US Manufacturing Competitiveness Expected to Decline

July 1, 2010 at 5:50 am 1 comment

U.S. manufacturing competitiveness will continue to decline, according to the 2010 Global Manufacturing Competitiveness Index (GMCI). Index projections suggest, by 2015, Brazil will have overtaken the U.S. for fourth in the global rankings behind China, India and the Republic of Korea. The report concludes the increasing talent pools worldwide, coupled with higher U.S. wages, have placed U.S. manufacturing at a disadvantage in the global markets. However, the U.S. should remain at the forefront of manufacturing innovation due to a focus on strengthening science and technology research, the strong intellectual property rights (IPR), technology transfer policy, and STEM initiatives.

The report was created through a partnership between Deloitte’s Global Manufacturing Industry group and the U.S. Council on Competitiveness. Based on survey responses from more than 400 senior global manufacturing executives and key government decision makers, researchers developed an index that ranked the “10 drivers of global manufacturing competitiveness.” Respondents also were asked to rate the overall manufacturing competiveness of 26 countries for 2010 and 2015.

Worldwide, respondents agreed that talent-driven innovation is the top ranked driver of global manufacturing. The “Asian juggernauts” (i.e. China, India and Korea) and other nations expected to increase their competiveness (e.g. Brazil, Russia and Poland) have successfully cultivated and retained a strong talent pool comprised of skilled workers, scientists, researchers, engineers, and teachers. Workers capable of fueling innovation and improving production efficiency have overtaken the availability of “cheap labor,” which finished third in the global rankings.

Executives with businesses operating in the United States found the U.S. to have two advantages, but also face several disadvantages in manufacturing competiveness. Intellectual property protection (75 percent of respondents) and technology transfer & adoption (61 percent) are the strongest contributors to U.S. competitive advantage in manufacturing. They are seen to increase U.S. competiveness due to increased royalty revenues and they create incentives for further investments in R&D. These advantages keep the U.S. at the cutting edge of manufacturing innovation. However, government policies and laws pertaining to immigration (32.7 percent of respondents), product liability (42.9 percent), healthcare (51.0 percent) and corporate tax (53.1) were reported to be disadvantages to U.S. competiveness. These policies are seen to increase the cost on producers and “discourage capital investments.” Due to the recent financial interventions (e.g. “bailouts”), government intervention and ownership in companies was ranked as the number one disadvantage (59.2 percent of respondents) to U.S. competitiveness in manufacturing. In the long-term, respondents believe that government financial intervention and ownership will hurt American competitiveness.

Download the study here.

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Entry filed under: Deloitte, Manufacturing. Tags: , , , .

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1 Comment Add your own

  • 1. Zara F. Larsen  |  July 1, 2010 at 2:48 pm

    History tells this story within the US automotive sector in spades — natural economic selection toyed with. Many contend that had the US government backed away from the original bailout of Chrysler Corporation in December, 1979, market conditions would have corrected the burgeoning over-capacity which has plague the US industry since then. The resulting “internal social welfare system” expanded to support trapping conditions such as ongoing entrenched leadership and union positions, and lack of breakthrough cost containment. This led to major decisions with limited foresight to (recognition of) the unintended consequences. Example: GM completely opened the beachhead for highly competitive Toyota manufacturing to move into the US — under the guise of GM labeling Toyota-designed/manufactured small cars built at their closed plant in California. By agreement, Toyota took possession of the facility within 10 years. Now look at Kentucky, Ohio, South Carolina, OEMs and suppliers alike — jobs, yes, but significant US-based reinvestment? Just read Clayton Christensen’s “The Innovators Dilemna”. No industry (or government or public service) is immune to the impact of limited strategic thinking, particularly now given how flat and fast the world has become (ala Thomas Friedman’s from “The World is Flat”).

    Reply

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