Manufacturing for Growth Strategies for Driving Growth and Employment

Executive Summary A World Economic Forum Report in collaboration with Deloitte Touche Tohmatsu Limited Disclaimer The viewpoints expressed in this report attempt to reflect the collective engagement of individuals as Green Growth Action Alliance members and do not necessarily imply an agreed position among them or institutional endorsement by any participating company, institution or organization involved in the Alliance, or of the World Economic Forum.

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Tel.: +41 (0) 22 869 1212 Fax: +41 (0) 22 786 2744 [email protected] www.weforum.org Contents

4 Introduction

5 Executive Summary

10 CEO Recommendations

12 Project Consultative Group

14 Acknowledgments

Manufacturing for Growth Strategies for Driving Growth and Employment 3 Introduction Project Methodology

The Future of Manufacturing report (April 2012) identified a During the World Economic Forum Annual Meeting 2012, the number of factors that will shape the future of competition Forum-Deloitte LLP project team presented key findings from between countries and companies. Three areas rose to the top The Future of Manufacturing report, the culmination of a as the most critical: human capital and talent development; one-year project that explores why manufacturing is a key driver innovation and technology advancement; and strategic use of of economic growth, how the global manufacturing ecosystem public policy emphasizing collaboration between policy-makers has changed and continues to change, and what the key factors and business leaders. This series of Manufacturing for Growth for both companies and countries will be to compete in the reports addresses these key competitive factors and defines future. ways to drive economic growth and high-value job creation In a largely unified response, project stakeholders – senior through manufacturing industry sectors. manufacturing executives, policy-makers and civil society The Manufacturing for Growth series comprises three volumes: leaders – directed the Forum-Deloitte team to continue the project by defining specific, effective, near-term ways to react to -- Volume 1: Globally Competitive Policy seeks to define the these future competitive factors. The resulting project, features of effective, comprehensive national industrial policy. Manufacturing for Growth, defines key strategies for driving This volume focuses on six countries chosen to represent growth and high-value job creation through manufacturing both historic manufacturing giants and new and emerging industry sectors, and provides best practice examples for manufacturing powerhouses. This cross-section was reacting to universal challenges in the area of talent development selected as representative of developed and emerging and innovation. economy nations to showcase the unique aspects of each and, more often than not, the similarities in what The Manufacturing for Growth project brings together extensive manufacturing executives recommend to policy-makers. primary and secondary research from industry, academic and policy leaders. The extended global project team conducted Volume 1 was informed by discussions with over 70 chief face-to-face interviews around the world with over 70 chief executives of multinational manufacturing companies, which executives of multinational manufacturing companies. Insights resulted in: from these interviews were supplemented with input collected -- Policy recommendations common across all interviews during workshops hosting senior manufacturing leaders, conducted in support of this project including members of the Project Consultative Group, in the following locations: -- Specific country policy recommendations for: -- World Economic Forum private session in Tokyo, Japan: 24 • Emerging economies – China, Brazil and India April 2012 • Developed economies – Germany, Japan and the -- Manufacturing & Society in the 21st Century, in collaboration United States with the Aspen Institute, Aspen, USA: 17 August 2012 -- An outline of various policy instruments that are available to -- World Economic Forum private session in Berlin, Germany: policy-makers and significantly influence competitiveness 17 October 2012 -- An analysis of some critical policy areas most frequently -- World Economic Forum private session in New Delhi, India: 6 cited by chief executives around the world as having a November 2012 direct impact on their companies’ ability to compete -- Talent-Driven Innovation Symposium, in collaboration with the In addition, an appendix comparing tax, energy and Manufacturing Institute and Alcoa Foundation, Washington environmental policy instruments for the six focus countries DC, USA: 28 November 2012 discussed in Volume 1 is available for download at www.deloitte.com/us/policyframework. -- World Economic Forum private session in Davos, Switzerland: 24 January 2013 -- Volume 2: Partnering for Competitiveness examines case studies of public-private collaboration from around the world The project team also gleaned findings from the Forum’s official that enable innovation and technology advancement and sessions on manufacturing during the Annual Meeting of the promote talent development. New Champions in Tianjin, People’s Republic of China, in September 2012 and the World Economic Forum on India in -- Volume 3: Manufacturing Value Chains Driving Growth Gurgaon, India, in November 2012. illustrates the value and jobs created by specific industry sectors – aerospace, automotive and chemicals – from a Additionally, this effort benefited from the invaluable time and global macro-view as well as a micro-view of the impact that content developed with a number of experts in the areas of a single product value chain or single production facility can policy, value chain analysis, human capital and specific have on a location. manufacturing sectors: Deloitte Tax LLP; Deloitte Consulting’s Energy Practice; the National Association of Manufacturers; To access the entire series electronically, visit Duke’s Center on Globalization, Governance & Competitiveness; http://wef.ch/mfgla13 The Dow Chemical Company; and Nissan.

4 Manufacturing for Growth Strategies for Driving Growth and Employment Executive Summary

John Moavenzadeh In today’s global economy, government actions and public policy play a critical role in Senior Director shaping the competitiveness of both nations and the individual companies that operate Head of Mobility Industries within their borders. The impact that government policies can have across a number of World Economic Forum USA competitiveness drivers – including trade; financial, monetary, tax and legal systems; infrastructure; education; labour markets; and science and technology – are significant. Maxime Bernard They can directly create both advantages and disadvantages relative to other nations. Senior Manager As the strategic use of public policy intensifies, collaboration between policy-makers World Economic Forum USA and business leaders to create win-win outcomes becomes more essential. Craig A. Giffi In Davos in January 2012, business leaders gathered to review and discuss the output Vice-Chairman of The Future of Manufacturing project, which focused on the question: How are global US Leader, Consumer & Industrial value chains evolving? The follow-up Manufacturing for Growth initiative focuses on the Products key question: What should be done? The objective of the Manufacturing for Growth Deloitte United States initiative is to foster constructive dialogue and collaboration between business leaders (Deloitte LLP) and public policy-makers and, therefore, to facilitate better public policy. Dorothy Powers Project Manager Globally Competitive Public Policy Deloitte United States Face-to-face discussions with more than 70 chief executives and other senior (Deloitte Consulting LLP) executives around the world were conducted from August 2012 through early January 2013 to collect insights into policy recommendations for six focus countries – three developed economy nations (Germany, Japan and the United States) to serve as Special surrogates for the developed world, and three emerging economy nations (Brazil, Acknowledgement China and India) to serve as surrogates for the emerging world. In addition, workshops were conducted around the world soliciting additional input Special thanks go to Andrew Liveris, from business executives and subject matter experts. Executives participating in the Chairman, President and Chief Executive working sessions and one-on-one interviews were both passionate and clear when Officer of The Dow Chemical Company, sharing their perspectives and recommendations on altering key aspects of current for his leadership and insights while government policies to drive manufacturing and economic growth. While the CEO serving as the Global CEO Champion for recommendations vary based on industry sector and the unique circumstances of the “Manufacturing for Growth” project each country, several common and recurring themes emerged regarding what effort. constitutes effective public policy. Effective public policy characteristics

-- Consistency, stability and certainty -- Globally competitive, fair and enforced -- Developed through dialogue and collaboration -- Creates institutional legitimacy, credibility and market confidence -- Harmony and alignment -- Financially prudent; balances costs versus benefits In addition, there were five specific public policy areas where common messages emerged from executives around the world.

Manufacturing for Growth Strategies for Driving Growth and Employment 5 Common Policy Recommendations Partnering for Competitiveness

1. Competitive tax policy applied within simplified tax The reality of today’s global competitiveness environment systems: Executives participating in the discussions requires a team effort to succeed. Increasingly, businesses, consistently expressed concern with both business tax policy government and academia are partnering to make strategic and complex national tax systems that negatively impact choices about how to develop and sustain the knowledge and competitiveness. While specific country tax systems vary capabilities necessary to be leaders in the advanced from country to country, executives broadly said that the manufacturing economy. countries that could offer competitive advantages in lowering Almost universally, the executives interviewed for this effort an organization’s overall effective tax rate, as well as remove expressed concern about attracting, training and retaining the resource and cost burdens often associated with most qualified talent and driving the innovation agendas of their compliance, would be the winners. organizations. Business executives emphasized the need for the 2. Policy that promotes and protects free and fair trade: Trade public and private sectors to collaborate, with each other and was frequently and passionately mentioned by almost all of with universities, national laboratories, research centres and the executives participating in the discussions. Executives other non-profits to create environments that breed both talent consistently called for policy-makers to increase both the and innovation. The examples of leading public-private number of free trade agreements and the pace at which new partnership organizations provided by executives varied widely agreements are formed and ratified. Business leaders also by sector, funding mechanics, tenure, exact focus of mission suggested that policy-makers need to consider non-tariff and geographic reach – from the Agency for Science, trade barriers, such as border administration and complex Technology and Research in Singapore to Fraunhofer- regulatory hurdles. Gesellschaft in Germany and to the Manufacturing Institute in the United States. Despite differences in location and mission, 3. Energy policy promoting efficiency, security, strong these leading examples demonstrate a common set of best infrastructure and low cost: Executives broadly expressed practices. that countries that could provide clean and sustainable sources of energy at a competitive cost would offer a Best practices of public-private partnerships significant advantage over other nations. They also said it was -- Demand-driven and highly responsive to specific needs of incumbent on policy-makers to develop comprehensive industry and society: The most effective public-private national energy policies that effectively and responsibly build partnership organizations are demand-driven and have a a portfolio of strategic sources of energy, ensure efficient mission focused on specific market needs, both from an delivery through world-class infrastructure, and support industry and societal perspective. These organizations appropriate R&D efforts in alternative sources of clean energy. address relevant, timely and current issues while anticipating 4. Education and workforce policy that develops superior future demands and trends. talent: The ability to develop and attract the world’s most -- Offers a differentiated value proposition that transcends talented workers was critical to every executive participating traditional business barriers: Each of the organizations in the discussions, regardless of geography. Executives identified has a distinct and differentiated value proposition consistently said that their ability to drive innovation is directly essential to its market success. Further, they all excel at linked to their ability to access highly educated workers. While creating bridges between groups that would otherwise STEM (science, technology, engineering and mathematics) operate in different spheres, extracting latent value from the literacy is important, executives consistently said STEM is not, collaboration. by itself, sufficient. Many commented that creativity and imagination are key ingredients to producing great innovation. -- Long-term horizon and flexible in measuring success: Like As a result, they stressed manufacturers need STEM well-managed businesses, leading public-private partnership educated, multidisciplinary thinkers who are also creative and organizations establish metrics for success and track can problem-solve in a team environment. themselves by those metrics. What differs are the type of metrics and the time horizon for success. A public-private 5. Science, technology and innovation policy which promotes partnership organization is not measured in quarterly advanced manufacturing: Finally, executives conveyed that earnings and may even use metrics other than monetary a talented workforce with strong STEM and creativity skills value. combined with policies that consistently promote superior science and technology research and development through -- Seeks revenue streams beyond government or public to commercialization – including the development of funding: Leading organizations derive a much more advanced manufacturing processes – are essential to significant portion of their revenue and funding from private national competitiveness. sources than from public sources. In virtually all cases, they have multiple funding sources. -- Core structural integrity: Leading public-private partnership organizations display unapproachable integrity when it comes to intellectual property protection and creating trust and credibility. They establish a track record of trust and respect with a nation, with industry and with customers.

6 Manufacturing for Growth Strategies for Driving Growth and Employment Comparative Economic and Related Data 2011 manufacturing export competitiveness by size, skill and technology

100% Japan 2000 Taiwan 2000 Japan 2011 Taiwan South Korea 2000 90% 2011 South Korea 2011

Singapore 2000 China China 2000 80% 2011

Germany 2000 United States Germany 2000 2011 Singapore 70% 2011

Canada 2000 60%

United States India 2011 2000 Brazil 2000 50% Manufacturing exports as % of total merchandise exports Manufacturing exports as % of total merchandise India (For lighter bubbles — 2000) darker 2011) 2011

Bubble shading: 40% Canada 2011 Manufacturing exports 2000

Brazil Manufacturing exports 2011 2011 30% -2% 3% 8% 13% 18% Manufacturing exports CAGR (%) Size of bubble indicates (For lighter bubbles 1995–2000) (For darker bubbles 2006–2011) manufacturing exports for 2011 in US$

39% 39% 18% 14% 32% 17% 46% 31% 26% 41% 50% 40% 22% 52% 33%

China Germany United States Japan South Korea $1,768.5 billion (2011) $1,226.3 billion (2011) $952 billion (2011) $724.8 billion (2011) $473.5 billion (2011) $219.3 billion (2000) $459.2 billion (2000) $644.6 billion (2000) $449.4 billion (2000) $154.9 billion (2000)

8% 20% 19% 20% 33% 31% 61% 27% 33% 72% 19% 48%

48% 21% 40% Singapore Taiwan Canada India Brazil $279 billion (2011) $270.7 billion (2011) $202.3 billion (2011) $151.7 billion (2011) $84.2 billion (2011) $117.5 billion (2000) $141.0 billion (2000) $175.4 billion (2000) $26.0 billion (2000) $31.6 billion (2000)

Source: Deloitte Touche Tohmatsu Limited analysis (iv) Percentages in these bubbles are for 2011 Key: Exports of manufactured goods with high skill and technology intensity Exports of manufactured goods with medium skill and technology intensity Exports of manufactured goods with low skill and technology intensity; and labour-intensive and resource-based manufactured goods

Note: The classification of goods into different degrees is based on Standard International Trade Classification (SITC) codes, UNCTAD (v)

Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2013 Global Manufacturing Competitiveness Index

Manufacturing for Growth Strategies for Driving Growth and Employment 7 Comparative Economic and Related Data Movement and levels of manufacturing products to and from top manufacturing economies and their trading partners, by product type

Canada South Korea Germany

China

United States

India

Total manufacturing exports in billion US$

>1,000 Japan Brazil 500–1,000

200–499 Taiwan <200 Singapore

Color of arrows High and medium skill and technology exports as % of total manufacturing exports Source: Deloitte Touche Tohmatsu Limited analysis (iv)

Notes: <40 40–59 60–80 >80 • The classification of goods into different degrees is based on Standard International Trade Classification (SITC) codes, UNCTAD (v) • Shaded grey countries represent export trade partners of top 10 GMCI competitive nations Thickness of arrows is total manufacturing exports from point A to point B Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2013 Global Manufacturing Competitiveness Index <$25 billion

$25–$100 billion

>$100 billion

8 Manufacturing for Growth Strategies for Driving Growth and Employment Manufacturing Value Chains Driving Growth -- Shifting end markets: As world trade is bouncing back from the economic crisis of 2008-2009, emerging economy Today’s manufacturing value chains are complex, highly nations are becoming the main growth engine of world interconnected, and rapidly changing. Policy-makers and economic recovery. Stagnant growth in demand in the global business leaders face competing objectives and challenges to North since the mid-1980s was exacerbated by the recent navigate this environment. Policy-makers strive to create more economic crisis, whereas demand is quickly growing in the high-value jobs and improve the quality of life for their citizens. global South, particularly in emerging economies like China, Manufacturing leaders are increasingly responding to India and Brazil. From 2005 to 2010, the merchandise competitiveness pressures to attract the best from a global pool imports of the European Union increased by 27%, while they of talent, along with the capital, capabilities, and the global increased in the US by 14%. Over the same time period, customers and revenues necessary to maintain their emerging economies expanded their merchandise imports competitiveness and viability. As explained by Gary Gereffi and much faster: Brazil, 147%; India, 129%; China, 111%; and Joonkoo Lee (in their essay adapted from their article Why the South Africa, 51%. World Suddenly Cares about Global Supply Chains1), the ability of a country to prosper today depends on its participation in the To better inform this dialogue on global value chains, the report global economy and its role in global supply chains. But illustrates and analyses the value and jobs created in three understanding its role – much less changing its role – can be manufacturing sectors: aerospace, automotive, and chemicals. complicated at best. Each of these sectors is representative of several broader Key concepts and trends in understanding today’s global value themes: globalization, including shifting consumer and chains production markets; spread of free trade; rise of the global middle class; increasing use of technology, digitization and -- Shift from “trade in goods” to “trade in value-added”: Over advanced processes; and the skilled and talented workforce the past 20 years, with an emphasis on East Asia, global required in today’s manufacturing. An understanding of how supply chains have grown exponentially, covering not only manufacturing and value chains work in a globalized world is finished goods but also sub-assemblies and components. critical to developing and implementing effective policies to This has resulted in more intermediate goods than finished enable the advancement of manufacturing. goods traded across borders, and more parts and Policy recommendations from chief executives and senior components imported for use in exports. In 2009, the world business executives, best practices of leading public-private exports of intermediate goods exceeded the combined partnerships with an emphasis on talent and innovation, and export values of final and capital goods. This new pattern of new perspectives on today’s complex global value chains are global trade is referred to as a shift from “trade in goods” to the key elements of the Manufacturing for Growth report. The “trade in value-added” and “trade in tasks”. hope is that this report serves as a primer for informed and While most intermediate goods are still traded within large spirited dialogue and debate, and that the Manufacturing for regional economic blocks such as the European Union rather Growth effort has helped to provide a foundation for constructive than across them, Asia’s linkages to the European Union and collaboration among business, government and civil society. North America represented the two highest inter-regional import flows of intermediate goods in 2008. Asia imported more intermediate goods than it exported, indicating the region’s high level of integration with global supply chains. Increasingly, China’s ability to excel at scale-driven specialization and develop “supply chain cities” has become a source of persistent competitive advantage. -- Top-down versus bottom-up: The Global Value Chain (GVC) framework analyses “the full range of activities that firms and workers perform to bring a product from its conception to its end use and beyond”. This holistic view provides two contrasting vantage points: a top-down “governance view” of supply chains focuses mainly on lead firms and the organization of global industries, and a bottom-up “upgrading” perspective which focuses on strategies used by countries and regions to maintain or improve their positions in the global economy. -- The new math of value-added: Interestingly, China does not create or capture most of the value generated through its value chain exports. As more types of intermediate goods are traded within global supply chains, the discrepancy is growing between where final goods are produced and exported and where value is created and captured. Domestic content only accounts for about half of China’s manufacturing exports.

1 Gereffi and Lee. Why the World Suddenly Cares About Global Supply Chains. Journal of Supply Chain Management. July 2012. Volume 48, Number 3, pp. 24-32

Manufacturing for Growth Strategies for Driving Growth and Employment 9 CEO Recommendations

Acknowledgements Frederico Pinheiro Fleury Curado Masaki Imai Chief Executive Officer Senior Vice-President and Executive The World Economic Forum and Deloitte Embraer SA Officer, General Executive of Strategic Touche Tohmatsu would like to thank the Brazil Corporate Planning Division following executives for providing their JVC Kenwood Corporation Vinod K. Dasari perspectives and recommendations for Japan the Manufacturing for Growth report Managing Director Ashok Leyland Limited Noriyuki Inoue India Chairman and Chief Executive Officer Mary Andringa Daikin Industries Ltd Luiz Tarquinio Sardinha Ferro Chief Executive Officer Japan Vermeer Corporation Chief Executive Officer USA Tupy SA V. G. Jaganathan Brazil President R. C. Bhargava Sundaram José Édison Barros Franco Chairman India Maruti Suzuki India Limited Chief Executive Officer India InterCement Brasil S/A Kellie Johnson Brazil President and Chief Executive Officer Thomas Bauer Ace Clearwater Enterprises Inc. Ralf-Michael Franke Chief Executive Officer USA Bauer Aktiengesellschaft Chief Executive Officer Germany Drive Technology Division Industry Sector Dirk Kaliebe Siemens AG Chief Financial Officer Rodney Brooks Germany Heidelberger Druckmaschinen AG Chairman, Founder, and Chief Technical Germany Officer Wu Gang Rethink Robotics Chairman and Chief Executive Officer Kazuaki Kama USA Goldwind Science & Technology Co. Ltd President and Chief Executive Officer China IHI Corporation Ronald Bullock Japan Chairman Jürgen M. Geißinger Bison Gear and Engineering Corp. Chief Executive Officer Neeraj Kanwar USA Schaeffler Technologies AG & Co. KG Vice-Chairman and Managing Director Germany Apollo Tyres Limited Raul Calfat India Chief Executive Officer Carlos Ghosn Votorantim Chairman and Chief Executive Officer Taro Kato Brazil Renault-Nissan Alliance President France NGK Insulators Ltd Carlos Cardoso Japan Chairman, President and Chief Executive S. Gopalakrishnan Officer Executive Co-Chairman Haruo Kawahara Kennametal Inc. Infosys Technologies Limited Chairman USA India JVC Kenwood Corporation José Carlos Grubisich Japan Marcelo Strufaldi Castelli Chief Executive Officer Chief Executive Officer Makoto Kimura Fibria Celulose SA Eldorado Brazil Celulose President Brazil Brazil Nikon Corporation Japan Wolfgang Colberg Liang Haishan Chief Financial Officer Executive Vice-President Klaus Kleinfeld Evonik Industries AG Haier Group Company Chairman and Chief Executive Officer Germany China Alcoa Inc. USA

10 Manufacturing for Growth Strategies for Driving Growth and Employment Yoshimitsu Kobayashi Atsutoshi Nishida K. Sridharan President and Chief Executive Officer Chairman Chief Financial Officer Mitsubishi Chemical Holdings Corporation Toshiba Corporation Ashok Leyland Limited Japan Japan India Masahiro Koezuka Keith Nobusch John Surma Executive Vice-President and Director Chairman and Chief Executive Officer Chairman and Chief Executive Officer Fujitsu Ltd Rockwell Automation Inc. United States Steel Corporation Japan USA USA Kazuhiro Kurihara Gregory Page Kazuhiko Takechi Vice-President and Executive Officer Chairman and Chief Executive Officer General Manager, Corporate Planning Hitachi Ltd Cargill Incorporated Center, Management Planning Office Japan USA Hitachi Ltd Japan Tom Linebarger Olof Persson Chairman and Chief Executive Officer Chief Executive Officer Luiz Eduardo Taliberti Cummins Inc. AB Volvo Chief Executive Officer USA Sweden Ecoverdi Participacoes S/A Brazil Andrew Liveris Nicholas Pinchuk Chairman, President and Chief Executive Chairman, President and Chief Executive Stephan B. Tanda Officer Officer Member of the Board The Dow Chemical Company Snap-on Incorporated Royal DSM NV USA USA Netherlands Geraldo Lopes Wolfgang Reitzle Todd Teske Chief Executive Officer Chief Executive Officer Chairman and Chief Executive Officer Ferbasa Linde AG Briggs & Stratton Corporation Brazil Germany USA Marcos A. de Marchi Gordon Riske Atsushi Tsurumi Chief Executive Officer Chief Executive Officer General Manager, Financing Department, Elekeiroz SA KION Group GmbH Financing and Accounting Headquarters Brazil Germany Nikon Corporation Siegfried Russwurm Japan Sergio Marchionne Chairman and Chief Executive Officer Chief Executive Officer K. Venkataramanan Fiat/Chrysler Group Industry Sector Chief Executive Officer and Managing USA Siemens AG Director Germany Larsen and Toubro Limited Robert McDonald India Chairman, President and Chief Executive Harry Schmelzer Jr Officer Chief Executive Officer John Weber The Procter & Gamble Company WEG Indústrias SA President and Chief Executive Officer USA Brazil Remy International Inc. USA John McGlade Winfried Seitz Chairman, President and Chief Executive Chief Technology Officer Jin Wei Officer BSH Bosch und Siemens Hausgeräte Chief Executive Officer Air Products and Chemicals Inc. GmbH Suntech Power Holdings Co. Ltd USA Germany China Shunichi Miyanaga Hideaki Shindo Roger Wood Senior Executive Vice-President General Manager, Corporate Strategy President and Chief Executive Officer Mitsubishi Heavy Industries Ltd NGK Insulators Ltd Dana Holding Corporation Japan Japan USA Alexandre Monteiro Mohsen Sohi Yoshitake Yamaguchi Chief Executive Officer Chief Executive Officer Senior Manager, Executive Support Lupatech SA Freudenberg & Co. KG Office, Corporate Government and Brazil Germany External Relations Division Toshiba Corporation Jan Mrosik Carlos José Fadigas de Souza Filho Japan Chief Executive Officer Smart Grid Chief Executive Officer Division Infrastructure and Cities Sector Braskem SA Junji Yasui Siemens AG Brazil Senior Executive Vice-President and Germany Chief Supply Chain Officer Michael Splinter NEC Corporation Hiroaki Nakanishi Chairman and Chief Executive Officer Japan Representative Executive Officer and Applied Materials Inc. President USA Hitachi Ltd Japan

Manufacturing for Growth Strategies for Driving Growth and Employment 11 Project Consultative Group

The Project Consultative Manufacturing for Growth Task Force Subodh Tandale Executive Director, Head of International Peter Bosch Group comprises members Business Head of Strategy, Production and Bharat Forge Ltd of the project task force Logistics (senior executives from Volkswagen AG Andrew Weinberg Chairman, Strategy Frederic Daubas Forum Partner companies) Brightstar Corp. Chief Marketing Officer as well as Members of the Safran Group Urban Wass Director, Head of Product and Road Safety Michael Hildinger Forum’s Global Agenda AB Volvo Head of Corporate Strategy Council on Advanced Schaeffler AG Jeff Wilcox Vice-President, Engineering, Corporate Manufacturing, who served Vijay Kalra Engineering and Technology Head of Manufacturing, Automotive in an advisory role to this Lockheed Martin Corporation Mahindra & Mahindra Ltd project by providing their Serge Yoccoz Michael Kamel Vice-President, Corporate and Strategic input through calls, Director, Strategy and Business Planning Development interviews and various Renault Bombardier Aerospace Forum workshops. The Sanjay Jalona Global Agenda Council on Advanced World Economic Forum Senior Vice-President and US Head of Manufacturing Manufacturing would like to express its Arindam Bhattacharya Infosys Ltd gratitude to the members of Partner and Managing Director Jock-Mendoza Wilson The Boston Consulting Group the Project Consultative Director, International and Investor Relations Fadi Farra System Capital Management Group. Adviser to the Prime Minister of Trevor Mann Kazakhstan Head of Supply Chain and Chairman of João Carlos Ferraz the Operating Committee for Africa, Vice-President Middle East and India Brazilian Development Bank (BNDES) Renault-Nissan BV Gary Gereffi Edward Rogers Professor of Sociology and Director, Global Strategy Manager, Corporate Strategy Center on Globalization, Governance & UPS Competitiveness Rodolfo Sabonge Duke University Vice-President, Market Research and Llyr Jones Analysis Head, Group Strategy Panama Canal Authority BAE Systems Plc Lisa Schroeter Kevin Kolevar Director, International Policy Vice-President, International Government The Dow Chemical Company Affairs and Public Policy Francisco Soares Neto The Dow Chemical Company Vice-President, Manufacturing Engineering Yasushi Konno Embraer SA General Manager and Senior Consultant Nomura Research Institute Ltd

12 Manufacturing for Growth Strategies for Driving Growth and Employment Jennifer McNelly President The Manufacturing Institute Atul Mehta Director, Global Manufacturing, Agribusiness and Services International Finance Corporation (IFC) Jun Ni Shien-Ming Wu Collegiate Professor of Manufacturing Science and Dean, University of Michigan, Shanghai Jiao Tong University Joint Institute University of Michigan Aloke Paliskar Global Head, Manufacturing Mahindra Satyam Limited Gary Pisano Harry E. Figgie Jr Professor of Business Administration Harvard Business School Jean-Paul Rodrigue Professor, Global Studies and Geography Hofstra University Vikas Sehgal Managing Director and Global Head, Automotive NM Rothschild & Sons Ltd Daniel Viederman Chief Executive Officer Verité

Manufacturing for Growth Strategies for Driving Growth and Employment 13 Acknowledgements

The Manufacturing for We would also like to extend Guy W. Wagner, considerable thanks to our workshop Director, Purchasing Administration, Growth project team would partners, the Aspen Institute, the Alcoa Strategy and Cost Management, like to thank everyone Foundation and the Manufacturing Nissan, North America Institute, as well as our research Priscilla Zhang, involved for contributing partners from the National Association R&D Tax and Government Incentives of Manufacturers, the Center on their time, perspective and Expert, Deloitte United States (Deloitte Globalization, Governance & Tax LLP) passion to the creation of Competitiveness at Duke University, and Maplecroft. Other subject matter Advanced Materials Systems this report. We would like to advisers to the research included (in offer special gratitude to the alphabetical order): Tom Aldred, Senior Manager, Deloitte United States Paul Ballonoff, members of the project (Deloitte Consulting LLP) Energy Policy and Regulatory Specialist, task force and the Global Deloitte United States (Deloitte Jeff Carbeck, Agenda Council on Consulting LLP) Massachusetts Institute of Technology, Materials Science and Engineering Advanced Manufacturing André Argenton, Global Senior R&D Director of Corporate Duane Dickson, for their contributions Research, Dow Chemical Principal, Deloitte United States (Deloitte Consulting LLP) through calls, workshops Ken Dewoskin, and document reviews. The Chairman, Deloitte China Research and Insight Centre (CRIC), Deloitte China members of the task force Gary Gereffi, Global Aerospace and Defence and Global Agenda Council Center on Globalization, Governance & Outlook are listed at the beginning Competitiveness, Duke University Pauline Biddle, Partner, Deloitte UK of the report. Doug Gish, Principal, Deloitte United States (Deloitte Tom Captain, Consulting LLP) Global A&D Sector Leader, Deloitte Michael Goldbas, Touche Tohmatsu Limited Principal, Deloitte United States (Deloitte Gianluca Di Cicco, Consulting LLP) Partner, Deloitte Italy Kevin Kolevar, Gilbert Fayol, Vice-President, International Partner, Deloitte France Government Affairs and Public Policy, The Dow Chemical Company Nidhi Goyal, Director, Deloitte India Ellen MacNeil, Partner, Deloitte United States (Deloitte Dan Haynes, Tax LLP) Principal, Deloitte United States (Deloitte Consulting LLP) Rebecca Ranich, Director, Deloitte United States (Deloitte Michael Hessenbruch, Consulting LLP) Partner, Deloitte Germany Lisa M. Schroeter, John Hung, Director of International Policy, The Dow Partner, Deloitte China Chemical Company

14 Manufacturing for Growth Strategies for Driving Growth and Employment Kevin McFarlane, Japan Duane Dickson, Managing Director, Deloitte United State Principal, Deloitte United States (Deloitte Kyoko Fujikawa, (Deloitte Corporate Finance LLC) Consulting LLP) Chief Staff, General Administration Frank Milano, Partner, Deloitte United Group, Deloitte Japan Craig A. Giffi, States (Deloitte & Touche LLP) Vice-Chairman and US Leader, Yasutoki Ishiguro, Consumer & Industrial Products, Koji Miwa, Partner, Deloitte Japan Partner, Process Sector Leader, Deloitte Deloitte United States LLP (Deloitte LLP) Japan Martin Vezina, Partner, Deloitte Canada Tim Hanley, Akira Kondo, Charles Wald, Director and Senior Global Manufacturing Leader, Deloitte Managing Partner, Deloitte Japan Advisor, Deloitte United States (Deloitte Touche Tohmatsu Limited Services LP) Yuki Kuboshima, Sharafat Khan, Partner, Asia Pacific Manufacturing Principal, Deloitte United States (Deloitte Chief executive officers and Leader, Deloitte Japan; Executive Consulting LLP) executive interviewers Director, South East Asia Deloitte Consulting Pte Ltd Paul Maynard, Brazil Partner, Deloitte United States (Deloitte Koichi Kuse, José Othon Tavares de Almeida, & Touche LLP) Partner, Clients & Industries, Deloitte Partner, Brazil Manufacturing Leader, Japan John Moavenzadeh, Deloitte Brazil Senior Director, Head of Mobility Toshifumi Kusunoki, Suellen Yuri Higashi, Industries, World Economic Forum USA Partner, Industrial Products & Senior, Brazil Manufacturing Practice, Electronics Sector Leader, Deloitte Sarita Nayyar, Deloitte Brazil Japan Managing Director, Head of Consumer China Industries, World Economic Forum USA Tomoko Matsumoto, Ricky Tung, Manager, Research & Knowledge Rob Parkins, Partner, China Manufacturing Leader, Management, Manufacturing, Deloitte Director, Deloitte United States (Deloitte Deloitte China Japan Services LP) Tracy Wang, Koji Miwa, Dorothy Powers, Senior Manager, National Industry Partner, Aerospace & Defense Sector Manager and Project Manager, Program, Deloitte China Leader, Deloitte Japan Manufacturing for Growth, Deloitte United States (Deloitte Consulting LLP) Rosa Yang, Yoichiro Ogawa, Partner, China Manufacturing Leader, Vice-Chairman of Global Board, Deloitte John Rhodes, Deloitte China Touche Tohmatsu Limited; Managing Partner, Deloitte United States (Deloitte Partner, Practice Development & & Touche LLP) Germany International Affairs, Deloitte Japan Jack Russi, Alexander Börsch, Masato Sase, Management Partner, Deloitte United Director, Clients & Markets – Research, Partner, Automotive Sector Leader, States (Deloitte LLP) Deloitte Germany Deloitte Japan Dmitri Shiry, Susan Schleicher, Joe Vitale, Deloitte United States (Deloitte Tax LLP) Senior Manager, Clients & Markets, Global Automotive Sector Leader, Nick Sowar, Industry Manufacturing, Deloitte Deloitte Touche Tohmatsu Limited Germany Partner, Deloitte United States (Deloitte Tomonori Yako, & Touche LLP) Jan Stratmann, Partner, Technology, Media & Managing Partner, Clients & Markets, Telecommunications Leader, Deloitte Deloitte Germany Japan Thomas Döbler, United States Partner, Manufacturing Industry Leader, Deloitte Germany Jodi Benkarski, Deloitte United States (Deloitte Services India LP) Alka Gupta, Lilly Chung, Senior Manager, Strategic Targets Principal, Deloitte United States (Deloitte Group, Clients and Markets, Deloitte Consulting LLP) India Michelle Collins, Lolita Joseph, Partner, Deloitte United States (Deloitte Manager, Strategic Targets Group, & Touche LLP) Clients and Markets, Deloitte India Bob Denove, Kumar Kandaswami, Partner, Deloitte United States (Deloitte Senior Director, Deloitte India & Touche LLP) Harsh Srivastava, Manager, Strategic Clients Group, Clients & Markets, Deloitte India

Manufacturing for Growth Strategies for Driving Growth and Employment 15 National Association of In addition, the project team would like The Manufacturing Institute (with the Manufacturers – Public policy subject to thank all special guests, discussion supports of the Alcoa Foundation matter experts leaders, panellists, and moderators at and Deloitte LLP) – Talent-driven the global workshops/events. These Innovation, Global Dialogue and Best Robyn Boerstling, individuals are (in alphabetical order): Practices for Growth: Panellists and Director, Transportation and presenters Infrastructure Policy Forum event panellists and Chris Conrardy, Gardner A. Carrick, discussion leaders Chief Technology Officer and Vice- Vice-President, Strategic Initiatives Soumen Basu, President, Technology and Innovation, Carolyn Holmes Lee, Executive Adviser, ManpowerGroup, EWI Senior Director, Tax Policy India Ryan Costella, Jessica Lemos, Peter Bosch, Director of Strategic Initiatives, Click Director, International Trade Policy Head of Strategy, Production and Bond Inc. Logistics, Volkswagen Alicia Meads, Chip Cotton, Director, Energy and Resources Policy Dilip Chenoy, Program Manager, Energy Research Chief Executive Officer and Managing and Development, General Electric Chad Moutray, Director, National Skills Development Chief Economist Peter Fischer, Corporation (NSDC) Minister (Economics), Embassy of the Rosario Palmieri, Gary Coleman, Federal Republic of Germany to the Vice-President, Infrastructure, Legal and Managing Director, Global Industries, United States Regulatory Policy Deloitte Touche Tohmatsu, Limited Kumar Garg, Brian Raymond, Fadi Farra, Senior Advisor to the Deputy Director, Director, Technology and Domestic Adviser to the Prime Minister of White House Office of Science and Economic Policy Kazakhstan; Global Agenda Council on Technology Policy Christine Scullion, Advanced Manufacturing Mary Gershwin, Director, Human Resources Policy Anil Gupta, President, US-Brazil Connect Jay Timmons, Michael Dingman Chair in Global Craig A. Giffi, President and Chief Executive Officer Strategy and Entrepreneurship, Vice-Chairman and US Leader, University of Maryland Amanda Wood, Consumer & Industrial Products, Director of Labor and Employment Baba N. Kalyani, Deloitte United States (Deloitte LLP) Policy Chairman and Managing Director, Johney Green, Bharat Forge Chip Yost, Director, Energy and Transportation Assistant Vice-President, Energy and Hartmut Kühne, Science Division, Oak Ridge National Resources Policy Department Head, Federal Ministry of Lab Economics and Technology of Germany William Hartman, Nihal G. Executive Vice-President, Fraunhofer Kulkarni, Managing Director, Kirloskar USA Inc. Oil Engines, India Scott Hudson, Yasushi Konno, Principal Manager, International Social General Manager and Senior Responsibility and Community Consultant, Nomura Research Institute Outreach, Alcoa Foundation Ltd Amy Kaslow, Arun Maira, Senior Fellow, Council on Member, Planning Commission, India Competitiveness Sarita Nayyar, Robert I. Lerman, Managing Director, Head of Consumer Institute Fellow, Urban Institute Industries, World Economic Forum USA Glenn Marshall, Dhruv M. Sawhney, Program Manager, Supply Chain Quality Chairman and Managing Director, Triveni at Newport News Shipbuilding, a Engineering & Industries, India Division of Huntington Ingalls Industries Ni Jun, Jennifer McNelly, Shien-Ming Wu Collegiate Professor of President, Manufacturing Institute Manufacturing Science and Dean, Alexei Monsarrat, UM-SJTU Joint Institute, University of Director, Global Business and Michigan Economics Program, Atlantic Council Arjun Nohwar, Jane Oates, Planning Commission of India Assistant Secretary, Employment and Training, US Department of Labor

16 Manufacturing for Growth Strategies for Driving Growth and Employment Dennis Dio Parker, Drew Greenblatt, The project team would like to thank all Assistant Manager, Toyota North President, Marlin Steel Wire Products, workshop, call and interview participants American Production Support Center LLC for contributing their insights and time. These individuals are (in alphabetical Bob Paton, Lawrence D. Kingsley, order): Chief Executive Officer, Manufacturing President and Chief Executive Officer, Skills Australia Pall Corporation Philippe Advani, Vice-President, Global Sourcing Joseph M. Pietrantonio, Lawrence Ladin, Network, EADS Vice-President, Environmental, Health, Chairman Emeritus, Compressor Safety and Quality, and Corporate Chief Controls Corporation Vineet Agarwal, Engineer, Air Products and Chemicals Joint Managing Director, Transport Michael C. Maibach, Inc. Corporation of India Ltd President and Chief Executive Officer, Dan Swinney, European-American Business Council Sachin Arolkar, Executive Director, Chicago Vice-President, Commercial and Steven H. McKnight, Manufacturing Renaissance Council Business Planning and International Director, Civil, Mechanical and Operations, Mahindra & Mahindra Ltd Peter Zierhut, Manufacturing Innovation Division Vice-President, European Operations, (CMMI), National Science Foundation Yogesh Bangur, Haas Automation Director, LNB Group Keith D. Nosbusch, The Aspen Institute – Manufacturing Chairman, President and Chief Rajeev Batra, & Society in the 21st Century: Executive Officer, Rockwell Automation Group Head, Corporate Affairs, Presenters and participants Inc. Hindustan Unilever Ltd Rodney Brooks, Timothy H. Powers, Ankur Bhatnagar, Chairman, Founder and Chief Technical Chairman, President and Chief Vice-President, Reputation.com Officer, Rethink Robotics Inc. Executive Officer, Hubbell Incorporated Robin Braeutigam, William D. Budinger, Timothy T. Tevens, Director, Technical Representative, Founder, Former Chairman and Chief President and Chief Executive Officer, Volkswagen Group Japan Kk Executive Officer, Rodel Inc. Columbus McKinnon Corporation Antonio Campello, Ronald D. Bullock, Jay Timmons, Vice-President, Corporate Strategy and Chairman and Chief Executive Officer, President and Chief Executive Officer, New Business Development, EMBRAER Bison Gear and Manufacturing National Association of Manufacturers Marcelo O. Cerqueira, Corporation; Chairman, Board of Franklin J. Vargo. Vice-President, Vinyls, Braskem Trustees, The Manufacturing Institute Former Vice-President, International Christian Charnaux, Gregory W. Cappelli, Economic Affairs, National Association Vice-President Strategy and Innovation, Co-Chief Executive Officer, The Apollo of Manufacturers Hilton Worldwide Group Jane L. Warner, Atul Dhawan, Carlos M. Cardoso, Executive Vice-President, Illinois Tool Partner, National Leader Clients and Chairman, President and Chief Works Markets, Deloitte Touche Tohmatsu Executive Officer, Kennametal Inc. John H. Weber, India Private Limited David Chavern, President and Chief Executive Officer, Frederic Daubas, Executive Vice-President and Chief, Remy International Inc. Chief Marketing Officer, Safran Operating Officer, US Chamber of Tim Welsh, Commerce Christopher Emerson, Senior Vice-President, National Industry Senior Vice-President, Future Thomas J. Duesterberg, Strategy Group, University of Phoenix Programmes and Market Strategy, Executive Director, Manufacturing & Airbus Society in the 21st Century, The Aspen Institute Kyouji Funatsumaru, Senior Vice- President, Group Truck Technology John F. Fiedler, APAC Cab and Vehicle Assembly, Volvo Chairman of the Board (Emeritus), Nippon KK BorgWarner Inc. Anshoo Gaur, Craig A. Giffi, Head, Amdocs India Vice-Chairman and US Leader, Consumer & Industrial Products, Mark A. Gottfredson, Deloitte United States (Deloitte LLP) Partner, Bain & Company Stephen V. Gold, Magnus Granström, President and Chief Executive Officer, Director Research and Public Funding Manufacturers Alliance for Productivity EU, Advanced Technology and and, Innovation (MAPI) Research, Volvo

Manufacturing for Growth Strategies for Driving Growth and Employment 17 Peter Hanna, Serge Yoccoz, Contributors Manager, Strategy and Business Vice-President, Corporate and Strategic From Deloitte LLP (in alphabetical order) Development, Bombardier Aerospace Planning, Renault SAS Mimi Lee, Peter Haynes, Ulhas Yargop, Deloitte Touche Tohmatsu Limited Senior Director, Advanced Strategies President, IT Sector, Group Chief and Research, Microsoft Corporation Technology Officer and Member, Group Scott Sopher, Executive Board, Mahindra & Mahindra Principal, Deloitte United States (Deloitte Michael Hildinger, Ltd Consulting LLP) Head of Corporate Strategy, Schaeffler AG Judith Zielke, Special thanks also to Jeffrey Callahan, Head of Division, Enterprise Connect, Justin Howard, Mike Lui, John Martin, Hidetoshi Imazu, Department of Industry, Innovation, Nic Perfetti, and Amish Thakker, Deloitte Member of the Board, Executive Science, Research and Tertiary United States (Deloitte Consulting LLP) Vice-President, Nissan Motor Co. Education, Australia Limited Production Christian Koitzsch, Core project team From Deloitte LLP Corporate Affairs, Technical Planning, From the World Economic Forum (in Robert Bosch, Germany Editor and Creative Design: Steve alphabetical order) Schmith, Deloitte United States (Deloitte Carsten Larsen, Stefano Ammirati, Services LP) New Business Development Director, Associate Director, Head of Automotive DOW DEUTSCHLAND INC. Industry, World Economic Forum Takahisa Miyauchi, Maxime Bernard, Executive Vice-President and Group Senior Manager, Aviation & Travel Chief Executive Officer, Chemicals, Services Industries, Global Leadership Mitsubishi Corporation Fellow, World Economic Forum USA; Jan Mueller, Project Manager, Manufacturing for Senior Vice-President, Communications Growth Strategy and PR Programmes, John Moavenzadeh, Deutsche Post DHL Senior Director, Head of Mobility S. Ananda Murali, Industries, World Economic Forum USA Sales Director, HCL Japan Ltd Dorothy Powers, Keisuke Nishimura, Manager and Project Manager, Director, Kirin Holdings Company Manufacturing for Growth, Deloitte Limited United States (Deloitte Consulting LLP) Ralf Oehl, From Deloitte LLP (in alphabetical order) Senior Vice-President, Corporate Jodi Benkarski, Strategy and Development, M+W Group Deloitte United States (Deloitte Services LP) Henning Oeltjenbruns, Michelle Drew, Head of Strategy Daimler Trucks, Buses Deloitte United States (Deloitte Services LP) and Vans, Daimler Bharath Gangula, Devdip Purkayastha, Deloitte United States (Deloitte Services LP) President, CHEP India Jonathan Holdowsky, Jackson Schneider, Deloitte United States (Deloitte Services LP) Executive Vice-President of People, Institutional Relations and Sustainability, Craig A. Giffi, Embraer Vice-Chairman and US Leader, Consumer & Industrial Products, Seo Bo Shin, Deloitte United States (Deloitte LLP) Managing Director and Chief Executive Officer, Hyundai Motor India Ltd, India Pandarinath Illinda, Deloitte United States (Deloitte Services LP) Antônio Cesar da Silva, Marketing Director, WEG Melodie Munoz-Sidun, Deloitte United States (Deloitte Services LP) Yo Takeuchi, Chief Financial Officer, Development Tripp Parran, Bank of Japan Inc. Deloitte United States (Deloitte Consulting LLP) Urban Wass, Director, Volvo Khushi Shah, Deloitte United States (Deloitte Services LP) Elisabeth Werner, Head of Unit, European Commission

18 Manufacturing for Growth Strategies for Driving Growth and Employment

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