Industrial manufacturing


of industrial manufacturing CEOs expect the global economy to stay the same or worsen in the coming year.

A subdued outlook for 2013

One-third of industrial manufacturing CEOs expect the economic outlook to worsen while only 18% think the situation will get better. And while fewer expect to see the economy decline compared to last year, there are other factors worrying industrial manufacturing CEOs. Compared to the overall sample, for example, far more sector CEOs are ‘extremely concerned’ that energy and raw material costs and exchange rate volatility could put the brakes on growth. That may be contributing to the fact that industrial manufacturing CEOs are less optimistic than last year, and they’re slightly less optimistic than their peers in other sectors too. Only 28% are very confident of growth over the next twelve months.

Industrial manufacturing CEOs are planning on a weak economy in 2013

Getting leaner
Many industrial manufacturing CEOs are focusing on making their businesses more efficient. Nearly half say operational efficiency is their top investment priority this year. That puts it at the top of the list. And four out of five tell us their companies have cut costs over the past twelve months. That’s even more than the 70% who told us last year they were planning cost reduction initiatives and continues a long-term trend in the sector.

Like their peers across the overall sample, industrial manufacturing CEOs are wary about inadvertently cutting value in the course of cutting costs – and slashing the workforce is one action that can certainly backfire. This probably explains why 29% of industrial manufacturing CEOs say their company has kept headcount the same for the past 12 months, while 38% have actually increased it. For next year, a similar number of industrial manufacturing CEOs expect to keep headcount steady or increase it. But when it comes to the minority who are planning to decrease staffing numbers, 17% of industrial manufacturing CEOs expect deep cuts (more than 8%) next year, compared to just 12% who cut headcount more than 8% last year.

Gearing up in China
China has developed into a key market for many industrial manufacturing companies around the globe, and this year is no exception, with one-third naming it a top destination for growth. That may be driving the strong interest that industrial manufacturing CEOs are showing in East Asia as a location for next year’s M&A, joint venture, or strategic alliance plans. When looking at the whole region (which also includes Japan, North and South Korea and Taiwan), industrial manufacturing CEOs are actually less optimistic that key operations will grow, compared to peers across the sample. Nearly half still expect revenues to increase though.

US, Brazil and Germany also showing strong prospects
For industrial manufacturing CEOs, the US is nearly as important as China, with 27% expecting it to be one of their top foreign growth markets this year. Brazil and Germany follow with 16% each.

That picture may change next year, if concerns about the state of the US economy prove to be well-founded – about one-third of industrial manufacturing CEOs think a recession in the US looks likely, and another 42% aren’t sure. 69% of sector CEOs say a US recession would hurt their business. Only 17% of sector executives expect to see the Eurozone break-up, although 40% are unsure. But 62% of industrial manufacturing CEOs think it would have a negative impact if it happened.

With the industry getting increasingly global, leadership development is changing too. Nearly three-quarters of industrial manufacturing CEOs say their companies now encourage global mobility and international experience in order to develop their leadership pipeline, more than across the sample as a whole.

Getting capacity right
For industrial manufacturing companies, making sure that capacity levels match demand is critical. More than a third of industrial manufacturing CEOs see it as one of their top investment priorities for the coming twelve months.

Investing in R&D
Industrial manufacturing CEOs continue to emphasise R&D and innovation too. Almost half say it’s a top investment priority this year for the coming twelve months, significantly more than the overall sample. Most don’t believe the government is helping very much. Only 20% of industrial manufacturing CEOs ‘agree’ or ‘agree strongly’ that the government supports innovation in the private sector.

Working together across the supply chain
Some industrial manufacturing companies are innovating together with supply chain partners. That may be one reason 44% of industrial manufacturing CEOs tell us that supply chain partners have a ‘significant influence’ on their business strategy, more than across the sample as a whole.


CEO interview quotes

"China, of course, will have an extremely important role in how the whole global economy develops. More particularly, economic development of China will be very important for Outotec, which provides technology for minerals and metals processing. Going forward, China will be pivotal in how that industry evolves."

Pertti Korhonen
President and Chief Executive Officer of Outotec Oyj

"To say we’re always well-prepared for changes may not be correct. We do our best to work through scenarios, opportunities and threats, and to prepare accordingly. In this respect, it is important to remain flexible, not dogmatic, and to work and think without taboos."

Yves Serra
President and Chief Executive Officer of Georg Fischer Ltd.

"In tackling climate change, I think that we’re living through a pivotal decade. It’s critical that sustainability doesn't fall off the agenda. In my view, it’s a matter of keeping in mind the net present value of our fragile ecosystem versus the cost we incur if its degradation continues. That cost would be huge."

Pertti Korhonen
President and Chief Executive Officer of Outotec Oyj

"We’ve been able to, through our own technology development, our investment in innovation, R&D and innovation, we’ve been able to renew our portfolio and this is not only to produce consistently updated and newer versions of what we have, but also to open and sometimes close business lines."

Dr. João Bento
Chief Executive Officer of Efacec Capital SGSP SA

"Innovation is very important for us … because it is a way to differentiate ourselves. We need to be innovative. We train our people to be close to our customers so as not to miss new trends, and cooperate with our customers to bring them solutions."

Yves Serra
President and Chief Executive Officer of Georg Fischer Ltd.

"There is a global talent war going on. And if one want to attract the best talent, it’s important that a company be able to communicate to prospective hires what the value of the company purpose is, what the mission is, and what the company values are."

Pertti Korhonen
President and Chief Executive Officer of Outotec Oyj

"All stakeholders are important. First we think of customers and employees. Do we have the right people in the right jobs? Then we think of our customers, and we talked already of how important Asia has become, because of its high growth."

Yves Serra
President and Chief Executive Officer of Georg Fischer Ltd.
These interviews contain the opinions and views of the CEOs interviewed, and do not necessarily represent the opinions and views of PwC.


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