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China’s Hunger for U.S. Planes and Cars: Assessing the Risks

April 8, 2014 Comments off

China’s Hunger for U.S. Planes and Cars: Assessing the Risks (PDF)
Source: U.S.-China Economic and Security Review Commission

The U.S. trade deficit with China continues to grow but at a slower rate. A key reason for this is the boom in U.S. automotive and aerospace shipments to China. As China becomes more affluent and urbanized, ordinary Chinese are driving more cars and traveling more by frequently by air. China’s future demand, however, could be affected by pollution, traffic bottlenecks, and other factors. U.S. companies must also contend with China’s industrial policy, which tilts the playing field toward domestic industry. In the long run, technology transfer and off-shoring could erode U.S. competitiveness and take business away from U.S. plants.

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Subcommittee exposes Caterpillar offshore profit shifting

April 2, 2014 Comments off

Subcommittee exposes Caterpillar offshore profit shifting
Source: U.S. Senate Permanent Subcommittee on Investigations

Caterpillar Inc., an American manufacturing icon, used a wholly owned Swiss affiliate to shift $8 billion in profits from the United States to Switzerland to take advantage of a special 4 to 6 percent corporate tax rate it negotiated with the Swiss government and defer or avoid paying $2.4 billion in U.S. taxes to date, a new report from Sen. Carl Levin, the chairman of the U.S. Senate Permanent Subcommittee on Investigations shows.

“Caterpillar is an American success story that produces phenomenal industrial machines, but it is also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes,” Levin said. “Caterpillar paid over $55 million for a Swiss tax strategy that has so far enabled it to avoid paying $2.4 billion in U.S. taxes. That tax strategy depends on the company making the case that its parts business is run out of Switzerland instead of the U.S. so it can justify sending 85 percent or more of the parts profits to Geneva. Well, I’m not buying that story.”

Productivity and Costs by Industry: Manufacturing Industries, 2012

March 28, 2014 Comments off

Productivity and Costs by Industry: Manufacturing Industries, 2012
Source: Bureau of Labor Statistics

Labor productivity — defined as output per hour — rose in 54 percent of the detailed manufacturing industries covered in 2012, the U.S. Bureau of Labor Statistics reported today. This was down from 68 percent in 2011. Unit labor costs, which reflect the total labor costs required to produce a unit of output, declined in 39 percent of the industries in 2012 compared to 49 percent in 2011. More than half of industries with productivity increases posted declines in unit labor costs.

Output and hours rose in more industries in 2012 than in the previous year. (See table 1.) Output rose in 2012 in 40 of 57 NAICS 4-digit manufacturing industries for which data were available, up from 37 industries in 2011. Hours increased in even more industries, 41 compared to 32 in 2011. Hours rose in more industries in 2012 than in any year since 1997.

New From the GAO

March 27, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Canceled DOD Programs: DOD Needs to Better Use Available Guidance and Manage Reusable Assets. GAO-14-77, March 27.
http://www.gao.gov/products/GAO-14-77
Highlights - http://www.gao.gov/assets/670/662018.pdf

2. Native American Housing: Additional Actions Needed to Better Support Tribal Efforts. GAO-14-255, March 27.
http://www.gao.gov/products/GAO-14-255
Highlights - http://www.gao.gov/assets/670/662064.pdf

3. Major Automated Information Systems: Selected Defense Programs Need to Implement Key Acquisition Practices. GAO-14-309, March 27.
http://www.gao.gov/products/GAO-14-309
Highlights - http://www.gao.gov/assets/670/662046.pdf

4. Manufacturing Extension Partnership: Most Federal Spending Directly Supports Work with Manufacturers, but Distribution Could Be Improved. GAO-14-317, March 27.
http://www.gao.gov/products/GAO-14-317
Highlights - http://www.gao.gov/assets/670/662014.pdf

5. Defense Infrastructure: DOD’s 2013 Facilities Corrosion Study Addressed Reporting Elements. GAO-14-337R, March 27.
http://www.gao.gov/products/GAO-14-337R

6. Patient-Centered Outcomes Research Institute: Review of the Audit of the Financial Statements for 2013 and 2012. GAO-14-415R, March 27.
http://www.gao.gov/products/GAO-14-415R

Chinese Engagement in Africa: Drivers, Reactions, and Implications for U.S. Policy

March 17, 2014 Comments off

Chinese Engagement in Africa: Drivers, Reactions, and Implications for U.S. Policy
Source: RAND Corporation

Most analyses of Chinese engagement in Africa focus either on what China gets out of these partnerships or the impacts that China’s aid and investment have had on African countries. This analysis approaches Sino-African relations as a vibrant, two-way dynamic in which both sides adjust to policy initiatives and popular perceptions emanating from the other. The authors focus on (1) Chinese and African objectives in the political and economic spheres and how they work to achieve them, (2) African perceptions of Chinese engagement, (3) how China has adjusted its policies to accommodate often-hostile African responses, and (4) whether the United States and China are competing for influence, access, and resources in Africa and how they might cooperate in the region.

The authors find that Chinese engagement in the region is primarily concerned with natural resource extraction, infrastructure development, and manufacturing, in contrast to the United States’ focus on higher-technology trade and services as well as aid policies aimed at promoting democracy, good governance, and human development. African governments generally welcome engagement with China, as it brings them political legitimacy and contributes to their economic development. Some segments of African society criticize Chinese enterprises for their poor labor conditions, unsustainable environmental practices, and job displacement, but China has been modifying its approach to the continent to address these concerns. China and the United States are not strategic rivals in Africa, but greater American commercial engagement in African markets could generate competition that would both benefit African countries and advance U.S. interests.

Measuring Manufacturing: How the Computer and Semiconductor Industries Affect the Numbers and Perceptions

March 13, 2014 Comments off

Measuring Manufacturing: How the Computer and Semiconductor Industries Affect the Numbers and Perceptions
Source: Upjohn Institute for Employment Research

Growth in U.S. manufacturing’s real value-added has exceeded that of aggregate GDP, except during recessions, leading many to conclude that the sector is healthy and that the 30 percent decline in manufacturing employment since 2000 is largely the consequence of automation. The robust growth in real manufacturing GDP, however, is driven by one industry segment: computers and electronic products. In most of manufacturing, real GDP growth has been weak or negative and productivity growth modest. The extraordinary real GDP growth in computer-related industries reflects prices for computers and semiconductors that, when adjusted for product quality improvements, are falling rapidly. Productivity growth in these industries, in turn, largely reflects product and process improvements from research and development, not automation. Although computer-related industries have driven growth in the manufacturing sector, production has shifted to Asia, and the U.S. trade deficit in these products has soared since the 1990s. The outsized effect computer-related industries have on manufacturing statistics also may distort economic relationships in the data and result in perverse research findings. Statistical agencies should take steps to assure that the influence that computer-related industries have on manufacturing-sector statistics is transparent to data users.

McKinsey Quarterly: Shaping the future of manufacturing

March 11, 2014 Comments off

McKinsey Quarterly: Shaping the future of manufacturing
Source: McKinsey & Company

Examines the future of manufacturing, how senior executives should spread best practices, why leadership-development programs fail, taking data analytics to the next level, and Starbucks’ Indian expansion.

CRS — U.S. Manufacturing in International Perspective

February 26, 2014 Comments off

U.S. Manufacturing in International Perspective (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The health of the U.S. manufacturing sector has long been of great concern to Congress. The decline in manufacturing employment since the start of the 21st century has stimulated particular congressional interest. The Obama Administration has undertaken a variety of related initiatives, and Members have introduced hundreds of bills intended to support domestic manufacturing activity in various ways. The proponents of such measures frequently contend that the United States is by various measures falling behind other countries in manufacturing, and they argue that this relative decline can be mitigated or reversed by government policy.

This report is designed to inform the debate over the health of U.S. manufacturing through a series of charts and tables that depict the position of the United States relative to other countries according to various metrics. Understanding which trends in manufacturing reflect factors that may be unique to the United States and which are related to broader changes in technology or consumer preferences may be helpful in formulating policies intended to aid firms or workers engaged in manufacturing activity. This report does not describe or discuss specific policy options.

Management Practices, Relational Contracts, and the Decline of General Motors

February 20, 2014 Comments off

Management Practices, Relational Contracts, and the Decline of General Motors
Source: Harvard Business School Working Paper

General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the U.S. market fell from 62.6% to 19.8%, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline-namely high legacy labor and health care costs-is seriously incomplete, and that GM’s share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s, and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties: including GM’s historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities, and its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge-based firm, and for the potential revival of manufacturing in the United States.

CRS — The Specialty Metal Clause: Oversight Issues and Options for Congress

February 11, 2014 Comments off

The Specialty Metal Clause: Oversight Issues and Options for Congress (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

This report examines the specialty metal clause, potential oversight issues, and options for Congress. The specialty metal clause in the Defense Federal Acquisition Regulation Supplement (DFARS) prohibits the Department of Defense (DOD) from acquiring end units or components for aircraft, missile and space systems, ships, tank and automotive items, weapon systems, or ammunition unless these items have been manufactured with specialty metals that have been melted or produced in the United States. Thousands of products used for defense, aerospace, automotive, and renewable energy technologies rely on specialty metals for which there are often few, if any, substitutes. Specialty metals covered by this provision include certain types of cobalt, nickel, steel, titanium and titanium alloys, zirconium, and zirconium base alloys.

New From the GAO

February 7, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Nanomanufacturing: Emergence and Implications for U.S. Competitiveness, the Environment, and Human Health. GAO-14-181SP, January 31.
http://www.gao.gov/products/GAO-14-181SP
Highlights - http://www.gao.gov/assets/670/660592.pdf
Podcast - http://www.gao.gov/multimedia/podcasts/660285

2. K-12 Education: Characteristics of the Investing in Innovation Fund. GAO-14-211R, February 7.
http://www.gao.gov/products/GAO-14-211R

CRS — Energy Tax Policy: Issues in the 113th Congress

January 28, 2014 Comments off

Energy Tax Policy: Issues in the 113th Congress (PDF)
Source: Congressional Research Service (via National Agricultural Law Center)

The scheduled expiration of a number of energy tax incentives means energy tax policy will likely be considered by the 113th Congress. Under current law, for example, renewable energy projects that begin construction after the end of 2013 will not qualify for the renewable energy production tax credit (PTC). A number of other energy tax incentives, including provisions to support building energy efficiency and renewable fuels, are also scheduled to expire at the end of 2013. In the past, expired and expiring energy tax provisions have been extended as part of “tax extender” legislation.

Energy tax policy may also be considered as part of comprehensive tax reform legislation in the 113th Congress. A base-broadening approach to tax reform might consider the elimination of various energy tax expenditures in conjunction with a reduction in overall tax rates. Alternative revenue sources, such as a carbon tax, may also be evaluated as part of the tax reform process.

The President’s FY2014 budget proposes a number of changes to energy tax policy. The Obama Administration proposes to repeal a number of existing tax incentives for fossil fuels, while providing new or expanded incentives for alternative and advanced technology vehicles, renewable electricity, energy efficiency, and advanced energy manufacturing. Several energy tax reform proposals have also been put forward in tax reform discussion drafts released by Senate Finance Committee Chairman Max Baucus.

The Surprisingly Swift Decline of U.S. Manufacturing Employment

January 27, 2014 Comments off

The Surprisingly Swift Decline of U.S. Manufacturing Employment
Source: Federal Reserve Board

This paper finds a link between the sharp drop in U.S. manufacturing employment beginning in 2001 and a change in U.S. trade policy that eliminated potential tariff increases on Chinese imports. Industries where the threat of tariff hikes declines the most experience more severe employment losses along with larger increases in the value of imports from China and the number of firms engaged in China-U.S. trade. These results are robust to other potential explanations of the employment loss, and we show that the U.S. employment trends differ from those in the E.U., where there was no change in policy.

Moore’s law: Repeal or renewal?

January 6, 2014 Comments off

Moore’s law: Repeal or renewal?
Source: McKinsey & Company

The global semiconductor industry has recorded impressive achievements since 1965, when Intel cofounder Gordon Moore published the observation that would become the industry’s touchstone. Moore’s law states that the number of transistors on integrated circuits doubles every two years, and for the past four decades it has set the pace for progress in the semiconductor industry. The positive by-products of the constant scaling down that Moore’s law predicts include simultaneous cost declines, made possible by fitting more transistors per area onto silicon chips, and performance increases with regard to speed, compactness, and power consumption. As a result, semiconductor-enabled products today play integral roles in virtually every aspect of modern life.

In this article, we will examine the technologies that aim to extend the life of Moore’s law and model their impact on four likely future scenarios for the industry. Obviously, there are many factors in play, but we believe the economics of continued advances in performance could eventually disrupt the companies competing in the business today.

CRS — U.S. Direct Investment Abroad: Trends and Current Issues

January 2, 2014 Comments off

U.S. Direct Investment Abroad: Trends and Current Issues(PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The United States is the largest investor abroad and the largest recipient of direct investment in the world. For some Americans, the national gains attributed to investing overseas are offset by such perceived losses as displaced U.S. workers and lower wages. Some observers believe U.S. firms invest abroad to avoid U.S. labor unions or high U.S. wages, however, 74% of the accumulated U.S. foreign direct investment is concentrated in high income developed countries, who are members of the Organization for Economic Cooperation and Development (OECD). Even more striking is the fact that the share of investment going to developing countries has fallen in recent years. Most economists conclude that direct investment abroad does not lead to fewer jobs or lower incomes overall for Americans and that the majority of jobs lost among U.S. manufacturing firms over the past decade reflect a broad restructuring of U.S. manufacturing industries responding primarily to domestic economic forces.

CBO — International Trade and Carbon Leakage: Working Paper

December 23, 2013 Comments off

International Trade and Carbon Leakage: Working Paper
Source: Congressional Budget Office

Under a broad-based carbon tax or cap-and-trade program, some of the reduction in U.S. carbon dioxide emissions would probably be offset by increases in foreign emissions that would not otherwise have occurred, a phenomenon known as carbon leakage. Industries with substantial total emissions, high trade ratios, and high emission intensities are the most likely to generate substantial leakage. Therefore, the industries most likely to be sources of significant leakage through trade in their products are the chemical; primary metal (such as aluminum and iron and steel); and, to a lesser extent, the nonmetallic mineral products (cement, lime, gypsum, and glass) and petroleum and coal products (refining and coke production) industries. Under narrower programs targeting particular industries, significant leakage would occur in fewer industries.

Studies of economywide programs have produced estimates of leakage ranging from 1 percent to 23 percent of the emission reduction the programs would achieve in the countries implementing them. However, those estimates may not apply to future proposals, and estimating leakage is difficult and subject to considerable uncertainty.

CRS — The Berry Amendment: Requiring Defense Procurement To Come From Domestic Sources

December 6, 2013 Comments off

The Berry Amendment: Requiring Defense Procurement To Come From Domestic Sources (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

This report examines the original intent and purpose of the Berry Amendment and legislative proposals to amend the application of domestic source restrictions, as well as potential options for Congress. In order to protect the U.S. industrial base during periods of adversity and war, Congress passed domestic source restrictions as part of the 1941 Fifth Supplemental Department of Defense (DOD) Appropriations Act. These provisions later became known as the Berry Amendment. The Berry Amendment (Title 10 United States Code [U.S.C.] §2533a, Requirement to Buy Certain Articles from American Sources; Exceptions) contains a number of domestic source restrictions that prohibit DOD from acquiring food, clothing (including military uniforms), fabrics (including ballistic fibers), stainless steel, and hand or measuring tools that are not grown or produced in the United States. The Berry Amendment applies to DOD purchases only.

Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010

December 2, 2013 Comments off

Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010
Source: Climatic Change

his paper presents a quantitative analysis of the historic fossil fuel and cement production records of the 50 leading investor-owned, 31 state-owned, and 9 nation-state producers of oil, natural gas, coal, and cement from as early as 1854 to 2010. This analysis traces emissions totaling 914 GtCO2e—63 % of cumulative worldwide emissions of industrial CO2 and methane between 1751 and 2010—to the 90 “carbon major” entities based on the carbon content of marketed hydrocarbon fuels (subtracting for non-energy uses), process CO2 from cement manufacture, CO2 from flaring, venting, and own fuel use, and fugitive or vented methane. Cumulatively, emissions of 315 GtCO2e have been traced to investor-owned entities, 288 GtCO2e to state-owned enterprises, and 312 GtCO2e to nation-states. Of these emissions, half has been emitted since 1986. The carbon major entities possess fossil fuel reserves that will, if produced and emitted, intensify anthropogenic climate change. The purpose of the analysis is to understand the historic emissions as a factual matter, and to invite consideration of their possible relevance to public policy.

UK — Crime against businesses: Detailed findings from the 20 12 Commercial Victimisation Survey

November 27, 2013 Comments off

Crime against businesses: Detailed findings from the 2012 Commercial Victimisation Survey (PDF)
Source: Home Office

This is the second release of data from the 2012 Commercial Victimisation Survey (CVS), wh ich further examines the extent of crime against businesses in England and Wales. The CVS was a recommendation from the National Statistician‟s review of crime statistics to address the significant gap in crime statistics that existed for crimes against businesses, not covered by either of the two main sources of da ta on crime: the Crime Survey for England and Wales (CSEW) and crimes recorded by the police. While police recorded crime does include crimes against businesses, it does not separate these out from other crimes (other than for offences such as shoplifting which, by its nature, is against businesses). The police recorded crime also only includes those crimes that are reported to, and recorded by, the police. The CSEW is a survey of crime against households and individuals living in those households and so does not cover crime against businesses at all. The CVS was previously run in 1994 and 2002, and is planned to be repeated in 2013 and 2014.

The 2012 CVS was a premises – based survey focused on four industry sectors: manufacturing, wholesale and retail , transportation and storage, and accommodation and food. The results of the survey should not be considered to be representative of crime against businesses as a whole, only of crime against these four sectors.

CRS — U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations

November 26, 2013 Comments off

U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Textiles are a contentious and unresolved issue in the ongoing Trans-Pacific Partnership (TPP) negotiations to establish a free-trade zone across the Pacific. Because the negotiating parties include Vietnam, a major apparel producer that now mainly sources yarns and fabrics from China and other Asian nations, the agreement has the potential to shift global trading patterns for textiles and demand for U.S. textile exports. Canada and Mexico, both significant regional textile markets for the United States, and Japan, a major manufacturer of high-end textiles and industrial fabrics, are also participants in the negotiations.

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