U.S. Manufacturing Renaissance T HE P ARTHENON G ROUP Myths and - - PowerPoint PPT Presentation

▶
u s manufacturing renaissance
SMART_READER_LITE
LIVE PREVIEW

U.S. Manufacturing Renaissance T HE P ARTHENON G ROUP Myths and - - PowerPoint PPT Presentation

Dec 04, 2022 115 likes •352 views

This document was created before Parthenon joined Ernst & Young LLP on August 29, 2014, and has not been updated to reflect the combination. U.S. Manufacturing Renaissance T HE P ARTHENON G ROUP Myths and Realities Presented by: Nigel Gault

slide-1
SLIDE 1

This document was created before Parthenon joined Ernst & Young LLP

  • n August 29, 2014, and has not been updated to reflect the combination.

THE PARTHENON GROUP

Myths and Realities

Presented by: Nigel Gault Partner and Co-Chief Economist The Parthenon Group

U.S. Manufacturing Renaissance

March 2014

slide-2
SLIDE 2

THE PARTHENON GROUP

2

Agenda Introduction to The Parthenon Group Myths and Realities

slide-3
SLIDE 3

THE PARTHENON GROUP

3

The Parthenon Group is a Global Boutique Strategic Advisory Firm Delivering Actionable Insights that Help Our Clients Discover and Achieve Their Full Potential™

Projects Completed by Parthenon

San Francisco

(2000)

Boston

(1991)

London

(1998)

Bombay

(2008)

Parthenon Offices

Shanghai

(2012)

Singapore

(2014)

slide-4
SLIDE 4

THE PARTHENON GROUP

4

Agenda Introduction to The Parthenon Group Myths and Realities

slide-5
SLIDE 5

THE PARTHENON GROUP

5

  • 20
  • 10

10 20 30% '08 Recession '01 Recession '90 Recession '74 Recession 1 = Peak 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 '80 Double Dip Recession

Some headlines talk of a manufacturing renaissance; in reality, we are making a slow recovery

Source: IHS Global Insight, Parthenon Analysis

2009 2013 2010 2011 2012 2008 2014

U.S. Industrial Production in the Manufacturing Sector, Compared with Previous Business Cycle Peak

slide-6
SLIDE 6

THE PARTHENON GROUP

6

If there is a manufacturing renaissance, it’s a very uneven one

70 80 90 100 110 120 Nondurables Manufacturing Durables Manufacturing

  • Jan. 2000
  • Jun. 2000
  • Nov. 2000
  • Apr. 2001
  • Sep. 2001
  • Feb. 2002
  • July. 2002
  • Dec. 2002
  • May. 2003
  • Oct. 2003
  • Mar. 2004
  • Aug. 2004
  • Jan. 2005
  • Jun. 2005
  • Nov. 2005
  • Apr. 2006
  • Sep. 2006
  • Feb. 2007
  • July. 2007
  • Dec. 2007
  • May. 2008
  • Oct. 2008
  • Mar. 2009
  • Aug. 2009
  • Jan. 2010
  • Jun. 2010
  • Nov. 2010
  • Apr. 2011
  • Sep. 2011
  • Feb. 2012
  • July. 2012
  • Dec. 2012
  • May. 2013
  • Oct. 2013
  • Feb. 2014

Source: IHS Global Insight

U.S. Manufacturing Production, (2007=100)

slide-7
SLIDE 7

THE PARTHENON GROUP

7

And the employment needle has barely moved

5 10 15 20M Employment in Nondurable Manufacturing Employment in Durable Manufacturing Employment in Manufacturing 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014

Source: IHS Global Insight

Employment in Manufacturing Sector, 1960-2014

slide-8
SLIDE 8

THE PARTHENON GROUP

8

The current account deficit has shrunk thanks to increased surpluses on services & investment income, not a smaller goods deficit

  • 1,000
  • 500

$500B Current Account Balance, Services, Investment Income and Other Current Account Balance, Goods Current Account Balance 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2013 Q4

Source: IHS Global Insight, Parthenon analysis

U.S. Current Account Balance 2002-2013Q4

slide-9
SLIDE 9

THE PARTHENON GROUP

9

The manufacturing trade deficit has widened; the energy deficit has narrowed

  • 600
  • 400
  • 200

$0B Manufacturing less Petroleum Refining Petroleum Refining, Oil and Gas 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Parthenon calculations based on U.S. Census Bureau and U.S. Energy Information Administration Figures

U.S. Trade Balance in Manufacturing, Oil and Gas 3-Month Moving Average 2002-2014

slide-10
SLIDE 10

THE PARTHENON GROUP

10

  • 40
  • 20

20 40% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Manufacturing Exports, except petroleum refining Manufacturing Imports, except petroleum refining

Non-petroleum manufactured exports have barely changed over the last twelve months

Source: Parthenon calculations based on U.S. Census figures

Year-on-Year Percent Change in Manufacturing Exports and Imports, excluding Petroleum Refining, 2002-2014

slide-11
SLIDE 11

THE PARTHENON GROUP

11

The vaunted low energy-cost boost has not come through to energy-intensive production…yet

70 80 90 100 110 120 Total Manufacturing Energy Intensive Manufacturing Aggregate

  • Jan. 2000
  • Jun. 2000
  • Nov. 2000
  • Apr. 2001
  • Sep. 2001
  • Feb. 2002
  • July. 2002
  • Dec. 2002
  • May. 2003
  • Oct. 2003
  • Mar. 2004
  • Aug. 2004
  • Jan. 2005
  • Jun. 2005
  • Nov. 2005
  • Apr. 2006
  • Sep. 2006
  • Feb. 2007
  • July. 2007
  • Dec. 2007
  • May. 2008
  • Oct. 2008
  • Mar. 2009
  • Aug. 2009
  • Jan. 2010
  • Jun. 2010
  • Nov. 2010
  • Apr. 2011
  • Sep. 2011
  • Feb. 2012
  • July. 2012
  • Dec. 2012
  • May. 2013
  • Oct. 2013
  • Feb. 2014

Note: Energy-intensive includes bulk chemicals, pulp & paper, cement & concrete, iron & steel, aluminum, petroleum refineries Source: IHS Global Insight, Parthenon Analysis

U.S. Manufacturing Production, (2007=100)

slide-12
SLIDE 12

THE PARTHENON GROUP

12 1,000 2,000 3,000 Japan United States 2005 2006 2007 2008 2009 2010 2011 2012 2013 OECD Europe 200 400 600 800 1,000 OECD Europe Japan United States 2005 2006 2007 2008 2009 2010 2011 2012 2013

The U.S. energy cost advantage is huge

Note: 2013 figure is second quarter only Source: International Energy Agency

Industrial Electricity Prices by Region, 2005-2013 ($/ton of oil equivalent) Industrial Natural Gas Prices by Region, 2005-2013 ($/ton of oil equivalent)

slide-13
SLIDE 13

THE PARTHENON GROUP

13 2 4 6 8 10% Pharmaceuticals 0.6% Transportation Equipment 0.6% Miscellaneous 0.6% Machinery 0.7% Leather and Allied Products 0.7% Computer and Electronics 0.8% Apparel 0.9% Furniture and Related 1.0% Electrical Equipment 1.2% Food, Beverage, and Tobacco 1.4% Fabricated Metals 1.5% Printing and Related 1.8% Plastics and Rubber 2.3% Manufacturing Average 2.7% Woods Products 2.9% Textiles and Products 2.9% Paper and Pulp 4.9% Nonmetallic Minerals (Clay, Glass, Cement) 5.9% Primary Metals 6.2% Chemicals (excl. Pharmaceuticals ) 9.1%

A few energy intensive sectors benefit greatly; most sectors are little affected

Note: Excludes petroleum refining Source: Parthenon calculations based on U.S. Census Bureau and U.S. Energy Information Administration Figures

Energy Intensity Rankings Within Manufacturing, 2010 (Purchased Energy as a Percent of U.S. Dollar Shipments)

slide-14
SLIDE 14

THE PARTHENON GROUP

14 20 40 60 $80B 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Manufacturing Construction in Chemical Sector Manufacturing Construction Manufacturing Construction except Chemicals

Energy cost advantages won’t be realized until capacity comes online; it is on the way in the chemicals sector

Source: IHS Global Insight, Parthenon calculations

Manufacturing Construction, 2000-2014

slide-15
SLIDE 15

THE PARTHENON GROUP

15

The U.S. also has been gaining competitiveness on labor costs – helped by outperformance on productivity growth

Source: The Conference Board International Labor Comparisons Program

1 2 3 4 5 6 7%

  • 2

2 4 6 8 10% Australia Canada Korea Italy France Germany U.K. Japan U.S. Unit Labor Cost Growth ('02-'12) Productivity Growth ('02-'12)

Productivity and Unit Labor Cost Growth, 2002-2012, CAGR

slide-16
SLIDE 16

THE PARTHENON GROUP

16

Key durable goods sectors will continue to lead growth

  • 60
  • 40
  • 20

20 40 60% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Aerospace Products and Parts Motor Vehicles and Parts Machinery

Historical Forecast

Source: IHS Global Insight; Parthenon Analysis

U.S. Manufacturing Production, Indexed at Peak of Business Cycle, 2007

slide-17
SLIDE 17

THE PARTHENON GROUP

17

The computer sector is in a class of its own

  • 20

20 40 60 80% Computers and Electronic Products 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: IHS Global Insight; Parthenon Analysis

Historical Forecast

U.S. Manufacturing Production, Indexed at Peak of Business Cycle, 2007

slide-18
SLIDE 18

THE PARTHENON GROUP

18

As construction revives, the cyclical manufacturing recovery will broaden…

  • 40
  • 30
  • 20
  • 10

10 20% Fabricated Metal Products Paints and Misc. Products Wood Products 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: IHS Global Insight; Parthenon Analysis

U.S. Manufacturing Production, Indexed at Peak of Business Cycle, 2007

Historical Forecast

slide-19
SLIDE 19

THE PARTHENON GROUP

19

…while energy-intensive sectors will accelerate

  • 40
  • 20

20 40% Iron and Steel Other Rubber Products Plastics Agricultural Chemicals Resin and Synthetic Rubber Basic Chemicals 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: IHS Global Insight; Parthenon Analysis

Historical Forecast

U.S. Manufacturing Production, Indexed at Peak of Business Cycle, 2007

slide-20
SLIDE 20

THE PARTHENON GROUP

20

  • 60
  • 40
  • 20

0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Printing Support Activities Apparel Textile Products Textile Mills

Source: IHS Global Insight; Parthenon Analysis

Historical Forecast

Even in a more favorable environment, some sectors will remain in long-term decline

U.S. Manufacturing Production, Indexed at Peak of Business Cycle, 2007

slide-21
SLIDE 21

THE PARTHENON GROUP

21

Conclusions

No broad-based U.S. manufacturing renaissance – performance varies widely across sub-sectors But energy and labor costs trends are favorable Cyclical recovery and structural change won’t raise all boats, but it will raise some

slide-22
SLIDE 22

THE PARTHENON GROUP

22

Connect with us for regular updates on events, research, reports, and thought-provoking

  • bservations on education

Twitter | @Parthenon_Group Facebook | www.facebook.com/ParthenonGroup LinkedIn | www.linkedin.com/company/the-parthenon-group

Parthenon Contacts

Jay Bartlett Partner, Co-Head of the Private Equity Practice 617.478.4612 jayb@parthenon.com Andres Saenz Partner, Co-Head of the Private Equity Practice 617.478.4619 andress@parthenon.com Nigel Gault Partner, Co-Chief Economist 617.478.4634 ngault@parthenon.com Chris Ross Partner 617.478.4679 chrisr@parthenon.com Matt Fish Partner, Head of Shanghai Office +86 (21) 33607778 mfish@parthenon.com Jim Hsu Senior Partner, Head

  • f Industrial Practice

617.478.4651 jimh@parthenon.com Jamie Bader Partner 617.478.4621 jbader@parthenon.com

Econometrics Contact Private Equity Contacts Industrial Contacts www.parthenon.com