Archive for August, 2011

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northern German green technologies

Thursday 18 August, 2011

It’s appropriate that the last international event I attended in Chicago before I left for India was with the Krauts, the 1’s who got me started in all this international stuff. They hosted this event: GREEN TECHNOLOGY: COOPERATION PERSPECTIVES FOR THE US MIDWEST REGION AND NORTHERN GERMANY  Part of the visiting delegation was stuck in Hamburg because of bad weather, but the show did go on.

Chicago’s new mayor Rahm Emanuel made a showing  before he ran off to open a school & noted that German firms employ 36K employees in the Chicagoland area.  On environmental notes, he added that Chicago has the most headquarters of wind companies & the most urban solar farms in the U.S.   He also wants to double the number of LEED certified buildings in Chicago.

You should be able to find most of the information presented @ the conference on the GACCOM website, so I’ll just hit the highlights here.

Frank Horch of the city of Hamburg kicked off by letting us know that his city is the 3rd largest port in Europe & 3rd largest aviation location in the world.  Jan Rispens of Renewable Energies Hamburg (erneuerbare energien hamburg, gmbh) said Germany has set a target of 20% of it’s energy needs served by renewable sources by 2020.  Investments of €20B has created 340K jobs & now creates 17$ of total energy production.  Solar is still expensive, but they are building solar photo-voltaic cell farms.  25 renewables companies in Hamburg employ 4K with a turnover of €5B.  60% of the world’s wind energy know-how is within 2.5 hours drive from Hamburg.

Panel 1:  Vattenfall is the #2 generator of wind power.  15% of their electricity comes from renewables & now they must replace the 20% of electricity that was generated by nuclear power.  Nordex created 200 jobs when they opened their new plant in Arkansas.  They see 25% better wind potential than in Germany.  AWEA has 2500 members & collaborates with EWEA.  Commonwealth Edison will be required by law to provide 20-25% of it’s energy via renewables by 2050.

Panel 2:  Buildings consume 1/2 of all energy consumption & create 1/3 of CO2 emissions.  Heating & cooling take the most energy, so investment in insulation is needed.  While green building of CO2 neutral houses mitigates environmental impact, the more pressing issue is how to make the existing housing stock more efficient.  1.6M ft2 are LEED certified daily in the US.  According to energy modeling data, predicted energy use occupancy goals are not being met.

Panel 3:  Energy transmission & storage are still challenges.  Hydrogen fuel cell technology is coming in the next few years.  There are 3 criteria for electrical/utilities issues:

  1. Whether or not it’s clean energy is a political issue.  Rechargers are 100% renewable.
  2. All users should be entitled to free access.
  3. Charging stations must fit with urban development.

Battery-operated cars are coming to the market before hydrogen powered cars, but hydrogen filling stations are expensive & it’s not certain that there’s a market there yet. Changing traffic lights to LED’s saved 70%.  Hamburg’s Climate Action Plan devotes €25M to these issues from the public budget.  We need to use the 3 S’s:  save, store, & substitute.

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ILL export conference

Tuesday 16 August, 2011

My last week in Chicago, I checked out the  ILLINOIS EXPORT CONFERENCE which was part of Illinois Export Week.  Warren Ribley, Director of IL Dept. of Commerce & Economic Opportunity, led off by saying Illinois leads the midwest with an increase in exports of 20% from 2009 to 2010.  Like Obama’s National Export Initiative, he hopes to double Illinois’ exports by 2015.  Governor Pat Quinn noted that there’s jobs in exports as Illinois exports were up 30% in the 1st quarter of 2011 to $14B.

Doug Oberhelman, CEO of Caterpillar, gave the keynote address.  70% of Caterpillar’s revenues come from exports.  Free Trade Agreements (FTA’s) have a negative connotation, but they shouldn’t as long as they’re reciprocal.  So why trade?  He gives 3 reasons:

  1. the US is no longer big enough, with only a population of 300M vs. 7B in the world.  ASEAN is importing $14B in airport infrastructure.  Brazil is investing $1.2TR in housing.  Africa is building 1200km of trans-Algerian highway.  India is building 54K miles of highway too.
  2. it’s better to play offense rather than defense.  Caterpillar confronted co-leader Komatsu in Japan & won.  With their world-wide footprint, they can serve Brazil’s needs in hydroelectrics.
  3. competition makes everyone better because it raises the bar for everyone.  Caterpillar has 150 new mostly low-cost competitors in China & they learn from every one.

Oberhelman offers these action points:

  • sign FTA’s with South Korea, Panama, & Colombia-we’re losing opportunities & jobs.  Caterpillar competes with German & Japanese companies for huge truck orders for their plant in Decatur, IL, of which 92% of it’s production is exported.  They’re losing opportunities in Colombia.  The revamped Panama Canal is an opportunity.  Others have duty-free access to the US-we should have the same duty-free access to their markets.
  • we must support those who lose their jobs to foreign trade with retraining.
  • write to your representatives to keep trade in mind when voting
  • don’t forget that the US is under attack @ all levels.

Q&A

  • Each tractor that comes out of the plant in Aurora, IL has a magnetic flag attached to it.  NAFTA has been a boon to North America.  The US is based on trade, starting in the 1900’s when we had no competition.  Caterpillar would lose if they moved all of their production to China, Brazil,…despite paying the highest tax rates in the world.
  • SME’s should start supplying customers who export & follow them.  Then think about whom do you know & trust?
  • Africa is an opportunity, but China is giving lots of aid & investment.

ILL companies export experiences panel discussion:

Bo DeLong of DeLong Company says ILL is a great place from which to export agricultural products.  They relied on the US Soybean Assn. & originally sold through agents & have grown from $100M in 2003 to $1B with 100 employees.

Jeff Dziura of NewMedical Technology has taken them to 36 distributors in 40 countries.  They went to Europe in 2008, Asia in 2010, Brazil in 2011.  They’re in highly regulated markets, but don’t get bogged down in paperwork. There is still cache to “made in the USA.”

J. Hurley Myers of DxR Development Group developed software for clinical problem solving featuring clinical simulations.  They went to Japan 1st, where translatin is key.  You need to do lots of research to find the right market matches.  It took years to find the right people in China where friendship comes 1st, before business.  You need to find someone you can trust, & it’s better if they have the right contacts.  You need local attorneys everywhere you go to protect your intellectual property.  Customer service can be done through local distributors who know the business.

Russell Witthoff of Dukane IAS has exported to Latin America since the late 1980’s & Europe & Asia since the 1990’s.  They focused more on central & eastern Europe than western Europe because they felt those areas were a better fit.  They now have a subsidiary in the Czech Republic which provides sales support for western Europe.  They’re establishing a subsidiary in China with contacts they made in Rockford.  CE standards can be an issue.

Q&A

  • Although face-to-face meetings are still best, Dziura found a distributor in Greece through LinkedIn.com
  • India is an alternative to a China strategy, but they are 2 different situations.  China exports while India serves customers @ home.  Local representation with a direct presence is critical to show commitment to the market.
  • Repatriating profits from China can be challenging.  You need to pay expenses in China from China.

The following awards were given out @ the Export Awards Luncheon:

  •                                    Exporter  Continuing Excellence      Exporter of the year          New Exporter
  • Small company:  Automated Industrial Machinery     NewMedical Technology  DxR Development
  • Avlon Industries
  • C&D USA Inc.
  • Elastec
  • Excel Railcar
  • Mid-sized co.:  Dukane Corp IAS Div.                                   Roho Group                           Rauland Borg Corp.
  • Williamson Energy LLC
  • Big Co.:    Flexco                                                                             Corn Products Intl.
  • NOW Foods
  • Export Promotion Agency of the Year:  ILL Soybean Assn.
  • Intl Trade Center of the Year:  SBDC @ SIU-Edwardsville
  • Agricultural Exporter of the year:  DeLong Co.
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democracy vs. corruption in India

Friday 12 August, 2011

The Chicago Council on Global Affairs hosted Kiran Bedi, the 1st & highest ranking female officer in the Indian Police Service & founder of the Navjyoti & India Vision Foundation who talked about RESTORING PUBLIC CONFIDENCE IN A DEMOCRATIC INDIA.  Bedi’s life’s mission is to fight corruption & she’s tried to use visual depictions rather than words to document it.  The Right To Information act of 2005 created a revolution in India which created dramatic results & exposures.  India has no anti-corruption authority as in Scandinavia, only an advisory organization, & it’s not mandatory that it is followed, so it is not respected.  There have only been 11 inquiries.  It’s not independent, so it relies on political powers that run hot & cold.  They also can’t investigate those with 25+ years of service without the approval of the government.  Corruption has increased as the economy has grown because there are no checks & balances.

The strength of Indian democracy is it’s 714M voters, more than the sum of Europe & North & Latin America.  Rural governance includes 1M+ women in 1/3 of all village councils.  It’s supreme court is independent & biggest strength, but does depend on other branches for it’s budget.  India’s comptroller general is fearless & exposes corruption in the headlines every day for the last 2 years.  The free & commercial media keeps people on their toes.

Bedi wants to see if Indians in America will raise their collective voice.  The head of the Commonwealth Games went to jail.  The founder of India’s Premier League was exposed as corrupt.  But watchdogs have no teeth.  In bribery scams, there was a system failure & India never fought for the system.  The government is only connected by voting, so there is no ongoing retrograde democracy.

To restore confidence, India filed a complaint about the Commonwealth Games.  They looked at laws in Hong Kong, Singapore, & Sweden & drafted their own bill.  India has been 1 of the last to sign the water treaty.  Indians say they want an honest democracy.  Civil society is using soft power along with mobile phones to influence virtually.

Q&A

An Indian millionaire lawyer took his child back to India against the wishes of his ex-wife & because of his wealth, has escaped the law.  These situations are being addressed in a new bill.

A common ID card with biometrics will clarify who gets what.  The common man needs access to this information.

India is estimated to lose $16B in corruption.

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US manufacturing revival?

Wednesday 10 August, 2011

A full house attended  MADE IN AMERICA: A REVIVAL IN U.S. MANUFACTURING? by the Chicago Council on Global Affairs.  The event was moderated by 1 of my favorite economists Diane Swonk, & featured Chad Moutray of the National Association of Manufacturers, Bill Strauss of the Federal Reserve Bank of Chicago, & David Beebe of Navistar.  Diane opened by noting that recent trade statistics are worse than when we were in the great depression.  We’re down $3B in imports from Japan as a result of changes in the automobile supply chain & the disasters in that country.  There have been structural shifts, such as wage differentials narrowing.  Productivity & transportation costs have soared.  Midwest manufacturers have protected their high-value-added production intellectual property by onshoring.

Moutray stated that American manufacturers are the most productive in the world, generating $1.6TR & 11% of US’ GDP & 9% of employment, but lost 2.3M manufacturing jobs & only gained 245K back.  86% have favorable expectations about the next 12 months, with an expectation of +5% in sales & 1.8% expect a raise.  The rising cost of raw materials is a problem, leading to expectations of 2.3% & 3.6% expectations for growth the next 2 years.  The US needs to attract foreign direct investment & do more research & development.  American costs are 18% higher than our competitors because corporate taxes are too high, for example compared to Canada where they’re only 16%.

Bill Strauss started off talking about the disconnect between manufacturing & policy.  Manufacturing’s share of the economy has fallen since World War II to 9%.  Increased productivity has raised output 600%.  Agriculture now only employs 1.6% of American workers.  Oil prices have increased logistics costs, so supply chains are localizing & not globalizing.  The economic downturn hit the midwest hard:  2.3M of 8.7M manufacturing jobs were lost.  We’ve seen 6.9% growth in the recovery since June, 2009 driven by increased productivity & not hiring.

Beebe said this recession is the worst in the last 50 years.  Navistar added to it’s portfolio to strengthen it’s position in the market & added that product development is key to technology exports.  He offered 4 keys to growth:

  1. focus on operations costs & breakeven
  2. expand your portfolio by leveraging your platform
  3. use a flexible manufacturing strategy with your people, products, & assets
  4. enter non-cyclical markets, such as the military

He’s optimistic as Chinese costs are closing & logistics costs are rising, the total cost equation has shifted.  We do need to reduce our corporate tax rate, encourage more free-trade agreements, & reduce regulations.

Panel Q&A

  • There are tradeoffs to reduce corporate tax rates.  R&D tax credits have been on & off again.  An onslaught of regulations hit disproportionately on SME’s.
  • We need to create a level playing field & keep balanced to bring back manufacturing to the US.  Corporations don’t pay taxes:  individual income & sales taxes fund government.  Those costs are passed along.
  • Colombia could be a big success if congress even passes that free-trade agreement.  We need to restart the Doha round talks.  The rest of the world is not stagnant.  The US can’t rest on it’s laurels.
  • It’s difficult to hire engineers today.  We need to keep educated immigrants in the US.
  • Manufacturing comprises 60% of US exports & were +14.5% last year.  We need 15%/year to double our exports to meet President Obama’s National Export Initiative goal.  Trade increases as goods get smaller.

Open Q&A

  • The world can learn from Germany’s educational system.
  • When an economy falters, the currency of that economy takes a hit.  The reverse it true in Germany.  If the Deutsche Mark were to return, it would be strong.  But in some ways exporting is overblown:  proximity matters.  Interstate American trade=some international trade.
  • The Chinese currency has appreciated since 2005 @ the real rate of inflation +10%. Companies are moving to western China.  There is upward pressure on wages in China.  Chinese labor markets are similar to those in the US.  China had 98M workers in manufacturing in 1995 & 83M in 2002.
  • Democrats are requiring trade adjustment assistance.
  • Manufacturing extension programs are contributing to SME job growth.  These manufacturers are highly innovative & do 2/3 of the research & development in the US.
  • The economic downturn seriously impacted innovation & venture capital, but that has now turned around.  Banks are looking for business. Some businesses are switching banks if their current provider isn’t meeting their needs.
  • Automakers supported bailouts of competitors to maintain their supply chains.  Market economies are very scary after a financial collapse.  We hit bottom in mid-2009, & could have been in a death spiral in 2010-11, but it’s been called a depression to frequently.  We won’t come out ahead, but it could have been worse.
  • Navistar has not constructed a new plant in the US for a long time, but they have created flexibility in that now they can make all their models in different locations.  Now they take a system-wide view on costs to determine where to produce.
  • Job creation is happening now as we create new export markets.  Jobs created for ancillary markets are important.