United States is No. 1 as Manufacturers Plan to Expand, New Deloitte Survey Shows North American Manufacturers Are Bullish on NAFTA as Contributing to

Competitiveness; Production Remains Achilles' Heel as Companies Compete

Globally



    WASHINGTON, June 18 /PRNewswire/ -- Despite intense global competition,
 manufacturers consider North America the most desirable region for
 expansion over the next three years, according to a new survey released
 today by Deloitte.
 
     The survey, Made in North America, targeted top-tier executives of
 manufacturing companies with North American operations. Results showed that
 these companies have expansion plans for a variety of operations, including
 sales, service, research and development, and sourcing. While expansion
 plans are global, North America -- especially the United States -- was
 cited as the No. 1 likely location in the short term. Most surprisingly,
 these manufacturers seem to have a renewed emphasis on North America as the
 home for actual production facilities, hoping to turn around an area that
 has been lagging.
 
     In terms of the executives' agendas for expansion, the survey found
 that sales and services topped the list with 76 percent planning to expand
 sales in the United States, 58 percent in Canada and 67 percent in Mexico.
 Sourcing of raw materials and parts (50 percent in China, 49 percent in the
 United States, and 43 percent in Mexico) and production (44 percent in the
 United States, 37 percent in Mexico and 37 percent in China) rounded out
 the top three priorities.
 
     Overall, the vast majority of respondents said North America will not
 lose competitive ground in those areas over the next five years. And a
 significant number said they believe North America will become even more
 competitive by 2012 in sales and marketing (45 percent), information
 technology (41 percent), customer service (37 percent), R&D/engineering (36
 percent) and finance/accounting (34 percent). A small percentage predicted
 that North America will be less competitive globally in these areas by
 2012, with the balance being neutral.
 
     "While globalization will continue and some manufacturing jobs will
 follow, North America is showing significant resiliency, based on the plans
 of these executives," said Craig Giffi, a Deloitte LLP vice chairman and
 the U.S. Consumer & Industrial Products industry leader.
 
     The survey also shed new light on how North American manufacturers view
 free-trade agreements. Overall, manufacturers paint a positive picture of
 their experiences with the North American Free Trade Agreement (NAFTA)
 after almost 15 years, according to survey respondents.
 
     In fact, North American manufacturers said they are confident about
 their competitive position in the global marketplace, and expect that to
 remain true for the next several years. The only dark spot is production
 capability. Despite plans to expand in North America in the short term,
 survey respondents painted a gloomy picture of this region's ability to
 compete over the long run with lower-cost locations for production,
 especially Asia.
 
     More than half of survey respondents (61 percent) said they expect
 North America to become even less competitive globally as a site for
 production by 2012. The key barriers to making production competitive
 globally were seen as labor cost (cited by 71 percent), tax policy (66
 percent), work rules (66 percent), lack of availability of skilled labor
 (51 percent) and costs of raw materials and energy (56 percent). Not
 surprisingly, these were the issues most frequently cited by executives
 surveyed as areas that governments should address as matters of public
 policy.
 
     By contrast, China and India were seen by executives surveyed as
 becoming increasingly competitive as locations for production facilities.
 For example, 37 percent of respondents said they plan to expand in China in
 the next three years, and 24 percent in India.
 
     As production shifts, manufacturers indicated they will move other
 operations as well. For example, more than 48 percent of respondents said
 they plan to expand sales operations in China over the next three years,
 and 34 percent said they plan to do the same in India. Additionally, 27
 percent plan service operations expansion in China and 23 percent plan to
 do so in India.
 
     "While the focus on expanding both production capacity and sales and
 service in North America, China and India may seem like a contradiction,"
 says Giffi, "it is evidence of the fact that to compete in the future,
 manufacturers need to be able to grow in all major markets around the
 world."
 
     Giffi added, "The simplistic way to view manufacturing is to look only
 where production is located. It's clear that a more accurate way to measure
 the economic impact of these companies is to look at where all operations
 are located, including sourcing, research and development, distribution,
 finance, marketing, and all of the other functions necessary for a company
 to thrive. In most cases, executives are telling us that North America
 provides a competitive business environment for most of these activities."
 
     About the Survey
 
     Deloitte, Deloitte Canada and Deloitte Mexico, with the cooperation of
 the National Association of Manufacturers (NAM), The Manufacturing
 Institute, and Canadian Manufacturers & Exporters (CME), surveyed 321
 executives of leading North American manufacturing enterprises across
 product sectors to obtain their perspectives on their current and expected
 future competitiveness. The majority of companies represented in the survey
 (45 percent) are based in the United States. The survey responses have been
 summarized and represent the opinions of the executive management of these
 firms. No supplementary research has been added.
 
     For more information and to download the complete survey results please
 go to http://www.deloitte.com/us/NAFTA.
 
     About Deloitte
 
     As used in this document, "Deloitte" means Deloitte LLP. Please see
 http://www.deloitte.com/us/about for a detailed description of the legal
 structure of Deloitte LLP and its subsidiaries.
 
 
Contact: Allyson McKenney Liz Torrez Public Relations Hill & Knowlton Deloitte +1 312 255 3036 +1 203 708 4406 liz.torrez@hillandknowlton.com amckenney@deloitte.com

SOURCE Deloitte

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