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Automation Technologies 3/2014

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Automation Technologies 3/2014

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news and markets United States economy on a sustainable path David Gersovitz, Martin Wendland The US economy has ridden the roller coaster. The boom and bust of the 1990s was followed by the housing bubble and the Great Recession of the last decade. Is that how the current growth cycle will end? Probably not, certainly not soon, which is good news for the rest of the world. Wall Street has been providing headlines with a long bull run, but now Main Street – the economy as a whole – is becoming the big story. The US is the world’s largest single national economy and second largest manufacturer. Technically, the recession in the US actually began in December 2007 and lasted until June 2009, but the recovery from its effects has been long and painful. Finally, there are signs that the economy is transitioning into a mildly expansionary phase. All key indices – GDP, inflation, interest rates, real wages, housing sales and prices, retail sales, business spending – are rising, but only modestly. Part of the impetus for growth is coming from some new, unlikely trends. The US as a world leader in oil and gas production again? Aluminum pickup trucks? Companies repatriating manufacturing they sent offshore? Who would have imagined that? Business spending on the rise The International Monetary Fund’s estimate for US GDP growth is 2.8 % this year and 3 % in 2015. Three percent would be the largest increase since 2005 (3.4 %). Inflation is low and well-contained. Consumer spending growth will continue to be constrained by a weak employment picture. The official jobless rate is down to the 6-6.5 % range, its lowest since 2008, but real unemployment, which includes people who have given up looking for work, is over 12 %. Many more remain under-employed, forced by hard times into low-paying or parttime jobs that doesn’t compensate them for their skills. Since the start of the recession, wage growth has stagnated or turned negative for all but the top 5 % of wage earners, which has weighed on consumer spending. Businesses spending, on the other hand, is expected to grow by 4.5 to 5 % this year, and 6 % gain next year. As a leading global manufacturer of connectors and other components for manufacturing, Harting has a finger on the pulse of US industry. “From what our sales and our customers are telling us, it feels like recovery phase of the cycle is finally behind us and the expansionary phase just beginning,” says Jon DeSouza, president and CEO of Harting North America. Modernization first, expansion later The US manufacturing sector has been able to boost productivity in 20 of the last 22 quarters. Among respondents to Assembly Magazine’s 2014 capital spending survey of assembly companies, the largest group investing in new equipment this year cited the desire to replace old machinery rather than to expand production, and in most cases, the objective would be to reduce labor and materials costs. American industry is accelerating its investments in labor-saving technologies. In robotics, for example, the Robotics Industries Association recently estimated there are about 230,000 robots in US factories. Whereas automotive assembly plants used to account for about 70 % of all robots in America, that has back to current issue Authors: David Gersovitz, freelancer, Martin Wendland, PR Toolbox, Toronto, Canada AUTOMATION TECHNOLOGIES 3/2014

news and markets decreased to about 60 % as other industries, notably life sciences, plastics and rubber, semi-conductors and electronics incorporate robots in their production. Once, only very large companies invested in robotics. Now, robots are being introduced into their operations by many middle-tier companies. Once again, a leading oil producer What distinguishes this growth cycle from other recent ones are some of the trends contributing to it. Thanks to the shale revolution, the US has become one of the world’s largest oil and gas producers again virtually overnight. The US Energy Information Administration data for crude oil and unprocessed condensate rose from 5.7 million barrels per day in 2011 to 7.4 million bpd in 2013 and will reach 9.2 million bpd by next year, close to the historic high of 9.6 million bpd in 1970. By 2036, production will reach 13.3 million bpd, at which point the US would be virtually energy self-sufficient. Crude exports are banned, but exports of refined products are allowed, and the definition is being broadened to include lightly refined condensate, an ultra-light oil product. This is being viewed as a first step towards eventually lifting the ban on crude exports. Investing in cleaner environment Environmental regulations are driving other investments. New federal rules are forcing the closure of the worst-polluting coal-fired power plants by 2016. Most of the replacement generation capacity is likely to be gas-fired, since natural gas is less expensive than coal as a fuel source. Automakers are making major investments to meet new stringent government fuel efficiency standards. By 2016, each manufacturer’s fleet-wide fuel economy for passenger cars must be at least 37.8 miles per US gallon (6.22 l/100 km) and 54.5 mpg (4.32 l/100 km) by 2025. “In the short term, it’s difficult to develop a whole new drive train to comply with the new standards,” says Lawrence A. Drake, president and CEO of Kuka Systems Group, the largest supplier of automotive assembly systems to the US market. “The only way is to go lightweight, change the structure of the vehicle by switching to lighter materials like aluminum and changing the joining technologies used – more gluing, sealing, clinching, riveting, as opposed to strictly resistance welding. When you combine lighter weight with the new power trains in process, it will be another step forward to achieving higher CAFE (fuel economy) regulations.” Bringing manufacturing home The most intriguing trend, and the hardest to forecast, is the so-called re-shoring movement. Rising labor and shipping costs to maintain a supply chain from Asia have convinced some American firms to repatriate some manufacturing they had sent overseas. Being closer to their North American customers reduces order turnaround times and can improve quality control. The “Made in USA” label has marketing appeal. In some cases, companies can qualify for state or local incentives. Value added manufacturing as a percentage of US GDP is down to about 12.5 %, compared with 22 % in Germany. Many of the manufacturing jobs lost to Asia were among the lowest paid. The tendency for companies re-shoring is to use more automation and other advanced technologies, and hire fewer but more highly skilled staff. There are predictions that up to five million jobs could be created through re-shoring by 2020. Yet, to date, according to one database that tracks re-shoring initiatives, fewer than 600 companies have production back to the US. Mexico, with lower wages and right next door, is an attractive re-shoring alternative. And when some US companies are looking to hire locally, they can’t find the right people. During the recession, many skilled workers retired, retrained for other jobs or moved away. It’s a legacy of hard times that will keep the economy from overheating in the foreseeable future. Photographs: fotolia AUTOMATION TECHNOLOGIES 3/2014


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