Michigan manufacturers outlook survey results 2012

Michigan Manufacturers Outlook Survey 2012 Key Findings

For four straight years, the Michigan Manufacturers Association (MMA) and Baker Strategy Group (BSG) have partnered toconduct the annual Michigan Manufacturers Outlook Survey. This instrument has become a valuable tool for measuringyear-over-year trends in the manufacturing industry and to gauge the collective outlook for manufacturers in Michigan.This year we received feedback from 400 respondents. The majority (59%) of the respondents are executives at theircompanies, but we also received solid representation from plant management, sales and marketing, humanresources, operations, regulatory compliance, government relations, and accounting/finance.In conducting our analysis, we focus primarily on respondents representing companies who manufacture in Michigan.Some salient statistics on these companies include: 61% are family-owned businesses, 56% have 100 or feweremployees, 60% have only one facility in Michigan, 37% manufacture automotive products, 92% 6manufacture non-automotive products, and 80% have a non-unionized workforce.With four years of data, we are able to look back and see progress and changes over time. What follows are 8 KeyFindings we observed in the data.

1 An Improved Company Outlook Michigan manufacturers are enthused about their company‘s prospects. Each year we ask respondents to gauge their company‘s Rate your companys outlook for the following periods: outlook by looking at three time periods: 6 10 months out, 1 year out, and 3 years out. Since 2009, scores for each of these 9 measures has increased annually. The one- year outlook has jumped from 4.9 beginning 2009 to 7.2 beginning 2012. And while the 8 7.5 outlook scores remain at moderate levels, the 7.3 7.4 upward momentum is clear. 6.8 6.9 7.2 7 Sample comments: 6.3 6.8 • ―The next 3 years are very hard to project. 6 6.4 But if the government can shrink and get a grip on the concept of fiscal responsibility 4.9 and actually put it to work, then will we 5 5.4 have a strong outlook for years to Next 3 years come, not just for three years.‖ – 4 Executive, furniture manufacturer Next 12 months 3.9 Next 6 months • ―We have been here since 1957 and plan 3 to be here for a long time.‖ – Executive, transportation equipment manufacturer 2 • ―We are conservatively optimistic. We did take a big hit two years ago and we are 1 still trying to recover.‖ – 2009 2010 2011 2012 Executive, automotive components manufacturer(1 = “Poor”, 10 = “Excellent”)

2 A More Business-Friendly Michigan Rate your level of agreement with the following statements: 10 According to respondents, Michigan remains an average state for doing business. But the 9 good news is that we‘ve improved over the Michigan is a great state for our companys business past few years. In 2009, Michigan‘s score for being a business-friendly state was 3.3. For 8 Michigan is a business-friendly state 2012, that score has risen to 5.0. 7 Sample comments: • ―Michigan is a great state and we are 6.1 proud to call it home.‖ – Executive, tool 6 5.4 and die manufacturer 5.0 5 4.7 • ―Michigan is a great state to bring people 4.5 into for livelihood.‖ – Chairman, baked goods manufacturing and distribution 4 3.7 company 3.3 3.2 • ―Under Governor Snyder, the business 3 climate in Michigan is rapidly improving.‖ – Director of Business Development, commercial heavy 2 equipment manufacturer 1 2009 2010 2011 2012(1 = “Strongly Disagree”, 10 = “Strongly Agree”)

3 Plans Expand in Michigan Manufacturers in Michigan are committed to the state. The score for planning to remain in Rate your level of agreement with the following statements: Michigan moved up from 7.9 in 2009 to 8.9 in 10 2012. And companies are not only staying, they‘re planning to expand in Michigan, as demonstrated by the rise in 9 8.9 scores from 4.4 in 2009 to 6.6 in 2012 for 8.6 Michigan expansion. In 7.9 8.0 contrast, manufacturers are less likely to look 8 to expand globally, perhaps due to an improved business climate in Michigan. 7 6.6 Sample comments: 5.8 5.8 • ―This year we plan to increase our regional 6 exposure, increase our Michigan customer 5.2 base by 10-15%, diversify our customer 5 4.6 4.6 base, and add 1-2 aerospace OEM or tier 4.4 5.0 1 customers.‖ – Executive, fabricated metals products manufacturer 4 • ―We plan to build on the new momentum in Michigan to help drive the state back to 3 Our company plans to remain in Michigan economic strength.‖ – Director, Government Relations, electrical Our company plans to expand in Michigan equipment manufacturer 2 Our company is actively looking to expand globally • ―We want to gain new accounts/customers 1 drawn primarily from SE Michigan.‖ – Sales & Marketing, corrugated 2009 2010 2011 2012 packaging manufacturer(1 = “Strongly Disagree”, 10 = “Strongly Agree”)

4 Plans to Hire Do you anticipate hiring additional workers this year? A full 84% of Michigan manufactures say they anticipate hiring additional workers in 2012, compared to 71% last year. 2011 2012 Sample comments: • ―What I see most lately are manufacturers I call on for tooling looking for experienced CNC operators. Finding these people No Yes No Yes seems to be the biggest problem with the companies that are growing.‖ – Owner, automotive supplier 16% • ―Our Challenge is in finding enough skilled 29% labor to staff the plant at the current workload, and beyond to the projected levels.‖ – Sales & Marketing, automotive manufacturer 71% 84% • ―We are struggling to find qualified employees. We have plenty of plant and capital equipment capacity; we simply need more qualified people.‖ – Business Development, fabricated metals manufacturer

5 The Impact of Healthcare Costs While the picture has improved for manufacturers in Michigan, there are still areas of concern. As manufacturers strive to How much impact do you expect the following costs will have on your companys operational remain competitive in a global performance? market, healthcare costs are still a big concern. Consistent with last year‘s findings, manufacturers‘ score for the impact 8.9 Healthcare costs of healthcare costs on operational 8.9 performance eclipse the scores for several other cost categories— labor, energy, tax, regulatory, and capital—as 7.9 Labor costs the costs that have the highest impact on 7.9 company operational performance. 7.4 Sample comments: Energy costs 7.6 • ―Healthcare costs continue to increase, and are painful to pass on to our employees.‖ – Executive, machinery 7.3 manufacturer Tax costs 7.4 • ―The cost increase in Medical coverage is explosive. Our increase this year was 6.7 larger than the past few years combined. Regulatory costs 6.9 This is with a healthy workforce with a favorable claims experience.‖ – Controller, paper products manufacturer 1 6.6 Capital costs 6.5 • ―Health care cost increases are greatly surpassing our ability to cover those increases.‖ – Executive, non-automotive 2012 2011 manufacturer(1 = “No Impact”, 10 = “Very Strong Impact”)

6 The Impact of Taxes Michigan manufacturers scored business How much do the following business tax issues impact your companys overall competitiveness? income tax (7.6), unemployment compensation (7.5), and personal property 7.6 tax (7.3) as the most important tax issues Business income tax 7.4 impacting their company‘s overall competitiveness. This is consistent with the 7.5 findings from the 2011 outlook survey results. Unemployment compensation 7.4 Sample comments: 7.3 • ―Companies will finally be able to adjust to Personal property tax 6.8 a more stable state tax system!‖ – Director, Government Relations, electrical equipment 6.9 manufacturer Real property tax 6.9 • ―We have high taxes with no help. Small 6.9 business is growing but lost in the MBT Surcharge 6.9 automotive picture in Michigan.‖ – Executive, plastics and rubber products manufacturer 5.8 Gross receipts tax 6.3 • ―What the Snyder administration has done regarding the simplification of the business tax system in the State of Michigan is a 1 5.1 Sales and use tax huge step forward.‖ – President and 5.2 CEO, machinery manufacturer 2012 2011(1 = “No Impact”, 10 = “Very Strong Impact”)

7 An Emphasis on Strategy Among a list of management emphases that companies can emphasize, Michigan manufacturers score strategic planning (8.4) How important are the following management tools for your companys success? as the most important for their company‘s success. According to the respondents, the Strategic planning 8.4 importance of strategic planning is even 8.1 greater than a number of other critical components of a manufacturer‘s Market diversification 7.9 success, such as market 7.8 diversification, employee training, product innovation, and market research. Employee training 7.8 7.4 Sample comments: Product innovation 7.6 ―My goal for 2012 is achievement of 7.4 operational and technical improvements and developing and implementing a strategy for 7.0 Market research 7.2 growth.‖ – Director, Continuous Improvement, pharmaceutical ingredients 6.8 manufacturer Strategic collaboration 6.5 ―I‘m focusing on customer relationship Business model innovation 6.4 building and execution of our strategic 6.0 business plan.‖ – President, transmission and power train parts manufacturer Developing global markets 5.8 5.6 ―We are working to increase sales and profitability, refine our market position, exploit Developing a global supply chain 1 5.1 4.8 our market strengths, review strategic partnerships, and push the speed of product development.‖ – CEO, machinery 2012 2011 manufacturer(1 = “Not at all Important”, 10 = “Extremely Important”)

8 Increased Collaboration with Michigan Organizations Organizations like MMA, the MEDC, local manufacturing groups, and colleges and universities can be rich sources of assistance How important have the following organizations been to your companys success in Michigan? for Michigan manufacturers. And while manufacturers give low scores overall for the Michigan Manufacturers Association (MMA) 6.1 importance of these organizations for a 6.1 company‘s success, the numbers are up from 2011. Greater collaboration within the state Michigan Economic Development Corporation (MEDC) 5.3 4.9 is on the rise, though there is clearly much room for improvement. Local manufacturing groups 5.1 5.3 Sample comments: Colleges and universities (4-year) 4.9 • ―Better university collaboration on 4.7 technology transfers would be helpful.‖ 4.9 – President, transmission and power train Community colleges 4.3 parts manufacturer Regional/local chamber of commerce 4.6 • ―We are developing a training curriculum 4.3 ‗university‘ for new and existing team 4.5 members. And we‘re working with local Michigan Manufacturing Technology Center (MMTC) 4.1 high school administrations, career counselors, etc. to help students see the National Association of Manufacturers (NAM) 4.3 opportunities for jobs in manufacturing.‖ 3.8 – Executive, fabricated metals products 4.0 manufacturer State chamber of commerce 3.8 • ―MMA is a key facilitator between U.S. Chamber of Commerce 1 3.4 3.3 manufacturers and the regulators. Their contributions are very much appreciated.‖ – Director, energy equipment 2012 2011 manufacturer(1 = “Not at all Important”, 10 = “Extremely Important”)

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Michigan manufacturers outlook survey results 2012

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