Portions of this post are taken from the publication “Industry Week”, Bloomberg View, 30 October 2017.

The Bloomberg report begins by stating: “The industrial conglomerate has lost $100 billion in market value this year as investors came to terms with the dawning reality that GE’s businesses don’t generate enough cash to support its rich dividend.”

Do you in your wildest dreams think that Jack Welch, former CEO of GE, would have produced results such as this?  I do NOT think so.  Welch “lived” with the guys on Wall Street.  These pitiful results come to us from Mr. Jeffery Immelt.  It’s also now clear that years of streamlining didn’t go far enough as challenges of dumpster-fire proportions at its power and energy divisions overshadowed what were actually pretty good third-quarter health-care and aviation numbers.  Let me mention right now that I can sound off at the results.  I retired from a GE facility—The Roper Corporation, in 2005.

The new CEO John Flannery’s pledged to divest twenty billion ($20 billion) in assets perhaps is risking another piecemeal breakup but as details leak on the divestitures and other changes Flannery’s contemplating, there’s at least a shot he could be positioning the company for something more drastic.  Now back to Immelt.

Immelt took over the top position at GE in 2001. Early attempts at changing the culture to meet Immelt’s ideas about what the corporate culture should look like were not very successful. It was during the financial crisis that he began to think differently. It seems as if his thinking followed three paths. First, get rid of the financial areas of the company because they were just a diversion to what needed to be done. Second, make GE into a company focused upon industrial goods. And, third, create a company that would tie the industrial goods to information technology so that the physical and the informational would all be of one package. The results of Immelt’s thinking are not impressive and did not position GE for company growth in the twenty-first century.

Any potential downsizing by Flannery will please investors who have viewed the digital foray as an expensive pet project of Immelt’s, but it’s sort of a weird thing to do if you still want to turn GE into a top-ten software company — as is the divestiture of the digital-facing Centricity health-care IT operations that GE is reportedly contemplating.  Perhaps a wholesale breakup of General Electric Co. isn’t such an improbable idea after all.

GE has lost one hundred billion ($100 billion) in market value this year as investors came to terms with the dawning reality that GE’s businesses don’t generate enough cash to support its rich dividend. It’s also now clear that years of streamlining didn’t go far enough as challenges of dumpster fire proportions at its power and energy divisions overshadowed what were actually pretty good third-quarter health-care and aviation numbers.

One argument against a breakup of GE was that it would detract from the breadth of expertise and resources that set the company apart in the push to make industrial machinery of all kinds run more efficiently. But now, GE’s approach to digital appears to be changing. Rather than trying to be everything for everyone, the company is refocusing digital marketing efforts on customers in its core businesses and deepening partnerships with tech giants including Microsoft Corp and Apple Inc. It hasn’t announced any financial backers yet, but that’s a possibility former CEO Jeff Immelt intimated before he departed. GE’s digital spending is a likely target of its cost-cutting push.

This downsizing will please investors who have viewed digital as an expensive pet project of Immelt’s, but it’s sort of a weird thing to do if you still want to turn GE into a top-10 software company — as is the divestiture of the digital-facing Centricity health-care IT operations that GE is reportedly contemplating.

The company is unlikely to abandon digital altogether. Industrial customers have been trained to expect data-enhanced efficiency, and GE has to offer that to be competitive. As Flannery said at GE’s Minds and Machines conference last week, “A company that just builds machines will not survive.” But if all we’re ultimately talking about here is smarter equipment, as opposed to a whole new software ecosystem, GE doesn’t necessarily need a health-care, aviation and power business.

Creating four or five mini-GEs would likely mean tax penalties.  That’s not in and of itself a reason to maintain a portfolio that’s not working. If it was, GE wouldn’t also be contemplating a sale of its transportation division. But one of GE’s flaws in the minds of investors right now is its financial complexity, and there’s something to be said for a complete rethinking of the way it’s put together. For what it’s worth, the average of JPMorgan Chase & Co. analyst Steve Tusa’s sum-of-the-parts analyses points to a twenty-dollar ($20) valuation — almost in line with GE’s closing price of $20.79 on Friday. Whatever premium the whole company once commanded over the value of its parts has been significantly weakened.

Wall Street is torn on General Electric, the one-time favorite blue chip for long-term investors, which is now facing an identity crisis and possible dividend cut. Major research shops downgraded and upgraded the industrial company following its third-quarter earnings miss this past Friday. The firm’s September quarter profits were hit by restructuring costs and weak performance from its power and oil and gas businesses. It was the company’s first earnings report under CEO John Flannery, who replaced Jeff Immelt in August. Two firms reduced their ratings for General Electric shares due to concerns about dividend cuts at its Nov. 13 analyst meeting. The company has a 4.2 percent dividend yield. General Electric shares declined 6.3 percent Monday to close at $22.32 a share after the reports. The percentage drop is the largest for the stock in six years. Its shares are down twenty-five (25%) percent year to date through Friday versus the S&P 500’s fifteen (15%) percent return.

At the end of the day, it comes down to what kind of company GE wants to be. The financial realities of a breakup might be painful, but so would years’ worth of pain in its power business as weak demand and pricing pressures drive a decline to a new normal of lower profitability. Does it really matter, then, what the growth opportunities are in aviation and health care? As head of M&A at GE, Flannery was at least partly responsible for the Alstom SA acquisition that swelled the size of the now-troubled power unit inside GE. If there really are “no sacred cows,” he has a chance to rewrite that legacy.

CONCLUSIONS:

Times are changing and GE had better change with those times or the company faces significant additional difficulties.  Direction must be left to the board of directors but it’s very obvious that accommodations to suite the present business climate are definitely in order.

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DISTRACTIONS

October 18, 2017


Is there anyone in the United States who does NOT use our road systems on a daily basis?  Only senior citizens in medical facilities and those unfortunate enough to have health problems stay off the roads.  I have a daily commute of approximately thirty-seven (37) miles, one way, and you would not believe what I see.  Then again, maybe you would.  You’ve been there, done that, got the “T” shirt.

It’s no surprise to learn that information systems cause driver distraction, but recent news from the AAA Foundation for Traffic Safety indicated the problem may be worse than we thought. A study released by the organization showed that the majority of today’s information technologies are complex, frustrating, and maybe even dangerous to use. Working with researchers from the University of Utah, AAA analyzed the systems in thirty (30) vehicles, rating them on how much visual and cognitive demand they placed on drivers. The conclusion: None of the thirty-produced low demand. Twenty-three (23) of the systems generated “high” or “very high” demand.

“Removing eyes from the road for just two seconds doubles the risk for a crash,” AAA wrote in a press release. “With one in three adults using the systems available while driving, AAA cautions that using these technologies while behind the wheel can have dangerous consequences.”

In the study, University of Utah researchers examined visual (eyes-on-the-road) and cognitive (mental) demands of each system, and looked at the time required to complete tasks. Tasks included the use of voice commands and touch screens to make calls, send texts, tune the radio and program navigation. And the results were uniformly disappointing—really disappointing.

We are going to look at the twelve (12) vehicles categorized by researchers as having “very high demand” information systems. The vehicles vary from entry-level to luxury and sedan to SUV, but they all share one common trait: AAA says the systems distract drivers.  This is to me very discouraging.  Here we go.

CONCLUSIONS:

I’m definitely NOT saying don’t buy these cars but it is worth knowing and compensating for when driving.


Portions of the following post were taken from the September 2017 Machine Design Magazine.

We all like to keep up with salary levels within our chosen profession.  It’s a great indicator of where we stand relative to our peers and the industry we participate in.  The state of the engineering profession has always been relatively stable. Engineers are as essential to the job market as doctors are to medicine. Even in the face of automation and the fear many have of losing their jobs to robots, engineers are still in high demand.  I personally do not think most engineers will be out-placed by robotic systems.  That fear definitely resides with on-line manufacturing positions with duties that are repetitive in nature.  As long as engineers can think, they will have employment.

The Machine Design Annual Salary & Career Report collected information and opinions from more than two thousand (2,000) Machine Design readers. The employee outlook is very good with thirty-three percent (33%) indicating they are staying with their current employer and thirty-six percent (36%) of employers focusing on job retention. This is up fifteen percent (15%) from 2016.  From those who responded to the survey, the average reported salary for engineers across the country was $99,922, and almost sixty percent (57.9%) reported a salary increase while only ten percent (9.7%) reported a salary decrease. The top three earning industries with the largest work forces were 1.) industrial controls systems and equipment, 2.) research & development, and 3.) medical products. Among these industries, the average salary was $104,193. The West Coast looks like the best place for engineers to earn a living with the average salary in the states of California, Washington, and Oregon was $116,684. Of course, the cost of living in these three states is definitely higher than other regions of the country.

PROFILE OF THE ENGINEER IN THE USA TODAY:

As is the ongoing trend in engineering, the profession is dominated by male engineers, with seventy-one percent (71%) being over fifty (50) years of age. However, the MD report shows an up-swing of young engineers entering the profession.  One effort that has been underway for some years now is encouraging more women to enter the profession.  With seventy-one percent (71%) of the engineering workforce being over fifty, there is a definite need to attract participants.    There was an increase in engineers within between twenty-five (25) and thirty-five (35).  This was up from 5.6% to 9.2%.  The percentage of individuals entering the profession increased as well, with engineers with less than fourteen (14) years of experience increasing five percent (5%) from last year.  Even with all the challenges of engineering, ninety-two percent (92%) would still recommend the engineering profession to their children, grandchildren and others. One engineer responds, “In fact, wherever I’ll go, I always will have an engineer’s point of view. Trying to understand how things work, and how to improve them.”

 

When asked about foreign labor forces, fifty-four percent (54%) believe H1-B visas hurt engineering employment opportunities and sixty-one percent (61%) support measures to reform the system. In terms of outsourcing, fifty-two percent (52%) reported their companies outsource work—the main reason being lack of in-house talent. However, seventy-three percent (73%) of the outsourced work is toward other U.S. locations. When discussing the future, the job force, fifty-five percent (55%) of engineers believe there is a job shortage, specifically in the skilled labor area. An overwhelming eighty-seven percent (87%) believe that we lack a skilled labor force. According to the MD readers, the strongest place for job growth is in automation at forty-five percent (45%) and the strongest place to look for skilled laborers is in vocational schools at thirty-two percent (32%). The future of engineering is dependent on the new engineers not only in school today, but also in younger people just starting their young science, technology, engineering, and mathematic (STEM) interests. With the average engineer being fifty (50) years or old, the future of engineering will rely heavily on new engineers willing to carry the torch—eighty-seven percent (87%) of our engineers believe there needs to be more focus on STEM at an earlier age to make sure the future of engineering is secure.

With being the case, let us now look at the numbers.

The engineering profession is a “graying” profession as mentioned earlier.  The next digital picture will indicate that, for the most part, those in engineering have been in for the “long haul”.  They are “lifers”.  This fact speaks volumes when trying to influence young men and women to consider the field of engineering.  If you look at “years in the profession”, “work location” and years at present employer” we see the following:

The slide below is a surprise to me and I think the first time the question has been asked by Machine Design.  How much of your engineering training is theory vs. practice? You can see the greatest response is almost fourteen percent (13.6%) with a fifty/fifty balance between theory and practice.  In my opinion, this is as it should be.

“The theory can be learned in a school, but the practical applications need to be learned on the job. The academic world is out of touch with the current reality of practical applications since they do not work in

that area.” “My university required three internships prior to graduating. This allowed them to focus significantly on theoretical, fundamental knowledge and have the internships bolster the practical.”

ENGINEERING CERTIFICATIONS:

The demands made on engineers by their respective companies can sometimes be time-consuming.  The respondents indicated the following certifications their companies felt necessary.

 

 

SALARIES:

The lowest salary is found with contract design and manufacturing.  Even this salary, would be much desired by just about any individual.

As we mentioned earlier, the West Coast provides the highest salary with several states in the New England area coming is a fairly close second.

 

SALARY LEVELS VS. EXPERIENCE:

This one should be no surprise.  The greater number of years in the profession—the greater the salary level.  Forty (40) plus years provides an average salary of approximately $100,000.  Management, as you might expect, makes the highest salary with an average being $126,052.88.

OUTSOURCING:

 

As mentioned earlier, outsourcing is a huge concern to the engineering community. The chart below indicates where the jobs go.

JOB SATISFACTION:

 

Most engineers will tell you they stay in the profession because they love the work. The euphoria created by a “really neat” design stays with an engineer much longer than an elevated pay check.  Engineers love solving problems.  Only two percent (2%) told MD they are not satisfied at all with their profession or current employer.  This is significant.

Any reason or reasons for leaving the engineering profession are shown by the following graphic.

ENGINEERING AND SOCIETY: 

As mentioned earlier, engineers are very worried about the H1-B visa program and trade policies issued by President Trump and the Legislative Branch of our country.  The Trans-Pacific Partnership has been “nixed” by President Trump but trade policies such as NAFTA and trade between the EU are still of great concern to engineers.  Trade with China, patent infringement, and cyber security remain big issues with the STEM profession and certainly engineers.

 

CONCLUSIONS:

I think it’s very safe to say that, for the most part, engineers are very satisfied with the profession and the salary levels offered by the profession.  Job satisfaction is great making the dawn of a new day something NOT to be dreaded.

TRUCKING

September 19, 2017


I have several clients I try to keep happy each week.  One is in Cleveland, Tennessee. That’s about a forty-five (45) minute drive for me, one way, so I get to see a great deal of Interstate traffic.  This is my thirteenth year with this company as a client so I have made that trip multiple times.  There is NO time of the day that I do not see an armada of fifty-three (53) foot rigs hauling their load from point “A” to point “B”.  The numbers are quite frankly staggering.  According to the American Trucking Association (ATA) for the year 2016:

  • The big rigs moved 10.42 billion tons of freight or seventy percent (70%) of all domestic freight tonnage.
  • The nation’s commercial trucks paid $41.3 billion in state and federal highway user fees and taxes. The average five-axel-trailer pays more than $5,600.00 in taxes annually.
  • There were 33.8 million trucks registered for business purposes, including 3.68 million Class 8 trucks. (NOTE: The Class 8 truck gross vehicle weight rating (GVWR) is a vehicle with a GVWR exceeding 33000 pounds (14969 kg). These include tractor trailer tractors as well as single-unit dump trucks of a GVWR over 33,000 pounds; such trucks typically have 3 or more axles.)
  • The 33.8 million trucks mentioned above burned 38.8 billion gallons of diesel fuel and 15.5 billion gallons of gasoline. Today’s average price per gallon for diesel is $2.71.
  • They traveled 450.4 billion miles.
  • Approximately 7.4 million Americans are employed in trucking-related jobs, including 3.5 million as truck drivers.
  • Trucking is an industry made up of small businesses; 91% of motor carriers operate six or fewer trucks and 97.3% operate less than 20.
  • Annual revenues for 2016 totaled $676.2 billion.
  • Freight volumes are projected to grow 2.8% in 2017 with an annual growth rate of 3.4% through 2023.
  • Truckload volumes are expected to grow 2.7% per year from 2017 to 2023.
  • Short haul or LTL shipments, will increase 3.3% per year from 2017 to 2023.

Companies, small and large, are making concerted efforts to lessen costs for diesel fuel and obtain greater efficencies thereby reducing overall total costs of operation.  This is a nationwide exercise all movers long-haul and short-haul are participating in.  We are already seeing FedEx, UPS, the Federal Post Office, DHL, police departments, taxi cab companies and others convert from diesel to propane or natural gas as the fuel of choice.  This not only reduces operating expense but reduces carbon emissions.   We also see companies who design and build engines for these big rigs, working hard to improve mileage and engine efficencies.  Progress is being made on a yearly basis.  So, the next time you pass an LTL or STL hauler, think about the industry and the efforts they are in the process of adopting to improve their company.

V2V TECHNOLOGY

September 9, 2017


You probably know this by now if you read my postings—my wife and I love to go to the movies.  I said GO TO THE MOVIES, not download movies but GO.  If you go to a matinée, and if you are senior, you get a reduced rate.  We do that. Normally a movie beginning at 4:00 P.M. will get you out by 6:00 or 6:30 P.M. Just in time for dinner. Coming from the Carmike Cinema on South Terrace, I looked left and slowly moved over to the inside lane—just in time to hit car in my “blind side”.  Low impact “touching” but never the less an accident anyway.  All cars, I’m told, have blind sides and ours certainly does.  Side mirrors do NOT cover all areas to the left and right of any vehicle.   Maybe there is a looming solution to that dilemma.

V2V:

The global automotive industry seems poised and on the brink of a “Brave New World” in which connectivity and sensor technologies come together to create systems that can eliminate life-threatening collisions and enable automobiles that drive themselves.  Knows as Cooperative Intelligent Transportation Systems, vehicle-to-vehicle or V2V technologies open the door for automobiles to share information and interact with each other, as well as emerging smart infrastructure. These systems, obviously, make transportation safer but offer the promise of reducing traffic congestion.

Smart features of V2V promise to enhance drive awareness via traffic alerts, providing notifications on congestion, obstacles, lane changing, traffic merging and railway crossing alerts.  Additional applications include:

  • Blind spot warnings
  • Forward collision warnings
  • Sudden brake-ahead warnings
  • Approaching emergency vehicle warnings
  • Rollover warnings
  • Travel condition data to improve maintenance services.

Already The Department of Transportation “Vehicle-to-Vehicle Communications: Readiness of V2V Technology for Application”, DOT HS 812 014, details the technology as follows:

“The purpose of this research report is to assess the readiness for application of vehicle-to-vehicle (V2V) communications, a system designed to transmit basic safety information between vehicles to facilitate warnings to drivers concerning impending crashes. The United States Department of Transportation and NHTSA have been conducting research on this technology for more than a decade. This report explores technical, legal, and policy issues relevant to V2V, analyzing the research conducted thus far, the technological solutions available for addressing the safety problems identified by the agency, the policy implications of those technological solutions, legal authority and legal issues such as liability and privacy. Using this report and other available information, decision-makers will determine how to proceed with additional activities involving vehicle-to-vehicle (V2V), vehicle-to-infrastructure (V2I), and vehicle-to-pedestrian (V2P) technologies.”

The agency estimates there are approximately five (5) million annual vehicle crashes, with attendant property damage, injuries, and fatalities. While it may seem obvious, if technology can help drivers avoid crashes, the damage due to crashes simply never occurs.  This is the intent of an operative V2V automotive system. While these “vehicle-resident” crash avoidance technologies can be highly beneficial, V2V communications represent an additional step in helping to warn drivers about impending danger. V2V communications use on-board dedicated short-range radio communication devices to transmit messages about a vehicle’s speed, heading, brake status, and other information to other vehicles and receive the same information from the messages, with range and “line-of-sight” capabilities that exceed current and near-term “vehicle-resident” systems — in some cases, nearly twice the range. This longer detection distance and ability to “see” around corners or “through” other vehicles and helps V2V-equipped vehicles perceive some threats sooner than sensors, cameras, or radar.  This can warn drivers accordingly. V2V technology can also be fused with those vehicle-resident technologies to provide even greater benefits than either approach alone. V2V can augment vehicle-resident systems by acting as a complete system, extending the ability of the overall safety system to address other crash scenarios not covered by V2V communications, such as lane and road departure. A fused system could also augment system accuracy, potentially leading to improved warning timing and reducing the number of false warnings.

Communications represent the keystone of V2V systems.  The current technology builds upon a wireless standard called Dedicated Shor- Range Communication or DSRC.  DSRC is based upon the IEEE 802.11p protocol.  Transmissions of these systems consists of highly secure, short-to-medium-range, high-speed wireless communication channels, which enable vehicles to connect with each other for short periods of time.  Using DSRC, two or more vehicles can exchange basic safety messages, which describe each vehicle’s speed, position, heading, acceleration rate, size and braking status.  The system sends these messages to the onboard units of surrounding vehicles ten (10) times per second, where they are interpreted and provide warnings to the driver.  To achieve this, V2V systems leverage telematics to track vehicles via GPS monitoring the location, movements, behavior and status of each vehicle.

Based on preliminary information, NHTSA currently estimates that the V2V equipment and supporting communications functions (including a security management system) would cost approximately $341 to $350 per vehicle in 2020 dollars. It is possible that the cost could decrease to approximately $209 to $227 by 2058, as manufacturers gain experience producing this equipment (the learning curve). These costs would also include an additional $9 to $18 per year in fuel costs due to added vehicle weight from the V2V system. Estimated costs for the security management system range from $1 to $6 per vehicle, and they will increase over time due to the need to support an increasing number of vehicles with the V2V technologies. The communications costs range from $3 to $13 per vehicle. Cost estimates are not expected to change significantly by the inclusion of V2V-based safety applications, since the applications themselves are software and their costs are negligible.  Based on preliminary estimates, the total projected preliminary annual costs of the V2V system fluctuate year after year but generally show a declining trend. The estimated total annual costs range from $0.3 to $2.1 billion in 2020 with the specific costs being dependent upon the technology implementation scenarios and discount rates. The costs peak to $1.1 to $6.4 billion between 2022 and 2024, and then they gradually decrease to $1.1 to $4.6 billion.

In terms of safety impacts, the agency estimates annually that just two of many possible V2V safety applications, IMA (Integrated Motor Assists) and LTA (Land Transport Authority), would on an annual basis potentially prevent 25,000 to 592,000 crashes, save 49 to 1,083 lives, avoid 11,000 to 270,000 MAIS 1-5 injuries, and reduce 31,000 to 728,000 property-damage-only crashes by the time V2V technology had spread through the entire fleet. We chose those two applications for analysis at this stage because they are good illustrations of benefits that V2V can provide above and beyond the safety benefits of vehicle-resident cameras and sensors. Of course, the number of lives potentially saved would likely increase significantly with the implementation of additional V2V and V2I safety applications that would be enabled if vehicles were equipped with DSRC capability.

CONCLUSIONS: 

It is apparent to me that we are driving (pardon the pun) towards self-driving automobiles. I have no idea as to when this technology will become fully adopted, if ever.  If that happens in part or across the vehicle spectrum, there will need to be some form of V2V. One car definitely needs to know where other cars are relative to position, speed, acceleration, and overall movement. My wife NEVER goes to sleep or naps while I’m driving—OK maybe one time as mentioned previously.  She is always remarkably attentive and aware when I’m behind the wheel.  This comes from experience gained over fifty-two years of marriage.  “The times they are a-changing”.   The great concern I have is how we are to maintain the systems and how “hackable” they may become.  As I awoke this morning, I read the following:

The credit reporting agency Equifax said Thursday that hackers gained access to sensitive personal data — Social Security numbers, birth dates and home addresses — for up to 143 million Americans, a major cybersecurity breach at a firm that serves as one of the three major clearinghouses for Americans’ credit histories.

I am sure, like me, that gives you pause.  If hackers can do that, just think about the chaos that can occur if V2V systems can be accessed and controlled.  Talk about keeping one up at night.

As always, I welcome your comments.


WHERE WE ARE:

The manufacturing industry remains an essential component of the U.S. economy.  In 2016, manufacturing accounted for almost twelve percent (11.7%) of the U.S. gross domestic product (GDP) and contributed slightly over two trillion dollars ($2.18 trillion) to our economy. Every dollar spent in manufacturing adds close to two dollars ($1.81) to the economy because it contributes to development in auxiliary sectors such as logistics, retail, and business services.  I personally think this is a striking number when you compare that contribution to other sectors of our economy.  Interestingly enough, according to recent research, manufacturing could constitute as much as thirty-three percent (33%) of the U.S. GDP if both its entire value chain and production for other sectors are included.  Research from the Bureau of Labor Statistics shows that employment in manufacturing has been trending up since January of 2017. After double-digit gains in the first quarter of 2017, six thousand (6,000) new jobs were added in April.  Currently, the manufacturing industry employs 12,396,000 people, which equals more than nine percent (9%) of the U.S. workforce.   Nonetheless, many experts are concerned that these employment gains are soon to be halted by the ever-rising adoption of automation. Yet automation is inevitable—and like in the previous industrial revolutions, automation is likely to result in job creation in the long term.  If we look back at the Industrial Revolution.

INDUSTRIAL REVOLUTION:

The Industrial Revolution began in the late 18th century when a series of new inventions such as the spinning jenny and steam engine transformed manufacturing in Britain. The changes in British manufacturing spread across Europe and America, replacing traditional rural lifestyles as people migrated to cities in search of work. Men, women and children worked in the new factories operating machines that spun and wove cloth, or made pottery, paper and glass.

Women under 20 made comprised the majority of all factory workers, according to an article on the Industrial Revolution by the Economic History Association. Many power loom workers, and most water frame and spinning jenny workers, were women. However, few women were mule spinners, and male workers sometimes violently resisted attempts to hire women for this position, although some women did work as assistant mule spinners. Many children also worked in the factories and mines, operating the same dangerous equipment as adult workers.  As you might suspect, this was a great departure from times prior to the revolution.

WHERE WE ARE GOING:

In an attempt to create more jobs, the new administration is reassessing free trade agreements, leveraging tariffs on imports, and promising tax incentives to manufacturers to keep their production plants in the U.S. Yet while these measures are certainly making the U.S. more attractive for manufacturers, they’re unlikely to directly increase the number of jobs in the sector. What it will do, however, is free up more capital for manufacturers to invest in automation. This will have the following benefits:

  • Automation will reduce production costs and make U.S. companies more competitive in the global market. High domestic operating costs—in large part due to comparatively high wages—compromise the U.S. manufacturing industry’s position as the world leader. Our main competitor is China, where low-cost production plants currently produce almost eighteen percent (17.6%) of the world’s goods—just zero-point percent (0.6%) less than the U.S. Automation allows manufacturers to reduce labor costs and streamline processes. Lower manufacturing costs results in lower product prices, which in turn will increase demand.

Low-cost production plants in China currently produce 17.6% of the world’s goods—just 0.6% less

than the U.S.

  • Automation increases productivity and improves quality. Smart manufacturing processes that make use of technologies such as robotics, big data, analytics, sensors, and the IoT are faster, safer, more accurate, and more consistent than traditional assembly lines. Robotics provide 24/7 labor, while automated systems perform real-time monitoring of the production process. Irregularities, such as equipment failures or quality glitches, can be immediately addressed. Connected plants use sensors to keep track of inventory and equipment performance, and automatically send orders to suppliers when necessary. All of this combined minimizes downtime, while maximizing output and product quality.
  • Manufacturers will re-invest in innovation and R&D. Cutting-edge technologies. such as robotics, additive manufacturing, and augmented reality (AR) are likely to be widely adopted within a few years. For example, Apple® CEO Tim Cook recently announced the tech giant’s $1 billion investment fund aimed at assisting U.S. companies practicing advanced manufacturing. To remain competitive, manufacturers will have to re-invest a portion of their profits in R&D. An important aspect of innovation will involve determining how to integrate increasingly sophisticated technologies with human functions to create highly effective solutions that support manufacturers’ outcomes.

Technologies such as robotics, additive manufacturing, and augmented reality are likely to be widely adopted soon. To remain competitive, manufacturers will have to re-invest a portion of their profits in R&D.

HOW AUTOMATION WILL AFFECT THE WORKFORCE:

Now, let’s look at the five ways in which automation will affect the workforce.

  • Certain jobs will be eliminated.  By 2025, 3.5 million jobs will be created in manufacturing—yet due to the skills gap, two (2) million will remain unfilled. Certain repetitive jobs, primarily on the assembly line will be eliminated.  This trend is with us right now.  Retraining of employees is imperative.
  • Current jobs will be modified.  In sixty percent (60%) of all occupations, thirty percent (30%) of the tasks can be automated.  For the first time, we hear the word “co-bot”.  Co-bot is robotic assisted manufacturing where an employee works side-by-side with a robotic system.  It’s happening right now.
  • New jobs will be created. There are several ways automation will create new jobs. First, lower operating costs will make U.S. products more affordable, which will result in rising demand. This in turn will increase production volume and create more jobs. Second, while automation can streamline and optimize processes, there are still tasks that haven’t been or can’t be fully automated. Supervision, maintenance, and troubleshooting will all require a human component for the foreseeable future. Third, as more manufacturers adopt new technologies, there’s a growing need to fill new roles such as data scientists and IoT engineers. Fourth, as technology evolves due to practical application, new roles that integrate human skills with technology will be created and quickly become commonplace.
  • There will be a skills gap between eliminated jobs and modified or new roles. Manufacturers should partner with educational institutions that offer vocational training in STEM fields. By offering students on-the-job training, they can foster a skilled and loyal workforce.  Manufacturers need to step up and offer additional job training.  Employees need to step up and accept the training that is being offered.  Survival is dependent upon both.
  • The manufacturing workforce will keep evolving. Manufacturers must invest in talent acquisition and development—both to build expertise in-house and to facilitate continuous innovation.  Ten years ago, would you have heard the words, RFID, Biometrics, Stereolithography, Additive manufacturing?  I don’t think so.  The workforce MUST keep evolving because technology will only improve and become a more-present force on the manufacturing floor.

As always, I welcome your comments.


Portions of this post were taken from Design News Daily publication written by Chris Witz, August 2017.

I generally don’t “do” politics but recent activity relative to the Federal Jobs Initiative program have fallen upon hard times.  President Donald Trump has decided to disband the council of his Manufacturing Jobs Initiative. The announcement came Wednesday morning, after a significant exodus of council membership.  This exodus was in response to the President’s comments regarding a recent white supremacist protest in Charlottesville, VA.  By Tweet, the president said:

Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both. Thank you all!

— Donald J. Trump (@realDonaldTrump) August 16, 2017

I personally was very surprised by his reaction to several members pulling out of his committee and wonder if there was not more to ending the activities than meets the eye.

The members counseling President Trump were:

Brian Krzanich—CEO Intel

Ken Frazier—CEO Merk & Company

Kevin Plank—CEO UnderArmour

Elon Musk—CEO of SpaceX and Tesla

Bob Iger—CEO of Disney

Travis Kalanick—Former CEO of Uber

Scott Paul—President, Alliance for American Manufacturing

Richard Trumka—President, AFL-CIO

Inge Thulin—CEO 3M

Jamie Dimon—CEO of JPMorganChase

Steven Schwarzman—CEO of Blackstone

Rich Lesser—CEO of Boston Consulting Group

Doug McMillon—CEO of Walmart

Indra Nooyi—CEO and Chairperson of PepsiCo

Ginni Rometty—President and CEO of IBM

Jack Welch—Former CEO of General Electric Company

Toby Cosgrove—CEO of the Cleveland Clinic

Mary Barra—President and CEO of General Motors

Kevin Warsh—Fellow at the Hoover Institute

Paul Atkins– CEO of Patomak Global Partners LLC

Mark Weinberger– Global chairman and CEO, EY

Jim McNerney– Former chairman, president and CEO, Boeing

Adebayo Ogunlesi– Chairman, managing partner, Global Infrastructure Partners

Phillip Howard– Lawyer, Covington; founder of Common Good

Larry Fink—CEO of BlackRock

Matt Rose– Executive chairman, BNSF Railway

Andrew Liveris– Chairman, CEO, The Dow Chemical Company

Bill Brown—CEO, Harris Corporation

Michael Dell—CEO, Dell Technologies

John Ferriola– Chairman, president, CEO, Nucor Corporation

Jeff Fettig– Chairman, former CEO, Whirlpool Corporation

Alex Gorsky– Chairman, CEO, Johnson & Johnson

Greg Hayes– Chairman, CEO, United Technologies Corp

Marillyn Hewson– Chairman, president, CEO, Lockheed Martin Corporation

Jim Kamsickas– President, CEO, Dana Inc

Rich Kyle– President, CEO, The Timken Company

Jeff Immelt– Chairman, former CEO, General Electric

Denise Morrison– President, CEO, Campbell Soup Company

Dennis Muilenburg– Chairman, president, CEO, Boeing

Michael Polk– CEO, Newell Brands

Mark Sutton– Chairman, CEO, International Paper

Wendell Weeks—CEO, Corning

Mark Fields– Former CEO, Ford Motor Company

Mario Longhi– Former CEO, U.S. Steel

Doug Oberhelman– Former CEO, Caterpillar

Klaus Kleinfeld– Former Chairman, CEO, Arconic

I think we can all agree; this group of individuals are “BIG HITTERS”.  People on top of their game.  In looking at the list, I was very surprised at the diversity of products they represent.

As of Wednesday, members departing the committee are as follows:   Kenneth Frazier, CEO of pharmaceutical company Merck; Under Armour CEO Kevin Plank; Scott Paul, the president of the Alliance for American Manufacturing; Richard Trumka, of the AFL-CIO, along with Thea Lee, the AFL-CIO’s deputy chief of staff; 3M CEO Inge Thulin; and Intel CEO Brian Krzanich.

In a blog post , Intel’s Krzanich explained his departure, saying:

“I resigned to call attention to the serious harm our divided political climate is causing to critical issues, including the serious need to address the decline of American manufacturing. Politics and political agendas have sidelined the important mission of rebuilding America’s manufacturing base. … I am not a politician. I am an engineer who has spent most of his career working in factories that manufacture the world’s most advanced devices. Yet, it is clear even to me that nearly every issue is now politicized to the point where significant progress is impossible. Promoting American manufacturing should not be a political issue.”

Under Armour’s Plank, echoed Krzanich’s sentiment, expressing a desire to focus on technological innovation over political entanglements. In a statement released by Under Amour, Plank said,

“We remain resolute in our potential and ability to improve American manufacturing. However, Under Armour engages in innovation and sports, not politics …” In the past year Under Armour has gained attention for applying 3D printing techniques to shoe design and manufacturing.

Paul, of the Alliance of American Manufacturing, tweeted about his departure, saying, “… it’s the right thing to do.”

I’m resigning from the Manufacturing Jobs Initiative because it’s the right thing for me to do.

— Scott Paul (@ScottPaulAAM) August 15, 2017

President Trump’s Manufacturing Jobs Initiative, first announced back in January, was supposed to be a think tank, bringing together the most prominent business leaders in American manufacturing to tackle the problem of creating job growth in the manufacturing sector. At its inception the council boasted CEOs from companies including Tesla, Ford, Dow Chemical, Dell, Lockheed-Martin, and General Electric among its 28 members. However, over the course of the year the council had been steadily dwindling, with the largest exodus coming this week.

The first major blow to the council’s membership came in June when Tesla CEO Elon Musk resigned from the council in response to President Trump pulling out of the Paris climate accord. Musk, a known environmentalist , tweeted:

Am departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world.

— Elon Musk (@elonmusk) June 1, 2017

At that same conference, when asked why he believed CEOs were leaving the manufacturing council, the President accused members of the council of being at odds with his plans to re-shore more jobs back to the US:

“Because [these CEOs] are not taking their job seriously as it pertains to this country. We want jobs, manufacturing in this country. If you look at some of those people that you’re talking about, they’re outside of the country. … We want products made in the country. Now, I have to tell you, some of the folks that will leave, they are leaving out of embarrassment because they make their products outside and I’ve been lecturing them … about you have to bring it back to this country. You can’t do it necessarily in Ireland and all of these other places. You have to bring this work back to this country. That’s what I want. I want manufacturing to be back into the United States so that American workers can benefit.”

Symbolic or Impactful?

It is unclear whether the dissolution of the manufacturing council will have an impact on Trump’s efforts to grow jobs in the US manufacturing sector. Some analysts have called the council little more than a symbolic gesture that was unlikely to have had any long-term impact on American manufacturing to begin with. Other analysts have credit Trump as a driving factor behind a spike in re-shoring in 2017. However other factors including labor costs and lack of skilled workers overseas are also playing a significant role as more advanced technologies in industries such as automotive and electronics hit the market.

CONCLUSIONS:

I personally regret the dissolution of the committee.  I think, given the proper leadership, they could have been very helpful regarding suggestions as to how to create and/or bring back jobs to our country.  In my opinion, President Trump simply did not have the leadership ability to hold the group together.  His actions over the past few months, beginning with leaving the Paris Climate Accord, simply gave them the excuse to leave the committee.  They simply flaked out.

As always, I welcome your comments.

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