Tag: manufacturing

Disappointing News on the Job Front

Posted on September 10, 2012

According to statistics released Friday by The Bureau of Labor Statistics (BLS), 96,000 jobs were added to the U.S. economy in August – a “worse than expected” showing, especially in manufacturing, notes Wharton management professor Peter Cappelli. The jobless rate dropped slightly from the previous month, from 8.3% in July to 8.1% in August.

“The unemployment rate fell because more job seekers have given up and withdrawn from the labor market,” Cappelli states. The labor force participation rate declined in August to 63.5% from 63.7% in July. “Manufacturing was surprisingly weak, and it could be that the recent fall of the euro against the dollar had some effect on that,” he adds. “The only good news out of these numbers is that public sector job losses have slowed.” In addition, August employment rose in food services and drinking places, professional and technical services, and health care.

The ADP National Employment Report – a measure of employment based on a subset of U.S. business clients – was published the day before and had offered more optimistic news – which only added to the disappointment regarding the BLS report, according to Cappelli. “Many people expected the numbers to be much better than they were, given that the jobs report from ADP, which is the second most important labor market estimate, showed that we had added 201,000 new jobs in August. The ADP numbers are based on 400,000 employers, so they are pretty good.”

Cappelli recently spoke with Knowledge@Wharton about the challenges for jobs seekers and employers, which he also addresses in his new book, Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It. Wharton Digital Press and Cappelli are offering the ebook free for one week, from September 10-17, 2012, to stimulate discussion about the jobs crisis during the presidential election season.

At the recent Republican and Democratic conventions, job creation, unemployment and the economy featured prominently as key election issues. Indeed, a recent USA Today/Gallup poll reported that 90% of U.S. registered voters count the economy as extremely or very important to their vote in the presidential election. Unemployment, the federal budget deficit, and health care follow near the top of the list.

In the wake of what just about everyone describes as a lackluster BLS report, observers speculate that the numbers might encourage the Federal Reserve at its policy meeting this week to take action that will help stimulate job growth, including a new bond-buying program, according to an article Friday in The Wall Street Journal. “That is one reason investors, many eager for Fed action, appeared to take the jobs tally — which fell short of the roughly 125,000 many had expected — in stride,” the article stated. The Dow Jones Industrial Average on Friday closed at 13,306.64, up 14.64.

The Journal also noted that at a recent meeting of economists and central bankers in Jackson Hole, Wyo., Fed chairman Ben Bernanke “described the weak labor market as a grave problem — a strong suggestion that he wanted to take new measures to strengthen economic growth.”

Cappelli has some advice for jobseekers: “First,it’s not your fault if you didn’t find a job in August. It looks like there wasn’t much hiring. Second, given that business performance is still pretty good, there might be some pent-up hiring during the next month.”

During the interview with Knowledge@Wharton, Cappelli also noted that in this era of automated hiring systems, it is important to connect with “a real person” so that job applicants can explain to him or her what their relevant skills are, “in ways that may not be completely obvious from your resume. It always helps to put yourself in the shoes of hiring managers who understandably want to minimize their risk – and find somebody who is really motivated to do the job. See if you can make that case to them.”

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India’s Bid to Ramp Up Electronics Manufacturing

Posted on February 10, 2012

Can India become a global destination for electronics manufacturing? This question was center-stage at the ISA Vision Summit held in Bangalore recently by the India Semiconductor Association, which represents the country’s electronic system design and manufacturing industry. The theme of the event was “Growth Drivers for Emerging Markets: Semiconductors and Electronic Systems.”

Currently, India accounts for only around 3% of the global electronics market and around 1% of global production. But industry leaders and government officials believe that with the huge increase in domestic demand fueled by a growing middle class and rising per capita income, the opportunity is there for India to become a significant global player.

Electronics sales in India were around $40 billion in 2009, and are expected to reach $100 billion by 2014 and $400 billion by 2020. Some players are optimistic that the market may grow to even higher figures. “We believe that by 2020, the domestic demand for electronic products in India can go as high as even $1 trillion,” Pradeep N. Dhoot, group president of Videocon Industries said during a keynote address. Dhoot pointed out that unlike the rapid expansion in India, the $1.75 trillion global electronics market has been posting annual growth in the low single digits for the past few years and is expected to continue at that pace.

India’s manufacturing opportunity lies in the gap between the expected demand in the country and the rate of domestic production. Although the market for electronics in India is expected to reach $400 billion by 2020, domestic production is only projected to account for $100 billion if it continues at the current pace. “Given the right impetus, the scale and the unique requirements of the Indian market will make it very attractive for players to design and manufacture here,” noted Ajai Chowdhry, chairman HCL Infosystems.

In a bid to develop indigenous capabilities in electronics, the Indian government has recently instituted a policy that will grant preferential market access in government procurement to electronic goods manufactured in India. With large pan-India government projects such as the national optical fibre network, the national knowledge network and e-governance programs in the works, this move would open up huge opportunities for domestic production.

Decisions regarding the opening of a semiconductor fabrication plant are also expected to be finalized by the end of the year. Sachin Pilot, minister of state for communications and information technology, said that the earlier government attempts to set up such a facility did not yield the desired result. “We are more flexible this time round and are ready to meet halfway. We have decided that we will get it done,” he noted. R. Chandrashekar, secretary of the department of IT and department of telecommunications added that “significant progress has been made and we are in serious discussion with a few players.”

One of the key concerns of the industry has been that there is not enough value addition and enough intellectual property creation in the country. The preferential market access policy stipulates that there must be 25% to 40% value addition. “This means that the [intellectual property] must be in India,” Chowdhry said. “This will give the confidence to industry players to make the necessary investments. I see it as a breakthrough and transformative step.”

Similarly, the setting up of a fabrication plant is seen as an important piece of the electronics manufacturing ecosystem. ”It has to be seen in the larger context,” according to Rajendra Kumar Khare, chairman and managing director of SureWaves, a Bangalore-based company that is creating an integrated grid for multiple forms of digital media. “India has tremendous design capabilities and most global [original equipment manufacturers] have strong design centers in India. Having a [fabrication facility] will go a long way in strengthening the entire [electronics system design and manufacturing] ecosystem in the country. This, in turn, will enable India to capture a larger pie of the domestic and global market.”

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To Bolster Manufacturing, India Tries the China Way

Posted on October 31, 2011

In an effort to build the country’s manufacturing base, the Indian government is planning to establish seven national manufacturing and investment zones (NMIZ) — large industrial parks that, similar to counterparts in China, promise to ease the compliance and tax burdens of doing business.

The zones are part of a national manufacturing policy, the country’s first, unveiled by the Indian government on October 25. Officials hope to create 100 million jobs over the next decade and to help spur growth in a sector where India lags behind other nations.

Conventional wisdom is that China is the factory to the world while India is the back office; the country’s strengths have traditionally been in providing outsourcing services in areas including information technology, business processes and health care. Currently, manufacturing only contributes 15% to 16% of Indian GDP, compared to 34% in China, 28% in South Korea and 27% in Indonesia. The goal of the new policy is to raise the share in India to 25% by 2022.

Anand Sharma, Union minister of commerce and industry, has been steering the manufacturing policy through different layers of the political arena and the government for nearly two years now. “The policy is a reality today,” he told Indian financial daily Business Standard. “All of us understand that this was needed.” But three critical issues related to the NMIZs that have generated controversy in recent times — labor, land acquisition and environmental clearance — have been left for the states to handle.

And many critics note that, unlike China, India doesn’t have enough funds to finance the infrastructure needed to make the NMIZs a success. “China’s manufacturing success is because of three reasons: cheap logistics, cheap labor and cheap money,” says C.R. Sasikumar, chief executive officer of the Shanghai branch of the State Bank of India. The Chinese government was able to build roads, extend power supplies and offer other incentives to bring in foreign companies, adds E.B. Rajesh, chief representative of the Confederation of Indian Industry (CII) in China.

Instead of trying to follow the exact path of the Chinese, many analysts say that India must concentrate on the strengths it can bring to the table, such as innovation and what Renault CEO Carlos Ghosn described as “frugal engineering.” For example, a Renault joint venture with the Mahindra conglomerate produced the Logan, a compact sedan. Local engineers managed to cut 15% of the production price.

But trying to compete on innovation won’t rid India of China as a competitor. Weimin Yao, vice president for corporate affairs at Shenzhen-based telecommunications and networking firm Huawei Technologies, predicts that China’s days of being purely a manufacturer of other countries’ products are coming to an end. “Our new thrust is research and development,” he says.

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Will Customers Buy Into Cars ‘Imported from Detroit’?

Posted on February 17, 2011

With a widely praised Super Bowl ad featuring rap musician Eminem and gritty scenes of Detroit, Chrysler gained the kind of buzz that the bankruptcy beleaguered brand has long been lacking.

The automaker is trying to capitalize on the talk, with an expanded campaign that brings the ad’s “Imported from Detroit” tagline to dealerships, merchandise and its own website. But will the comeback promised by the commercial come to fruition for Chrysler?

Traffic for the Chrysler brand increased 267% on the auto shopping site Edmunds.com in the hours after the initial airing of the commercial, which showed Eminem behind the wheel of the new Chrysler 200 sedan. The 200 saw a 1,619% bump in traffic, Edmunds reported.

According to a story from Advertising Age, Chrysler and ad agency Wieden & Kennedy (which also created the “Just Do It” campaign for Nike) are rolling out dealer kits that cast sellers as “embassies” for cars “imported from Detroit.”  So far, the merchandising efforts, at least, appear to be paying off: T-shirts bearing the slogan are currently sold out on Chrysler’s “Imported from Detroit” website, which also features interviews with some of the real Detroit people who appeared in the ad.

The Super Bowl spot was successful because of the “symbolic linking of Detroit’s recovery with Chrysler’s recovery, and Eminem’s Recovery album, and the idea of Detroit becoming something new and different,” says Wharton management professor John Paul MacDuffie, who studies the auto industry. “[The ad] stirred emotions without feeling manipulative. It made you think about something familiar in a new way.”

MacDuffie predicts that many more consumers will seek out reviews of the 200 and give it a test drive as a result of the commercial. What they’ll find is that most reviews of the car “draw an explicit contrast to the Sebring, the model on the same platform that preceded it,” MacDuffie notes. “The Sebring had all sorts of problems, so it is easy for the 200 to make a positive impression by comparison.”

The 200′s upsides, such as a better-designed interior, also symbolize broader changes consumers can expect from other Chrysler products, MacDuffie says. The automaker, which was restructured and entered into a partnership with Italian car company Fiat after filing for bankruptcy in 2009 and receiving a government bailout, is also introducing a Chrysler 300 sedan.

While MacDuffie calls the pricing of the 200 — it starts at $19,245 — “attractive,” he says the car will be up against some tough competition. “Despite the ad’s emphasis on luxury, the 200 is really competing against the core mid-size sedans offered by both domestic and foreign automakers, which means such powerhouse products in terms of reliability … and reputation as the Toyota Camry, Honda Civic, Nissan Altima and Hyundai Sonata. As one reviewer put it, the 200 appears to be a more value-priced alternative to these products than a strong head-to-head competitor.”

In a recent Knowledge@Wharton interview about the overall state of the auto industry, MacDuffie noted that Chrysler has long been dependent on big trucks and SUVs to generate sales. “The whole logic of the Chrysler-Fiat tie-up was to bring the Fiat small car line-up to the U.S…. That will make them much more balanced and able to take advantage of what looks like a likely boost in small car demand.”

To sustain the renewed optimism for the Chrysler brand, the 200 needs put up relatively strong sales numbers, MacDuffie says, and “the 300 and other new products need to keep the trajectory of improvement — and hence the storyline of recovery and comeback — going.”

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