Presentation Transcript

1. North America: re-emerging marketWhy North America? Performance and potential

   Edward (Ned) Hill Dean, Levin College of Urban Affairs Cleveland State University
2. Road map Performance & Potential Part of an integrated global strategy Rebound Why a rebound in US manufacturing? Cost Energy Digital manufacturing, flexibility, and labor cost Ocean freight and Lean Supply chain risk Labor flexibility Position
3. Performance Percent change in Real GDP: 2010 to 2017 Will Canada stall in 2014? China India Percent Growth Rate Brazil World US Mexico Canada Source: International Monetary Find (IMF), World Economic Outlook Database April 2012.
4. Performance Output gap begins to close in 2014 Canada, US, Euro Area and Japan Japan Canada US Percent of Potential GDP Euro Area Source: International Monetary Find (IMF), World Economic Outlook Database April 2012.
5. Performance Unemployment rates Does Canada's rate stall at 6.5% to 7.0%? Euro Area UK Canada Percent of Workforce US Mexico China Source: International Monetary Find (IMF), World Economic Outlook Database April 2012.
6. Potential: North America Some very large markets in 2010 Questions: What is their purchasing power? What is the risk? How do you enter? (in millions of people) Source: International Monetary Find (IMF), World Economic Outlook Database April 2012.
7. Potential: China China's growth will be investment driven Source: The Economist, “Peddling Prosperity, May 26, 2012
8. Potential: currency Energy induced run-up in the value of the Canadian dollar appears to be over Ratio Canadian Dollar: US Dollar monthly 1990 to 2012 Source: Board of Governors, Federal Reserve System. Data are monthly. U.S. recessions are shaded. Data are (US$/CA$)
9. Rebound: energy The geography of shale oil and shale gas It is a continental energy market; consider Canadian oil & electricity exports Source: U.S. Energy Information Administration Updated: May 9, 2011
10. Rebound: manufacturing The Third Industrial Revolution? What are the implications for location and market entry? Year
11. Rebound: manufacturing What counts when looking for a production site? Cost remains king (Responses from 106 large corporations) What drives the location decision? Labor costs 57% Product quality 41% Ease of doing business 29% Proximity to customers 28% Where is the energy cost and supply chain on the list? Considering or planning to re-shore operations to the US? 37% of sampled 48% of companies with more than $10 billion in revenue Source: BCG: April 20,2012
12. Rebound: manufacturing Business costs in US regions 1998-2010; US average each year = 100 Source: Moody’s Analytics, Economy.com
13. Rebound: ocean shipping costs Demand and supply for container shipping, 2000 to 2011 The fleet will sail again-but when? Demand Supply Source: UNCTAD, Review of Maritime Transportation, 2011, Figure 3.4, page 76.
14. Rebound: ocean shipping costs 20 & 40 foot container prices US Dollars quarterly averages: 2005(1) to 2011(1) 40 foot 20 foot Source: UNCTAD, Review of Maritime Transportation, 2011, Figure 3.6, page 80.
15. Rebound: ocean shipping costs World's idle container fleet grows 10-fold to 750,900 Twenty Foot Equivalents (TEU) over 6 months from June 2011 to January 2012 Source: SeaNews, Turkey www.seanews.com.tr
16. Rebound: risk (Source: Allianz)
17. Rebound: industries BCG's industries at the tipping point Transportation goods (autos and trucks) Appliances and electrical equipment Furniture Plastics and rubber products (67% say they expect to re-shore) Machinery (42% expect to re-shore) Fabricated metals (35% expect to re-shore) Computers and electronics (41% expect to re-shore) BCG says that 10-30% of current US imports can shift location by the end of the decade. Source: BCG: April 20,2012
18. Position A tale of maps: cultural and economic Recessions lead to regional industry-based restructuring National economic performance is the average of regional performance Joel Garreau, Nine Nations of North America, Houghton Mifflin, 1981 IHS Global Insight, U.S. state forecast, November 14, 2011
19. Position US cautions Consumer sentiment Political risk Long-term debt Europe Access to capital Cheap if you can get it A Canadian advantage is access for domestic expansion
20. Households lost 52% of their equity in real estate from peak 2005(4) to 2011(1) from $13.1 trillion to $6.2 trillion. A loss of $6.9 trillion. Net Worth Households & Nonprofit Corporations ($ millions) Position Households lost 52% of equity in real estate and it's still going down Peak: 2007(2) at $65.9 trillion Home Equity ($millions) Net Worth ($millions) Net worth expressed in millions of current dollars Source: Board of Governors of the Federal Reserve System, Flow of funds Tables, Z1, retrieved Apr 17, 2012 Variables FL152090005.Q and FL155035065.Q Quarterly 1990(1) to 2011(4) Recessions are shaded Edward (Ned) Hill
21. Position As home values decline, mortgage liabilities as a percent of house equity climbs 169.2% Mortgage Liabilities House Equity 70% Source: Board of Governors of the Federal Reserve System, Flow of funds Tables, Z1, retrieved Apr 17, 2012 Variables FL155035065.Q and FL153165105.Q Note: Equity is for Households, while Home mortgages are held by households and Nonprofit organizations. Recessions are shaded Edward (Ned) Hill
22. Position What are the market areas of North America? Products and culture Finance Energy-land Breadbasket Northern Foundry Dixie Integrated circuit and its spawn Cascadia Maritimes Quebec World Cities (Finance, IT, Headquarters, Gateway) MexAmerica Housing shock
23. Position Labor cost sensitive production will not come back Mass customization appears to be real for consumers Risk adjusted low cost is the key to manufacturing The real cost of production First cost Transit Inventory Risk of supply distribution Flexibility: speed to adapt-model cycles Feedback about quality Consider markets within nations
24. Summary Questions? Thank you! Edward (Ned) Hill Dean, Levin College of Urban Affairs Cleveland State University