agreed that worker talent—specifically the talentthat drives innovation—trumps all other fac- inadequate talent in skilled production roles were hurting their ability to expand operations or improve productivity. Eleven percent oftors in gauging competitiveness.16 Developing respondents were considering relocating, andthis talent through education, then, is among these, the most commonly cited reasonthe most important element in ensuring was greater access to qualified talent.manufacturing success. Survey respondents also indicated that the workers hardest to find today include machin-Talent shortages ists, operators, craft workers, and technicians— and these are the positions they also expect to The existence of a substantial and growing be hit hardest by retirement over the next threeU.S. skills gap in science, technology, engi- to five years.18 As these experienced employeesneering, and math (STEM) disciplines is well retire, finding younger talent to replace themdocumented, and the gap is having obvious will become an increasingly difficult challenge.effects on competitiveness. In the 2011 surveyconducted by Deloitte and the ManufacturingInstitute, 67 percent of responding manufac- STEM teaching deficienciesturers reported moderate to severe shortages of One reason for the skills gap is a long-available, qualified workers; 56 percent antici- term shift in educational focus, both in thepate that these shortages will grow worse in the classroom and in teacher training programs.next three to five years. According to many of the university presidents And the talent shortage inevitably affects and national laboratory leaders participat-American innovation. As the Baby Boomer ing in Ignite 2.0: Voices of Voices of Americangeneration wanes, losses of skilled workers, University Presidents and National Labscientists, researchers, engineers, and teach- Directors on Manufacturing Competitiveness,ers will have a lasting impact on manufactur- in recent decades, the emphasis in teachering competitiveness and thus the country as education has shifted strongly away froma whole. Without radical action, most 21st subject-matter content and toward pedagogy,century workers are likely to be less skilled the theory of teaching itself.19 This has led tothan their Baby Boom counterparts.17 critical deficiencies in the teaching of STEM In an era of widespread unemployment, subjects in particular.manufacturers reported that 5 percent of Most of the business executives par-positions at their firms were unfilled due to a ticipating in Ignite 1.0: Voices of CEOs onlack of qualified candidates. As noted above, Manufacturing Competitiveness said U.S.that represents more than 600,000 jobs that students are less interested and perform more 15
  18. 18. Manufacturing Opportunity Education leaders should be aligning educational pathways in degree programs to portable, industry-recognized skills credentials, creating more ‘on and off ’ ramps, says Emily Stover DeRocco, former president of The Manufacturing Institute. This could help close the gap between the skills manufacturers need and those held by graduates entering the workforce. poorly in science and engineering disciplines disciplines often fail to translate their studies than foreign students.20 Put simply, many into technical careers. According to a recent American educational programs are not teach- study by Georgetown University’s Center on ing STEM topics well, and just as importantly, Education and the Workforce, more than 30 they are failing to make these disciplines percent of engineering, computer science, and seem important, interesting or rewarding mathematics majors choose careers in business to students. or professional services rather than in science The global business community does report and engineering.23 concerns regarding engineering graduates America is still a vibrant and innovative from institutions in emerging markets, due to country, and its manufacturers still represent ongoing questions about instructor qualifica- an extremely valuable knowledge base. But tions, soaring student-teacher ratios and the our ability to innovate and to address complex variability of curricula. Despite these concerns, scientific, technological, and social challenges however, the emergence of a large and skilled is in jeopardy. Most of the leaders participat- technical workforce is one of the most impor- ing in the various reports cited throughout tant factors driving the competitiveness of this document agreed that U.S. manufactur- nations such as China and India.21 ing competitiveness can be improved only Perceptions of manufacturing careers if Americans become more interested in are also are hurting the United States’ abil- manufacturing through educational programs ity to develop a highly talented workforce. In that portray the industry as a valuable career another study conducted by Deloitte and the choice with good employment opportunities. Manufacturing Institute, 18–24-year-olds rank Furthermore, we need to arm students with manufacturing dead last among industries in the right technical and problem-solving skills which they would choose to start a career.22 through flexible education pathways that lead Moreover, even students pursuing STEM to advanced degrees or certifications.16
  19. 19. A Deloitte series on making America strongerRecommendations: educated workforceParticipants in the Ignite series offered the following recommendations to improve America’sability to develop an educated and prepared workforce.24 While they recognized budgetchallenges and the imperative of reducing the federal deficit, participants consistently feltthat funding in these areas were essential to U.S. manufacturing competitiveness.Maintain long-term, predictable federal and state support for universities,community colleges, and the nation’s research and science infrastructure.• Focus U.S. public and higher education on developing skills in science, technology, engineering, and math. The revival of America’s STEM talent pool must begin in the earliest grades with teachers who are fully prepared to teach and inspire the next generation of professionals. As part of this effort, the United States should: –– At the state level, adopt consistent standards and curricula for STEM disciplines. These standards should be tied to metrics followed in other leading manufacturing economies. –– Provide guidelines and incentives to attract and retain primary and secondary STEM teachers who are true subject-matter experts that are able to prepare students for degrees or certifications. Incentives such as continuing education opportunities could be offered to current STEM teachers. The next generation of teachers could be cultivated with scholarship programs that attract top high-school talent to pursue STEM education. K–12 systems could be offered discipline-linked salary tiers similar to those provided to college and university professors to reward teachers for developing and maintaining subject-matter expertise.• Develop flexible higher education tracks that foster STEM literacy through community colleges, vocational trade schools, work-training programs, etc.• Support state universities’ efforts to attract high-caliber students to STEM programs and increase the number of graduates in STEM disciplines.• Develop initiatives that promote and market manufacturing as a vital and high-value industry with rewarding long-term career opportunities for high school and college students. This commitment should involve focused, creative, and measurable initiatives targeted at today’s and tomorrow’s students—and parents.• Build government-industry partnerships that provide incentives for prospective workers to pursue careers in science, engineering, and manufacturing.• Advance performance-based legislation and incentives such as the America COMPETES Act, the Elementary and Secondary Education Act, the Carl D. Perkins Career and Technical Education Act, the Investing in Innovation Fund, and the Race to the Top and Teacher Incentive funds.• Benchmark best practices from other countries that are succeeding in attracting and retaining top STEM talent.• Expand programs such as Helmets to Hardhats® and project labor/community workforce agreements that hire and train active military personnel, disadvantaged youths, and unemployed veterans for successful careers in the skilled trades. 17
  20. 20. Manufacturing Opportunity Innovation national laboratories and other private and public bodies that support the manufactur- A cross the spectrum of policy, from the tax code to the direct incubation of small businesses, government has an important role ing ecosystem. And while many participating in the Ignite series felt that the United States is still capable of manufacturing high-quality to play in boosting innovation. goods at very competitive prices, they also A healthy domestic manufacturing base believe that competing on wages alone would is important if the United States is to benefit not be beneficial to American manufacturing from emerging technologies in the future. For and that the United States must focus on and example, the shifting of television production support the R&D and innovation phases of to Asia cost the United States its opportunity to manufacturing if it is to retain any lasting edge develop next-generation flat panel technology, in competitiveness. a competency that later proved instrumental in the design and manufacture of solar panels.25 Fostering a climate for manufacturing innovation The competitive landscape According to CEOs around the world, other Globalization and technological progress, nations have done a much better job in creat- especially in advanced communications, have ing, pursuing, and communicating national put American workers into direct competi- innovation strategies (see figure 7). Germany, tion with rising, leading-edge talent pools for instance, has established a comprehensive worldwide. And while many of the lead- national strategy across all its federal min- ers participating in the Ignite series agreed istries with goals and timetables for critical that the U.S. should not engage in a “race to fields, and it greatly increased its research and the bottom” with other nations concerning development funding.27 Germany’s Fraunhofer wages, nationwide discussion is increasing Institute, jointly funded by government and on the topic of how to reestablish the United private contracts, is Europe’s largest applied States as an attractive and competitive loca- research organization, conducting both fun- tion for R&D and customer support func- damental and applied research and early-stage tions. Bringing much of this capability back commercialization development.28 is becoming a profitable and efficient decision Many CEOs participating in Ignite 1.0 for companies.26 said they would like to see the United States Many felt ‘manufacturing’ is in fact a foster similar instruments for manufactur- misnomer, since it fails to address the many ing innovation. They believe that government sectors, including universities and colleges, Many felt ‘manufacturing’ is, in fact, a misnomer since it fails to address many sectors, including universities and colleges, national laboratories, and other private and public bodies that support the manufacturing ecosystem.18
  21. 21. A Deloitte series on making America strongerFigure 7. Policy advantages and disadvantages (percent indicating advantage or disadvantage) Competitive DISADVANTAGES Competitive ADVANTAGES China SCIENCE, TECHNOLOGY AND INNOVATION 69.3% ECONOMIC DEVELOPMENT 65.7% INFRASTRUCTURE DEVELOPMENT 62.0% SUSTAINABILITY POLICIES 56.9% TRADE POLICIES 56.2% HEALTHCARE POLICIES 27.7% IMMIGRATION POLICIES 32.1% Europe INFRASTRUCTURE DEVELOPMENT 46.1% SCIENCE, TECHNOLOGY AND INNOVATION 43.4% INTELLECTUAL PROPERTY PROTECTION 42.1% FOREIGN DIRECT INVESTMENT POLICIES 36.8% GOVERNMENT INTERVENTION & OWNERSHIP IN COMPANIES 31.6% ENERGY POLICIES 31.6% ENVIRONMENTAL POLICIES 36.8% LABOR LAWS & REGULATIONS 42.1% United States INTELLECTUAL PROPERTY PROTECTION 75.5% TECHNOLOGY TRANSFER AND ADOPTION 61.2% IMMIGRATION POLICIES 32.7% PRODUCT LIABILITY LAWS 42.9% HEALTHCARE POLICIES 51.0% CORPORATE TAX POLICIES 53.1% GOVERNMENT INTERVENTION & OWNERSHIP IN COMPANIES 59.2%Source: Deloitte and U.S. Council on Competitiveness, 2010 Global Manufacturing Competitiveness Index 19
  22. 22. Manufacturing Opportunity investments in the areas of science, technology, government support for sector-specific indus- and engineering can substantially improve trial clusters that place universities, national manufacturing competitiveness. Such invest- laboratories, and companies in close proxim- ments could include the establishment of ity to optimize the commercialization of new support research institutions, technological ideas, citing examples such as the biomedical supports for manufacturers, and the encour- clusters in Ohio and Massachusetts. agement of local manufacturing clusters.29 Co-located research and manufacturing connections encourage continuous product Co-locating R&D and and process improvement promoting the manufacturing maturation of basic research into applied research, and the transition of pilot projects University leaders and national research into full commercialization. They would laboratory executives participating in Ignite 2.0 enhance the quality and return on investment underscored a similar point. Many advocate of breakthrough discoveries.30 Recommendations: innovation Participants in the Ignite series offered the following recommendations to improve America’s ability to innovate. Establish a consortium of business, university, labor, and political leaders to develop long-term U.S. manufacturing goals with a 15– to 20–year development horizon. This consortium should work collaboratively to craft investment and development programs as well as the educational, technological, and intellectual infrastructure needed to support progress toward those goals. • Develop a U.S. innovation strategy that establishes programs to support basic and applied research into manufacturing innovation and commercialization. This strategy should aim at eliminating barriers to collaboration among universities, laboratories, and other private and public entities. Its programs should be supported with long-term funding mechanisms that insulate them from the uncertainties of election cycles. A major goal should be the establishment of public and privately funded pathways to drive innovative ideas and technologies through the “valley of death”— where many inventions and new technologies tend to die—to commercialization. • Increase the number of public-private industry clusters that convene research institutions, industry, and the best talent to focus on advancing research and full life-cycle commercialization. • Encourage national laboratories to develop mission-driven innovations crucial to national interests while broadening the definition of national interest to include economic development. This would include leveraging the ability of America’s national laboratories to drive applied research on the journey to commercialization, as well as the establishment of succinct and concise goals in areas important to the United States for economic development as well as national security, defense, energy, etc. This effort should also support the laboratories’ role in community outreach programs, such as educational outreach to local primary and secondary schools, nearby corporations, and the community at large.20
  23. 23. A Deloitte series on making America strongerEconomic, trade, financial, concerns the research and development tax credit, which has existed in varying forms asand tax issues a “temporary” but perennially reauthorizedR egulatory compliance costs, labor laws and regulations, and intellectual propertyprotection and enforcement all have a strong measure for nearly three decades, earning it what the Journal of Accountancy has called “well-deserved reputation for complexity andinfluence on competitiveness and growth. uncertainty.”36A 2008 study found that U.S. manufacturerson average spend nearly 18 percent more on Intellectual property protectionnon-production expenses—the cost of energy,taxes, employee benefits, torts, and pollution Protecting American intellectual prop-abatement—than do their counterparts in the erty—whether by trademark for a new brandnation’s major trading partners.31 or by patent for a new technological innova- tion—is essential to maintaining competitive- ness. A 2005 National Bureau of EconomicTax policy Research study, for instance, concluded that Americans show strong support for tax improvements in intellectual property rightspolicies that support competitiveness; 69 result in increased technology transfer bypercent agree that tax cuts for businesses and multinational enterprises.37individuals create jobs, while 65 percent sup-port tax incentives for manufacturing.32 Trade policy High tax burdens. Taxes represent asubstantial burden for U.S. manufacturing. International trade agreements, too, are anIn 2011, the United States had the highest obvious competitive factor in an era in whichcorporate tax rates among the OECD nations, 95 percent of our manufacturers’ potentialup from second place in 2010.33 Critics of U.S. customers live outside the United States.38corporate tax policy note that the nation’s rates While the topic of trade policy was consistentlyhave remained virtually unchanged for the important to all stakeholders participatingpast two decades, even as competitor nations in the Ignite series, there were clear simi-have lowered theirs.34 High corporate tax rates larities and differences between business and(as well as questions regarding permanency of labor leaders.tax credits and policies) reduce manufactur- For example, both groups felt more needsers’ ability to invest with confidence over the to be done to ensure the enforcement of U.S.long term. rights under existing trade agreements, and Repatriation could boost competitive- to ensure compliance with WTO includingness. Business leaders interviewed for the legal action against countries that violate tradeIgnite series often cite the ability to repatriate policy and limit the United States’ ability tocash from abroad as a means to boost com- compete fairly in the global marketplace. Bothpetitiveness. The United States is the only G8 groups also felt the United States should estab-member that does not employ a territorial tax lish fair and equitable free trade agreementsrate policy, which taxes only income earned that address various aspects of the businessinside the nation’s borders.35 Even a policy environment in competing countries, includ-allowing U.S. firms to repatriate cash at a ing labor laws and regulations concerninglower tax rate could help level the playing field minimum wages, child labor, working condi-between domestic and foreign manufactur- tions, human rights, environmental protection,ers and encourage U.S. companies to increase and workplace safety.domestic investments. Where the groups differed concerns the R&D tax credit. Still another perti- notion often described as “fair trade vs. freenent issue mentioned by Ignite participants trade.” While many executives interviewed 21
  24. 24. Manufacturing Opportunity by Deloitte and the Council support recent in producing finished products on time and at free trade negotiations, such as those with minimum cost. Modern power grids and tele- Korea (which promise to boost U.S. exports communications networks play similar roles in by $10 to $11 billion), Colombia, and Panama, moving energy and information. many labor leaders interviewed for Ignite In addition to improving America’s road- 3.0 expressed frustration with these agree- ways, airports, waterways, electric grid, and ments, calling them unfair, one-sided, and broadband capabilities, infrastructure invest- detrimental to national security, U.S. industry, ments also can create long-term, high-paying and American workers.39 They argued that jobs in the United States, putting thousands narrowly defined trade policies alone are not of people back to work while encouraging sufficient to position U.S. businesses fairly private investment. The Federal Aid Highway in the international marketplace and may be Act of 1956, the largest public works project detrimental to domestic production.40 in U.S. history, is often cited as an example of how large, nationally supported infrastruc- ture projects can create long-term benefits Infrastructure and prosperity. Proponents of greater infra- T ransportation infrastructure is vitally important to U.S. manufacturing competitiveness in terms of attracting busi- structure investment also point to recent Congressional Budget Office estimates which suggest that every dollar of infrastructure ness investment, improving the effectiveness of spending generates an additional 60 cents in logistics, the movement of raw materials, and economic activity.41 Recommendations: Economic, Trade, Financial, and Tax Systems Participants in the Ignite series offered the following recommendations to improve America’s economic, trade, financial, and tax systems. • Institute a comprehensive reform of federal corporate taxes that provides long-term clarity and stability and offers globally competitive rates. This should involve the reduction or elimination of taxes on repatriated foreign earnings and permanent research and development tax credits that favor U.S.-based innovation, continuing STEM education, and the acquisition of R&D equipment and infrastructure. • Develop a benchmarking process to analyze the impact of government regulations on global competitiveness. This could help diminish the cost and complexity of regulatory compliance. The nation’s overlapping federal, state, and local regulations are challenging to navigate and can create barriers to innovation and growth. • Develop a new trade promotion and fast-track authority to quickly establish fair and equitable free trade agreements. One task should be the establishment of a set of principles to guide the formulation of beneficial trade agreements that address environmental and worker protections and resolve trade imbalances. • Aggressively pursue the closure of a commercially meaningful WTO Doha Agenda to lower global trade barriers.22
  25. 25. A Deloitte series on making America stronger America’s competitors understand the traditional energy sources, market forces willimportance of modern infrastructure. In play a crucial role in driving the development2005, China devoted 7.3 percent of its GDP and adoption of alternative forms of energyto infrastructure development; by 2009, this and its efficient use. Alternative energy sourcesshare had risen to about 9 percent. A large also promise a competitive advantage for anyshare of this spending went to the rail sector, nation that can develop them effectively.44which saw a 70 percent increase in fixed- Alternative energy solutions could createasset investments.43 many more manufacturing jobs. U.S. labor Infrastructure improvement is perhaps the leaders, noting forecasted growth in this areaclearest example of how government action from 9 million jobs in 2007 to as many as 37can improve manufacturing competitiveness – million in 2030 (many of them not subjectespecially in areas that improve the efficiency to offshoring to overseas markets), stronglyof exports as well as job creation. And the support policies to promote the research,opportunity is not limited to the federal gov- development and production of alternativeernment. States, for example, can help metro- energy (solar panels, wind turbines, advancedpolitan regions resolve issues with traffic flow. batteries, etc.).45 They also favor an extension of the Advanced Manufacturing Tax Credit,Energy which provides incentives for investments in the advanced energy products, and may prove Clean, reliable energy is an all-important critical if America is to lead the next genera-element of manufacturing production. With tion of manufacturing.46increasing demand for and limited supplies ofRecommendations: InfrastructureParticipants in the Ignite series offered the following recommendations to improveAmerica’s infrastructure.To ensure long-term funding, the United States should create a nationalinfrastructure bank—a government-owned yet independent and professionallymanaged entity responsible for managing investment in and the long-term financing of regional and national infrastructure projects.• Prioritize support for projects that improve export capabilities and promote the efficient movement of goods, including air traffic infrastructure, ports, railroads, roads, nuclear facilities, the electric grid, and IT infrastructures. To win approval, projects should create jobs within the United States.• Develop incentives to encourage the creation of private-public partnerships to complete vital infrastructure projects.• Assist state and local governments with funding infrastructure projects by providing federal guarantees to lower borrowing costs and minimize disruptions to the municipal bond market. To further this effort, Congress should reinstate the Build America Bonds program, which issued $181 million in taxable municipal bonds before expiring at the end of 2010.• Create a comprehensive national energy policy that encourages reinvestment in current infrastructure; furthers energy efficiency and conservation; and balances investment across a diverse portfolio of all fuel sources, including solar, wind, and nuclear power as well as critical U.S. assets in coal, natural gas, and offshore oil. 23
  26. 26. Manufacturing OpportunityConclusion T he stakeholders participating in the joint efforts between Deloitte, the Forum, the U.S. Council on Competitiveness, and the commitments to rebuilding our education system and creating and cultivating an effec- tive ecosystem of public-private research and Manufacturing Institute understand that U.S. product development. manufacturing is at a crossroads. Low-cost, Most Americans understand that our basic manufacturing is unlikely to ever recover economic success is closely linked to our its former importance in our economy; our ability to make useful and valuable products. long-term opportunities lie in increasingly Government can advance efforts to retain that complex and emerging technologies—and in ability by supporting the solutions summarized America’s ability to lead in the development in this report, which can help the United States of such breakthroughs. Taking full advantage regain its global lead in manufacturing for of these opportunities will require sustained many years to come. Low-cost, basic manufacturing is unlikely to ever recover its former importance in our economy; our long-term opportunities lie in increasingly complex and emerging technologies—and in America’s ability to lead in the development of such breakthroughs.24
  27. 27. A Deloitte series on making America strongerAppendix A:The World Economic ForumFuture of Manufacturing projectI n January 2011, in response to a call to action from manufacturing CEOs atDavos, Switzerland, the World Economic Future of Manufacturing: Harnessing the Power of Global Manufacturing for Economic Growth. The final Future of Manufacturing report wasForum joined with manufacturing special- released in a joint Forum-Deloitte media con-ists from Deloitte to establish the Future of ference in Tokyo in April 2012.Manufacturing project, with the objective of Based on strong support from CEOs andexploring the evolution of the global manu- policymakers in Davos in January 2012,facturing ecosystem and identifying pivotal Deloitte and the Forum are now collaboratingdrivers of change and the factors most likely on a new initiative called Manufacturing forto shape the future of competition. A year Growth. This initiative will assess the value-later, at the World Economic Forum’s 2012 added economic benefits, employment impact,Annual Meeting in Davos, manufacturing and growth potential of different types ofleaders, including numerous CEOs and senior manufacturing and deliver recommendationsexecutives, participated in public and private to stimulate high-multiplier manufacturing.sessions, unveiling a draft report titled The 25
  28. 28. Manufacturing OpportunityAppendix B:The U.S. ManufacturingCompetitiveness Initiative S ince 2009, Deloitte has collaborated with the U.S. Council on Competitiveness on the U.S. Manufacturing Competiveness policymakers on improving America’s manufacturing competitiveness. Based on interviews with the CEOs rep- Initiative, a multi-year, multi-phase project resenting organizations such as Deere, Ford, focused on improving the U.S. manufacturing General Electric, Lockheed Martin, and sector’s ability to compete and prosper glob- Honeywell, Ignite 1.0 outlines the changes ally. The findings of this initiative, including executives feel are needed in energy and tax overall recommendations for policymakers, policy, the regulatory and legal environment, were documented in the Council’s MAKE and infrastructure investment to improve U.S. report of December 2011, and were informed manufacturing competitiveness. by research conducted by Deloitte on behalf of Ignite 2.0 builds on these perspectives and the Council that included a recurring survey of recommendations. Based on interviews with more than 400 global manufacturing CEOs as the presidents of institutions including MIT, well direct face-to-face interviews with nearly the University of Michigan, Michigan State 80 U.S. business, academic, scientific, and University, Ohio State University, Carnegie labor leaders. Mellon, Georgia Tech, and the University of This research reached a disturbing conclu- California, as well as directors of key national sion that should raise a red flag for U.S. poli- laboratories in the United States, this second cymakers, business leaders, and the American report focuses on how policymakers and public: the United States is perceived as the business, academic, and scientific com- ranking fourth in global manufacturing com- munities can work together to ensure that petitiveness, behind China, India, and Korea, America has a highly skilled and talented and it is expected to fall behind Brazil as well workforce, and to create pathways that drive within the next five years. innovation through basic and applied research Deloitte’s collaboration with the Council to commercialization. has yielded the following reports: Finally, Ignite 3.0 outlines recommenda- • The Global Manufacturing Competitiveness tions on linking U.S. policy with job cre- Index, a biennial survey of about 400 global ation from labor leaders such as Leo Gerard, manufacturing CEOs that pinpoints talent- president of the United Steelworkers Union; driven innovation as the most important Bill Hite, general president of the United driver of global manufacturing competi- Association of Plumbers and Pipefitters; and tiveness, followed closely by cost of labor R. Thomas Buffenbarger and Own Herrnstadt, and materials; energy costs and policies; both with the International Association of economic, trade, financial, and tax systems; Machinists and Aerospace Workers. and quality of physical infrastructure. Together, the Ignite reports provide a • The Ignite series consists of three reports set of recommendations capable of form- that offer recommendations to U.S. ing the foundation of a long-term U.S. manufacturing strategy.26
  29. 29. A Deloitte series on making America strongerAppendix C:Understanding Americanperceptions of manufacturingand tackling the growing skillsgaps in the United StatesF or nearly five years, Deloitte has worked with the Manufacturing Institute and itsformer president, Emily Stover DeRocco, to range of topics, Americans remain steadfast in their commitment to creating a strong, healthy, globally competitive manufacturinginvestigate the average American’s view of sector in the United States.manufacturing and the growing skills gap • Boiling Point? The Skills Gap in U.S.in the United States. Two recurring sur- Manufacturing, based on an annual, nation-veys conducted jointly by Deloitte and the wide survey of company executives, whichManufacturing Institute offer unique views of seeks to answer several important questionsthe effectiveness of policymakers and business about the nature of the skills and talent gapsleaders in ensuring that the United States con- in manufacturing today:tinues to have a robust manufacturing sector,as well as the challenges manufacturing execu- –– What impact is the skills gap having ontives face concerning employee education, tal- company performance?ent cultivation, and performance management. –– How is it evolving in the face of contin-These two reports are: ued economic and competitive chal- • Unwavering Commitment: The Public’s View lenges? Which manufacturing jobs are of the Manufacturing Industry Today, which being affected the most? reports the results of an annual research –– What does the future of talent look like? program, gauging the American public’s What upcoming trends are companies perspectives on manufacturing. Findings preparing for today? How fast are these of the third annual survey, released in changes occurring? September 2011, suggest that despite fre- quent swings of public opinion on a wide 27

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