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U.S. No. 1 as Manufacturers Plan to Expand

June 19, 2008
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WASHINGTON, D.C., June 18-Despite intense global competition, manufacturers consider North America the most desirable region for expansion over the next three years, according to a new survey by Deloitte.

The survey, Made in North America, targeted top-tier executives of manufacturing companies with North American operations. Results showed that the 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 most likely location in the short term. Most surprisingly, the manufacturers seem to have a renewed emphasis on North America as the home for actual production facilities.

In terms of the executives' agendas for expansion, the survey found that sales and services topped the list with 76% planning to expand sales in the United States, 58% in Canada and 67% in Mexico. Sourcing of raw materials and parts (50% in China, 49% in the United States and 43% in Mexico) and production (44% in the United States, 37% in Mexico and 37% 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 5 years. And a significant number said they believe North America will become even more competitive by 2012 in sales and marketing (45%), information technology (41%), customer service (37%), R&D/engineering (36%) and finance/accounting (34%). A small percentage predicted that North America will be less competitive globally in these areas by 2012, with the balance being neutral.

More than half of survey respondents (61%) 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%), tax policy (66%), work rules (66%), lack of availability of skilled labor (51%) and costs of raw materials and energy (56%).

By contrast, China and India were seen by executives surveyed as becoming increasingly competitive as locations for production facilities. For example, 37% of respondents said they plan to expand in China in the next 3 years, and 24% in India.

As production shifts, manufacturers indicated they will move other operations as well. For example, more than 48% of respondents said they plan to expand sales operations in China over the next 3 years, and 34% said they plan to do the same in India. Additionally, 27% plan service operations expansion in China and 23% plan to do so in India.

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