- Tom Pellette, group president of Caterpillar, was encouraged by the change that the manufacturing industry is seeing as it adopts more automation.
- China’s slowdown has hurt its trading partners more than it has affected American Manufacturing.
- Manufacturers of affordable luxury goods have seen strong growth in the Midwest and are excited for the coming year.
- Growth for the industry as a whole is expected to be at a moderate 1-3%
The Crain’s Manufacturing Summit, the industries forum for the leaders of some of the most recognizable manufacturing firms in the midwest, wrapped up this week in Chicago, IL. Featuring a guest list that would make even Rockefeller blush, the forum allowed for invitees to discuss with local manufacturing leaders about how the market was, how it is, and how it will be.
The summit could not have come at a better time, as when one turns on the financial news, one may suddenly feel a longing for a large blanket to hide under and a drink. “We are about to enter another recession,” one pundit may state as several other armchair economists nod in agreement. Even if one changes the news source, you’ll be met with graphs of the plummeting value of the Yuan or the “catastrophic” affect the “brexit” might have if x happens, on a full moon, in the middle of winter.
However the feeling from the panel was that of cautious optimism, not that of an economic armageddon. Firms aren’t quite ready to state that 2016 is going to be the best year ever, however, from an automation revolution to America’s need for updated infrastructure, things seem to be looking bullish.
A is for Automation
The profile for the manufacturing industry has begun to change. Today’s assembly plants, and the jobs inside, are evolving as the industry enters a technological evolution, pioneered by the rise in automated machinery. And due to the struggle of firms on finding the right workers, Tom Pellette, group president of Caterpillar, was incredibly encouraged by the change. After discussing how 3D printing and the now digital connecting world has lead to a successful push for affordable technology, Mr. Pellette spoke about the boons that this new technology brings – how it reduces downtime, increases productivity, and most importantly, improves safety.
The Caterpillar president was, however, most excited by CAT connect technology. CAT connect makes smart use of technology and services to improve job site efficiency. Using the data from technology-equipped machines, Mr. Pellette hopes to aid clients by getting more information and insight onto their equipment and operations to boost productivity, reduce costs, and improve safety.
The road to autonomy is not a process that will happen over night. It will take time for conventional construction to bring in the capital it needs to purchase and implement automation equipment. However, as more manufacturing firms enter the automated age, Mr. Pellette excitedly spoke about the future and how, from his perspective, we will see a movement towards semi-autonomy, followed by full autonomy in the manufacturing marketplace.
The Challenge of China
While the panel agreed that Europe is a bright spot, China still proves to be a difficult nut to crack. The Chinese government is doing good job at focusing on keeping their economy a consumer country rather than allowing exports to rise. This means that it’s becoming increasingly difficult for foreign manufacturers to compete with domestic Chinese companies for the many lucrative Chinese contracts.
Tom Pellette mentioned that China is currently only at 80% peak in terms of construction, and that there is still room to grow the market space which could allow American firms to theoretically enter. He went on to say that the United States still retains the top spot for manufacturing.
While China’s economy may still be growing at unprecedented levels, it has begun to slow down, which has had serious consequences on many of its trading partners, such as Brazil. The combination of a slowdown in Chinese imports, draught, and corruption have not left the country of Brazil in a good spot. Overall, Mr. Pellete could not respond when asked when he believes their economy will turn around. He did, however, point to Caterpillar group’s profits in the region, which have dropped from 65 billion to 47 billion this year. He went on to speculate a potential 10% decline over the course of this year, which could leave this once promising economy to resemble more of a stray cat than the tiger it was once reported to become.
The Return of the Republic
When discussing the situation on the United States’ own domestic front, the panel’s response was mixed. Jason Asure COO of Vosges Haut, a super premium chocolates manufacturer based in the US, said that Vosges Haut was seeing high single and even double digit growth. As an affordable luxury, their business is looking incredibly strong.
Chris Clawson, executive of Life fitness, a health and fitness brand, also stated that their brand business was looking positive with distributors in 120 countries. Mr. Clawson also spoke about his excitement for growth in the developing year, and the hope to expand to a greater number of countries.
However, both Tom Pellette of Caterpillar and Sagar Patel, president of Woodward, an aerospace and energy parts manufacturer, stressed that while business is mediocre they expect to see slow growth. The numbers discussed were in the range of 1-3% instead of a projected 7% growth in 2016. Mr. Pellete then suggested that due to the fact 54% of Caterpillar’s contracts are now abroad, a changing foreign scene could potentially lead to repercussions domestically.
Regardless of how the 2016 market performs, there are a few steps that we can all take to help keep all manufacturing and related firms healthy.
Remember that innovation is key. When you’re a company that’s innovating, you attract the new generation. Long gone are the days when the labour force was happy to get its hands dirty. This generation of students that are entering the workforce no longer want to work traditional 9-5 jobs. They need to see how the companies of yesterday are in the future today. Firms must show how they have already incorporated today’s technology.
Business leaders must also never forget how you run within your four walls. Always look at cost during the bull or the bear and never allow waste to creep into your business. Work like you’re going bankrupt everyday.