global manufacturing and fdi - area...

Global Manufacturing and FDI

March 6, 2017

Area Development Automotive Workshop

Alex Frei

Senior Managing Director

Cushman & Wakefield

Area Development | Cushman & Wakefield

• Global Manufacturing Environment

• Challenges, Trends, Markets

• FDI in North America

• Advantages, Challenges

• Thank you Mr. President?

• Magic 8Ball


Agenda

2



Businesses are being impacted by digital disruption as new entrants and

competitors invest in technology to enable mass customization.

3

Challenges

• Additive Manufacturing

• Robotic Process Automation

• Internet of Things

Example: Auto industry is

undergoing undisputed disruption.

• Electrification & driverless

vehicles

• Diverse mobility & connectivity



Challenges

4

Manufacturing sector is at the center of a period of great change with far-

reaching implications for businesses across the global industrial

landscape.

• Integration of technology and service into every day products.

• Adapting lean/vertically integrated production lines to support mass

customization and customer service.

• In the short term, manufacturing remains partly constrained by a lack

of capital investment in plants, reducing near-term radical shifts in

location decisions.

The new norm being a complex, horizontally structured ecosystem of

design, technology, production and service, which will then redefine

how those products and services are created and delivered.



Pure cost reduction strategies are being challenged.

5

Trends

• Questions will be raised about

locations that fundamentally

serviced a different era.

• Cost remains the most

significant location criteria for

many companies, however,

other fundamentals such as

operating conditions and

country risk profiles are

becoming more important

contributors to future decision

making.



Managing change poses a number of challenges:

• Sustained pressures on operating costs and shift in end-market

demand…continues to drive a relentless need for manufacturers to

increase labor and capital productivity.

• Traditional supply chains and business models continue to be

disrupted…new competitors leverage emerging technologies and

embrace digital capabilities in order to identify new ways of increasing

profitability to generate growth.

• A necessity for smarter products, smarter production and smarter

supply chains…continues to challenge manufacturers in their

decisions of where to locate.

6

Trends



Managing change poses a number of challenges:

• Companies are simplifying their organizational structures and re-

positioning as more agile businesses…the ability to respond quickly in

an every changing environment remains a key to success.

• Looming talent shortages are driving businesses to reposition their

brands…brand reputation is often critical in talent attraction and

retention.

CEOs and senior management required to think more holistically about

innovation, potential operating models, and how their products or

services satisfy the needs of their consumer base.

7

Trends



Historical Focus on Manufacturing – Select Countries

8

Manufacturing GDP

(US$)*

GDP, Nominal

(Trillions US$)*

World - 75.9

South Korea 428.5 B (31.1%) 1.4 (1.8%)

China** 3.2 T (29.9%) 11.0 (14.5%)

Germany 746.7 B (22.2%) 3.4 (4.4%)

Japan 775.2 B (18.8%) 4.1 (5.4%)

Mexico 201.4 B (17.6%) 1.1 (1.5%)

India 270.3 B (12.9%) 2.1 (2.8%)

United States 2.2 T (12.3%) 18.0 (23.7%)

Canada 159.7 B (10.6%) 1.6 (2.0%)

United Kingdom 277.2 B (9.7%) 2.9 (3.8%)

*World Bank (2015)

**Excludes Taiwan and special regions of Macau and Hong Kong


How do we minimize site selection risk?


Site Selection Implications

9



2016 Manufacturing Risk Index – Established Locations

10

Highly Automated

1. Malaysia

2. China (Taiwan)

3. China

4. United States

5. South Korea

6. Canada

7. Hungary

8. Sweden

9. Czech Republic

10. Netherlands

Cost Sensitive

1. Malaysia

2. China (Taiwan)

3. Canada

4. China

5. United States

6. Poland

7. Czech Republic

8. Philippines

9. Hungary

10. Thailand

Conditions Sensitive

1. Singapore

2. Sweden

3. Netherlands

4. Switzerland

5. China (Taiwan)

6. United States

7. Malaysia

8. Canada

9. Germany

10. Austria

Malaysia, China (Taiwan), United States and Canada only countries to make

top ten index under all three scenarios.



2016 Manufacturing Risk Index – Pioneering Locations

11

Highly Automated

1. Costa Rica

2. Vietnam

3. Sri Lanka

4. Lithuania

5. Tunisia

6. Morocco

7. Bulgaria

8. Colombia

9. Peru

10. Slovakia

Cost Sensitive

1. Vietnam

2. Sri Lanka

3. Costa Rica

4. Tunisia

5. Morocco

6. Bulgaria

7. Lithuania

8. Peru

9. Colombia

10. Slovakia

Conditions Sensitive

1. Lithuania

2. Costa Rica

3. Vietnam

4. Bulgaria

5. Morocco

6. Tunisia

7. Sri Lanka

8. Colombia

9. Slovakia

10. Peru



12

Asia Pacific

• China

• Direct funding in science, technology,

technology transfer, sustainability,

infrastructure…helps Chinese-based

companies to create a significant

competitive advantage.

• India

• Government’s focus on ‘Make in

India’…leading in increasing

investments by global manufacturers.

• Investment will further support

infrastructure improvement projects,

especially as further policies and

regulations actually take shape .



13

Europe

• UK remains a leader in research &

development and innovative design.

• The location of the top global education

practices and Universities is critical in a

number of sectors requiring production /

manufacturing.

• Near-term currency fluctuations as a result of

Brexit has seen a devaluation of the pound,

leading to increased demand for exports.

• There is no prospect of modern production

facilities being relocated or closed purely

because of Brexit at this stage, but

negotiations surrounding trade tariffs and

free movement of goods and people will be

monitored carefully….BUT WAIT!



14

Mexico

• Since NAFTA manufacturers have

redesigned their production systems to

spread operations throughout the United

States, Canada, and Mexico.

• President Trump has led to significant

uncertainty for Mexican manufacturing,

exposing the market to greater risk.

• The announcement in early 2017 that

Ford is to cancel a $1.6 billion new plant

in Mexico and instead invest $700

million in Michigan to create 700 new

U.S. jobs is indicative of the scale of

uncertainty currently at play.



15

United States

• Strong and supportive policies and

investment surrounding research &

development and innovation reinforce the

attraction of the US - offsetting the higher

costs.

• Even prior to the 2016 election of President

Elect Trump, a resurgence in manufacturing

in the US.

• While the new president is committed to

bringing manufacturing jobs back to the US,

how this can be managed on any significant

scale without increasing the costs of

production and as such negatively impacting

the competitiveness of the US manufacturers

is yet to be seen.


Highlights

• Most heavily invested country in

world (US$ Trillions)

• Second largest producer of vehicles

• Some of the largest proven natural

gas reserves

Advantages

• Leader in innovation (largest

spender in research, US$64.4 billion

2013)

• Leader in terms of patents filing

• Focus on start-ups, labs, and

universities to collaborate on R&D

• One of the highest worker

productivities in world

Challenges

• High-cost of labor

• Lack of skilled labor

• Lagging investment in infrastructure

• One of highest corporate tax rates

• Growing investment of R&D in

emerging nations of based foreign

and U.S. companies

• Shifts in trade policy

• Political system


United States to Remain Leader in FDI

16


It’s Huge!


The Trump Effect

17


Global Manufacturing

18

The Trump Effect

The impact on the open global economy is in questions and should the

President succeed in implementing his proposed agenda, the effects on

globalization could play out at three levels:

• The U.S. is the world’s largest economy, measured in market dollars, and its third most populated. A partial withdrawal from the global economy by the U.S. is therefore likely to register in measures of globalized stocks and flows, simply by virtue of the country’s size.

THE U.S. TURNING INWARD

• We may see countries retaliate against U.S. protectionist policies. This is the basis for concerns that Trump could precipitate a trade war. The threat has already been made explicit by the state-sponsored Chinese tabloid, Global Times.

BEHAVIOR OF OTHER COUNTRIES

• The breaking of globalization’s first wave a century ago is proof that the forces of global economic integration are neither irresistible nor irreversible.

INJECTION OF A HUGE AMOUNT OF UNCERTAINTY


Global Manufacturing

19

The Trump Effect

Which American producers would suffer most from ending NAFTA?

• Texas faces an average

tariff of only 3%, but its

exports to Mexico are worth

nearly 6% of its GDP

(compared with 1.3%

nationally). In total, as a

percentage of GDP, Texas

would pay more than any

other state.

• Michigan is another state

with reason to worry. Its

exports of cars and parts

would attract tariffs

averaging only about 5%.

But with such shipments

totaling $4.1 B, the bill would

be painfully large.

Alex Frei

Senior Managing Director, Business Incentives Practice

+1 (312) 470 1836

[email protected]

Q&A

global manufacturing and fdi - area...

Documents