Author Archives: philjafflin

Grow into the North American Aerospace Industry

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Launch into the Aerospace Market in the Southeastern United States – update # 3

The Global Market Forecast and the new Chief Commercial Officer, Eric Schulz, Chief Commercial Officer by Airbus anticipates 37,400 new deliveries over the next 20 years with a current fleet of 21,500!

The value of it …$5.8 Trillion aircraft value!A320

10,600 aircraft will stay in service from these days.

Interesting to know that 54% ($3.2 Tn) in value is expected from small body i.e. 230 seats and 3,000 nm range and 25% ($1.4 Tn) from medium body i.e. 300 seats and 5,000 nm range.

Also, a growth of 10% ($0.6 Tn) in large body and 11% ($0.6 Tn) in XL categories are expected as well.

Backlog market shares of Airbus is 88% in medium body (A321 LR and A330 neo), 54% in smaller airplane (single-aisle plane). For larger plane, the backlog is 52% for L – A 350 XWB and 35% for the XL segment (A 380, A350-1000).

Like its peer, Boeing Current Market Outlook (CMO) is dedicated to forecasting new airplane demand over the next 20 years. In many ways, it paints a picture of the future of flight.

B737

Although the numbers do not match the analysis of the trends is the same.

Based on the CMO from Boeing, it anticipates 41,030 deliveries over the next 20 years with a current fleet of 21,500!   

The value of it …$6.1Trillion aircraft value!

3,070 additional planes will be flying over the US to reach 10,130 planes in active duty.

In a nutshell see the executive summary of this Market Outlook as below:

Boeing Global Forecast 2017-2037

Do you want a “piece of the Business”? Question is more …how, right? Then, let’s check below first…

Florida’s NASA rocket ships aren’t the only ones in the Southeast lifting off at high speeds. The aerospace industry is the fastest growing industry in the region. Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become an industry leader, with major firms setting up manufacturing sites all throughout the area.

See the map prepared by The Georgia Electric Membership Corporation below:

aerospace SE map 2018

Foreign firms are attracted to the U.S. aerospace market because it is the largest in the world and has a skilled and hospitable workforce, extensive distribution systems, diverse offerings, and strong support at the local and national level for policy and promotion. According to a study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. Investment in the U.S. aerospace industry is facilitated by a large pool of well-trained machinists, aerospace engineers, and other highly skilled workers with experience in the aerospace industry.

The graphic on the right below illustrates how aerospace exports in the Southeast have been outpacing overall U.S. aerospace exports, increasing by 180 percent from 2006 to 2016, 2.3 times the growth of U.S. exports. Georgia has been substantially overtaking both the Southeast and U.S. overall. Georgia’s aerospace industry exports account for 30 percent of all aerospace exports in the Southeast, followed by Florida with 25.9 percent and South Carolina with 24.7 percent.

Exports Aerospce GA

Georgia Aerospace economic impact has been estimated at $63.8B by the Georgia Economic Development ,12% increase over 2013. 99,000 highly skilled workers are employed by 800 + Companies.

Investors in the U.S. aerospace industry are supported by the Federal Aviation Administration’s (FAA) “gold standard” of aviation safety, boosting the confidence worldwide in the safety of aircraft and aircraft parts manufactured in the United States.

State Specialties

Each state has its own special advantages and contributions that strengthen the industry:

  • Georgia: According to PWC, Georgia ranks #1 overall for aerospace manufacturing attractiveness. Georgia houses more than 800 companies in the aerospace industry, along with a business climate consistently ranked as one of the best in the country with a business-friendly tax code and other incentives. Aircraft manufacturing accounts for more than 70 percent of all employment in Georgia’s aerospace industry, followed by other air transportation support activities and aircraft engine and engine parts manufacturing with 12.2 percent and 9.2 percent, respectively.
  • Florida ranks #2 among states for aviation and aerospace establishments, with more than 2,000 companies employing 82,500 workers. These businesses export more than $5.2 billion in goods annually, making Florida a national leader in these sectors.
  • North Carolina is now second in the U.S. in aerospace growth, and hosts two of the top 10 aerospace and aviation clusters in the South. The state justifies such growth due to unique industry research advantages, 9,500+ aerospace manufacturing employees, cost advantages, and more.
  • Mississippi is home to some of the world’s most renowned names in aerospace: GE Aviation, Airbus Helicopters, Rolls-Royce and Lockheed Martin. All rely on a skilled and productive workforce, comprehensive workforce training, a supportive business environment, a strategic location, low startup and operation costs, and cutting-edge R&D.
  • Over 300 aerospace companies from more than 30 different countries have chosen Alabama, including industry giants such as Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace. Another of these giants is Airbus, which now produces its A320 Family passenger jets at a new $600 million manufacturing facility in Mobile.
  • Some of the world’s top aerospace and defense companies operate facilities in Tennessee, including Vought Industries, Beretta USA, Eaton Corp., Standard Aero Alliance, Honeywell, Barrett Firearms Manufacturing, BAE Systems Ordinance and Bell Helicopters, with more on the way.
  • The total economic impact of aerospace on South Carolina’s economy is $19 billion per year. There are approximately 400 aerospace companies in South Carolina and four aviation related military facilities. These companies and facilities combined employ more than 53,000 people. Of the 17,000 employed in the private sector, approximately 72.2 percent of employees are in manufacturing, 17.8 percent of employees are in air transportation support, and 10 percent are in air transportation.

Ideal Business Environment

Many factors are guiding aerospace firms towards the Southeast:

  • Strong economy – the Southeast is one of the nation’s most robust economies, with a GDP of $3.8 trillion in 2015, which represents nearly 21 percent of the U.S. economy as a whole
  • Growing workforce – the region accounted for 17.9% of all U.S. workers in 2012
  • Growing population – population growth in the Southeast outpaces that of the U.S. overall due to the excellent weather and economic climate, and is currently home to 25.75% of the U.S. population
  • Well-educated population – the Southeast has some of the nation’s top colleges and universities
  • Low unionization – unionization rates in the Southeast are low and continue to decline
  • Low cost of doing business – for major cost measures, most Southeastern states are below the national average

Proximity to numerous space launch facilities in the Southeast helps aerospace firms lower the cost of doing business in logistics, manufacturing and R&D, while positioning them to capitalize on the emerging space market.

The Southeast can present a lucrative opportunity for any aeronautical company looking to invest. But given your company’s particular needs, what would be the ideal market entry strategy? Mergers and acquisitions? Setting up a U.S.-based sales office? Finding a partner to penetrate the market? Direct sales?

Each heterogeneous region of the United States presents its own unique advantages and challenges. Foreign firms need a partner – an expert hands-on in the region’s aerospace business environment – who they can count on. Proper planning and a well-researched approach can put companies on the right flight path for growth and profitability. And passion!

Please contact COGNEGY with any questions you might have: phil.jafflin@cognegy.com

Aircraft, Engine & Parts Manufacturing In the US: A Leaner, Quicker & Brighter Future

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The aircraft, engine and parts manufacturing industry is climbing due to rising fleet replacement and global air travel, which is driving demand for more commercial aircraft and associated parts.

Key Statistics Snapshot according to IBISWORLD:

key statistics 2018

Market Shares for key US players:

The Boeing Comp 33.9%
GE Aviation 8.5%
Lockheed Martin Corporation 7.7%
United Technologies Corporation 6.7%

Airlines around the world are seeking to upgrade their fleet to newer, more fuel-efficient models. In particular, economic growth in the U.S. and in emerging markets has increased global air travel traffic and enticed airlines to expand their fleets. Year-over-year passenger travel growth for the past five years has averaged 6.2 percent. Low air fares, higher living standards with a growing middle class in large emerging markets, and the growth of tourism and travel relative to total consumer spending in major economies are all driving strength in the demand for air travel.[1] As a result, Boeing and Airbus have surplus demand for aircraft, with combined backlog orders of over 9,000 commercial aircraft.

Breakdown of the total US revenue of $240 B

breakdown of 240B

Key External Drivers:

  • Demand from air transportation
  • Federal funding for defense
  • Non-Nato defense spending
  • Trade-weighted index (The trade-weighted index (TWI) measures the value of the US dollar against the currencies of its largest trading partners. A decreasing TWI leads to lower export prices and higher import prices.

The United States is prepared to soak up this demand. The U.S. is the largest aircraft manufacturer in the world, and is home to the leading companies in the large commercial aircraft, combat aircraft, helicopters, unmanned aerial vehicles and engines segments. In the commercial aircraft segment, Boeing dominates, as it is the only U.S. manufacturer of medium to large size airliners. Since U.S. companies like Boeing hold such a strong market position, any increase in demand by international airlines for new aircraft typically leads to increased demand for U.S. planes.

In a 2015 PwC report, the U.S. was ranked as the top location for commercial aircraft manufacturing. Countries were ranked on several variables, including costs, industry size, and infrastructure/stability/talent. The U.S. ranked first out of 142 countries, despite only moderate grades in the cost and infrastructure/stability/talent categories, because it’s the largest in terms of industry size.

U.S. companies are seeing enormous opportunities to partner with foreign firms in hopes of gaining market shares in new regions. U.S. manufacturers across the supply chain – from makers of engines to electronics and communications systems to airframe parts – have already made quick strides to partner with emerging aviation manufacturers, but this looks to be simply the beginning of a much more globalized industry.

Expansion in global markets carries numerous risks, including but not limited to intellectual property protection, talent recruitment, training, and retention.

Finding a right partner for manufacturing in dollars might be a huge opportunity to drive your global business further.

COGNEGY has successfully worked with foreign companies in advanced industries who want to enter the U.S. marketplace. COGNEGY’s Atlanta, Washington, Philadelphia locations, staff of C-level executives and extensive experience provides foreign firms with a hands-on, trusted partner well versed in the local business climate to map out an partner search and acquisition or a customized plan for corporate growth.

Please contact COGNEGY with any questions you might have: e-mail phil.jafflin@cognegy.com  or call +1 (404) 917-7100 extension 903

 

[1] Boeing Current Market Outlook, 2017-2036, page 7

[2] http://usblogs.pwc.com/industrialinsights/2014/01/20/globalization-pressures-lessons-from-the-us-aircraft-industry/

Aerospace Market

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Launch into the Aerospace Market in the Southeastern United States

Florida’s NASA rocket ships aren’t the only ones in the Southeast lifting off at high speeds. The aerospace industry[1] is the fastest growing industry in the region. Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become an industry leader, with major firms setting up manufacturing sites all throughout the area.

These include Airbus in Mobile, AL; Gulfstream in Savannah, GA; Boeing in North Charleston, SC; Honda Jets in Greensboro, NC, and United Technologies Corp. (UTC) in Charlotte, NC, and more. NASA and the U.S. Air Force launch rockets in Cape Canaveral, Florida.

Aerospace GA

 

 

 

 

 

 

 

 

 

The graphic on the right below illustrates how aerospace exports in the South

Exports Aerospce GA

east have been outpacing overall U.S. aerospace exports, increasing by 180 percent from 2006 to 2016, 2.3 times the growth of U.S. exports. Georgia in particular has been substantially overtaking both the Southeast and U.S. overall. Georgia’s aerospace exports account for 30 percent of all aerospace exports in the Southeast, followed by Florida with 25.9 percent and South Carolina with 24.7 percent.

Foreign firms are attracted to the U.S. aerospace market because it is the largest in the world and has a skilled and hospitable workforce, extensive distribution systems, diverse offerings, and strong support at the local and national level for policy and promotion. According to a study by the U.S. Department of Commerce, aerospace exports directly and indirectly support more jobs than the export of any other commodity. Investment in the U.S. aerospace industry is facilitated by a large pool of well-trained machinists, aerospace engineers, and other highly skilled workers with experience in the aerospace industry.

Investors in the U.S. aerospace industry are supported by the Federal Aviation Administration’s (FAA) “gold standard” of aviation safety, boosting the confidence worldwide in the safety of aircraft and aircraft parts manufactured in the United States.

State Specialties

Each state has its own special advantages and contributions that strengthen the industry:

  • Georgia houses more than 800 companies in the aerospace industry, along with a business climate consistently ranked as one of the best in the country with a business-friendly tax code and other incentives. Aircraft manufacturing accounts for more than 70 percent of all employment in Georgia’s aerospace industry, followed by other air transportation support activities and aircraft engine and engine parts manufacturing with 12.2 percent and 9.2 percent, respectively.
  • Florida ranks #2 among states for aviation and aerospace establishments, with more than 2,000 companies employing 82,500 workers. These businesses export more than $5.2 billion in goods annually, making Florida a national leader in these sectors.
  • North Carolina is now second in the U.S. in aerospace growth, and hosts two of the top 10 aerospace and aviation clusters in the South. The state justifies such growth due to unique industry research advantages, 9,500+ aerospace manufacturing employees, cost advantages, and more.
  • Mississippi is home to some of the world’s most renowned names in aerospace: GE Aviation, Airbus Helicopters, Rolls-Royce and Lockheed Martin. All rely on a skilled and productive workforce, comprehensive workforce training, a supportive business environment, a strategic location, low startup and operation costs, and cutting-edge R&D.
  • Over 300 aerospace companies from more than 30 different countries have chosen Alabama, including industry giants such as Boeing, Lockheed Martin, GE Aviation, Raytheon and GKN Aerospace. Another of these giants is Airbus, which now produces its A320 Family passenger jets at a new $600 million manufacturing facility in Mobile.
  • Some of the world’s top aerospace and defense companies operate facilities in Tennessee, including Vought Industries, Beretta USA, Eaton Corp., Standard Aero Alliance, Honeywell, Barrett Firearms Manufacturing, BAE Systems Ordinance and Bell Helicopters, with more on the way.
  • The total economic impact of aerospace on South Carolina’s economy is $19 billion per year. There are approximately 400 aerospace companies in South Carolina and four aviation related military facilities. These companies and facilities combined employ more than 53,000 people. Of the 17,000 employed in the private sector, approximately 72.2 percent of employees are in manufacturing, 17.8 percent of employees are in air transportation support, and 10 percent are in air transportation.

Ideal Business Environment

Many factors are guiding aerospace firms towards the Southeast:

  • Strong economy – the Southeast is one of the nation’s most robust economies, with a GDP of $3.8 trillion in 2015, which represents nearly 21 percent of the U.S. economy as a whole
  • Growing workforce – the region accounted for 17.9% of all U.S. workers in 2012
  • Growing population – population growth in the Southeast outpaces that of the U.S. overall due to the excellent weather and economic climate, and is currently home to 25.75% of the U.S. population
  • Well-educated population – the Southeast has some of the nation’s top colleges and universities
  • Low unionization – unionization rates in the Southeast are low and continue to decline
  • Low cost of doing business – for major cost measures, most Southeastern states are below the national average

Proximity to numerous space launch facilities in the Southeast helps aerospace firms lower the cost of doing business in logistics, manufacturing and R&D, while positioning them to capitalize on the emerging space market.

The Southeast can present a lucrative opportunity for any aeronautical company looking to invest. But given your company’s particular needs, what would be the ideal market entry strategy? Mergers and acquisitions? Setting up a U.S.-based sales office?

Each heterogeneous region of the United States presents its own unique advantages and challenges. Foreign firms need a partner – an expert in the region’s aerospace business environment – who they can count on. Proper planning and a well-researched approach can put companies on the right flight path for growth and profitability.

Please contact COGNEGY with any questions you might have: phil.jafflin@cognegy.com

[1] The industry includes aerospace products and parts manufacturing as well as other support activities for air transportation.

US MARKET PENETRATION BY ACQUISITION in 2018

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Market Penetration by Acquisition

Mergers & Acquisitions – Buy Side

Corporations and private equity firms foresee an acceleration of merger and acquisition (M&A) activity in 2018, particularly in terms of the size of those transactions. From a sector perspective, technology and healthcare will drive M&A activity in North America because of the U.S.’s strength in tech innovation and the aging populations in advanced economies. Further consolidation within the energy and raw materials sectors should also continue to generate transactions in the coming years.

Companies involved in M&A have been most interested in acquiring relevant technologies. This in addition to expanding customer bases in existing markets, adding to product offerings and diversifying services rank as top three strategic imperatives. M&A also helps companies improve synergy, diversify, grow, expand their products and increase supply-chain pricing power and market share.

Some factors that have made foreign direct investors (FDIs) favor the U.S. for M&A deals include the recent slow international growth, political crises & ongoing wars in certain areas of the world, along with global economic uncertainty. Despite this uncertainty (listed as a key concern in Deloitte’s 2018 M&A Trends Report), M&A is rising to the forefront. FDIs can use M&A as a tool for both smaller, strategic, niche acquisitions as well as bold transformative deals.

In PwC’s Global CEO Survey, four out of 10 CEOs said their companies are targeting the U.S. for their growth prospects. That was reflected in the 6% rise in inbound deal volume through Q1 2017. A few months later, the pace picked up, with year-over-year volume up 10% through May. This could be a sign that overseas businesses are looking to the U.S. to compensate for uncertainties in markets such as China, South Korea and Russia, where economic prospects aren’t as stable. These survey findings are consistent with other analyses, such as a UNCTAD forecast that the U.S. will be the favorite investment destination of global business through 2018, followed by China and India.

As markets adjust to ongoing political and regulatory changes, the M&A market should be buoyed by strong fundamentals and the potential for pro-business policy changes. In particular, opportunities may emerge from potential new U.S. policies, such as cash repatriation, corporate tax reform and more modest regulation.

Fears of increasing protectionism in 2016 morphed into uncertainty about policy that could affect global trade. However, despite trade barrier speculation, cross-border M&A has already been a hallmark of deal making in 2017, with a resurgence of deals between the U.S. and Western Europe. Companies are looking everywhere for pockets of growth, although the main focus has shifted back to developed markets, according to the EY 16th Global Capital Confidence Barometer (CCB).

Sluggish economic growth slowly spread out throughout the world over the past six years has made it more difficult to find the right partner for accelerating business growth. Only 1 out of every 6 investments by venture capitalists in the U.S. delivers its projected return on investment.  With such dim prospects, how can FDIs take advantage of the M&A momentum, hasten their business growth, and overcome deal barriers?

Companies get the most out of their M&A deals with proper focus, preparation and execution. There is no substitute for a well-thought-out M&A strategy and a solid execution plan to improve prospects for the completion of a successful M&A deal.

COGNEGY can help FDIs every step of the way. COGNEGY has teamed with many foreign firms to identify the right target, engage in project discussions, perform both business and legal due diligence (with trusted partners), outline business valuation, craft deals, negotiate, integrate, and accelerate growth.

Please contact Phil Jafflin with any questions you might have: phil.jafflin@cognegy.com

Shift Gears Towards the Automotive Industry in the Southeastern United States

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When thinking of investing in the U.S. automotive industry, thoughts often lean towards the Detroit, Michigan area. Check again – the rapidly expanding Southeastern Automotive Corridor has become the new epicenter of automotive manufacturing growth in the United States, abundant with strong networks and growth potential.

Georgia, Alabama, Florida, Mississippi, North Carolina, South Carolina and Tennessee have collectively become a key industry driver for the U.S. automotive market – one of the largest in the world. This comes as no surprise as the Southeast is home to both 25.4% of the U.S. population and one of the nation’s most robust economies, with a GDP of $2.4 trillion – representing nearly 15.5 percent of the U.S. economy as a whole.

More than 1,060 automotive firms are located throughout the seven states. The region hosts 16 major auto, truck, and bus assembly plants for leading companies such as Hyundai, General Motors, BMW, Honda, Kia, Volkswagen, Toyota and Blue Bird. Mercedes-Benz and Porsche both maintain North American headquarters in Atlanta, GA, and Nissan holds theirs in Franklin, TN.

auto-_-se

Map and Research by Georgia Power

Business Facilities magazine named Tennessee the top state in its Automotive Manufacturing Strength ranking for five of the past six years. The Nissan plant in Smyrna, TN is the most productive plant in North America, producing 633,347 automobiles in 2015. Southeastern states exported nearly $28 billion in motor vehicle, motor vehicle bodies and trailers and motor vehicle parts in 2012, accounting for 62 percent of total transportation equipment exports. Consumer demand is on the rise – new vehicle registrations in the area are expected to grow from around 3 million to 3.1 million between 2016-2020.

The Southeast’s sound economy, stable and growing workforce, low unionization, right-to-work status and low costs of doing business provide additional incentives for automotive leaders to drive towards the region. The Southeast can present a lucrative opportunity for any automotive company looking to invest. But what is the best approach? With the right partner to help plan the ideal market entry strategy through M&A or else, investing in the Southeastern automotive sector can put firms on the right track for growth and profitability.

Please contact COGNEGY  with any questions you might have or email us at phil.jafflin@cognegy.com

 

U.S….What’ s up doc?

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The food industry is largely dependent on consumer spending and economic growth. Therefore, this is valuable to have an overall understanding of the current trends before investing.

The two most widely followed indicators of consumer confidence jumped to the highest levels in seven years last week. The Conference Board reported Tuesday November 4, 2014 that its Consumer Confidence Index climbed to 94.5 in October, the strongest reading since October 2007 before the economy entered the Great Recession.
The solid increase suggests consumers largely dismissed concerns about slowing global growth and have ignored the sharp swings in financial markets in October. Instead, greater hiring and lower gas prices are boosting their outlook.
US consumer confidence rebounded strongly in October, hitting a 7-year high as solid job gains and falling gas prices raised expectations for economic growth. This came despite slowing economic growth in Europe and China that has fueled volatility in financial markets.

Then on Friday October 31, the University of Michigan’s Consumer Sentiment Index rose from 84.6 in September to 86.9 in October, the highest level since July 2007. It was the third consecutive monthly increase in this Index. Respondents to both surveys cited expectations of better economic growth and job gains in the coming months, along with falling gasoline prices, as reasons for their optimism.

On Thursday, October 30th advance report on 3Q Gross Domestic Product came in at a better than expected 3.5% instead of 3% following the 4.6% showing in the second quarter. According to the advance report, the increase in GDP in the 3Q primarily reflected positive contributions from consumer spending, exports, nonresidential fixed investment, federal government spending and state and local government spending…
The Fed has also taken the decision to end quantitative easing (QE) last Wednesday. A further analysis of the official statement released after the policy meeting yields more clues as to when the Fed might start raising interest rates finally.
Second, as for US inflation, which is running below the Fed’s target of 2%, the Fed noted that falling energy prices are the main reason inflation has retreated as of late. They expect inflation to increase modestly when energy prices bottom out.

Yet at the same time, the latest polls on the Direction of the Country show that a 66.0% of Americans believe the country is headed in the wrong direction with only 27.8% who believe the nation is moving in the right direction. There is a huge disconnect between these measures of consumer confidence versus how Americans feel about the direction the country is headed.
So the question is, how can consumer confidence be at a 7-year high when two-thirds of Americans believe the country is headed in the wrong direction?
As always, the economic signals are mixed. However, the headline numbers over the last year support the public’s optimism.
It is true that a big increase in defense spending and a drop in oil imports accounted for a good part of the stronger growth in GDP this year. Moreover, true, too, spending on business equipment (+7.2%) and by consumers (+1.8%) grew more slowly in the 3Q than in the previous quarter, but at least such spending did expand.
The Fed has done its part, arguably, by holding short-term interest rates near zero for the last five years and buying trillions of dollars of long-dated Treasury bonds and mortgage-backed securities to keep long rates low. While the Fed did end its QE bond-buying program as promised, it committed to keep short rates near zero for a considerable time.

Then there are those anecdotal statistics that are useful supplements to the more closely followed government reports:
o Gasoline prices are plunging as new supply exceeds shrinking demand, putting cash into consumers’ pockets just as the holiday season starts. The rule-of-thumb is that every 1-cent-per gallon price decline adds $1 billion to consumer purchasing power.
So the 30-cent drop in the past month gives consumers $30 billion more to lavish on toys, apparel, and, of course, iPhones. In addition, economists estimate that every $1 decline in gasoline prices is associated with a 10% increase in sales of cars and trucks, especially of highly profitable SUVs and light trucks.
o Hundreds of thousands of holiday jobs are available. The seven largest retailers have 400,000 openings that are proving so difficult to fill that employers are “bombarding customers’ inboxes and Twitter feeds with help-wanted ads,” according to the Wall Street Journal. Many retailers ring-up between 25% and 50% of their annual sales in the next few months.
o Profits of leading corporations are up, and after some violent gyrations, the S&P 500 Index is up over 10% from the record level reached at the end of last year. This is good for investors and suggests a strong holiday shopping season.
o Finally, Apple’s iPhone 6 and 6Plus accounted for an estimated 10% of all recent US economic growth, adding 0.3% to overall GDP. Innovation is always a good thing.

Taken together, the economic news does explain the uptick in consumer confidence, although that confidence is dampened somewhat by gloomy economic news from Europe, China, Brazil, Russia, and other countries, as well as by stagnant middle-class incomes, and a job market that could be stronger. The improving economic outlook marches in parallel with a largely bipartisan fear that the institutions of government are just not fully working.

The legislative branch, Congress, is dysfunctional. Democrats are split between moderates appealing to independent voters and the left that is rallying the party’s “core” to remain on a “progressive” path to the 2016 presidential election. Republicans are afraid to speak out on politically sensitive issues and are divided by the Tea Party that sees compromise as weakness.
Other institutions are also in ill repute. The Centers for Disease Control, once the most widely respected government agency, fumbled its response to Ebola, unnerving a public that once looked to the CDC for guidance when faced with a health scare. The Department of Veterans Affairs is unable to deliver adequate healthcare to the nation’s veterans. .
All of this has to be a big part of why two-thirds of Americans believe the country is headed in the wrong direction long-term, even as confidence in the short-term is riding high.

However…Consumer Confidence Hit a 7-Year High in October!

 

Reference: Gary D. Halbert and Investors Insight.

U.S. gas export boom

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It would be difficult to replicate U.S. shale boom, expert says

The shale boom will remain uniquely American for years to come, thanks to the combination of capital, talent, legal system, infrastructure and market that cannot be easily replicated, geopolitical strategist Peter Zeihan said. “This is not something that your average state-run thug can do.” He added.

I spent a full week attending the 2014 OTC Show (In Houston) early this month on behalf of a client distributing its offerings in the energy sectors. I have been quite impressed by the industry dynamics and how big is the boom. The past ten years has seen the global offshore industry bring on stream some of the largest and most complex projects ever attempted. (See more)

The International Energy Agency (IEA) and other expert sources expect oil to remain the fuel of choice up to at least 2035, with a 27% share (down from 33% today) whereas gas is expected be the only fossil fuel to increase its share. Global demand for natural gas is to grow by 64% by 2040. At the same time natural gas prices are to remain strong evidenced by a near term price increase, settling to $4.38/mmBtu in 2020, in the long term prices are expected to rise to $7.65 by 2040. Importantly, the US is projected to become a net exporter of LNG by 2016, spurring the development of new LNG terminals – currently 6 have been approved and 22 are under evaluation.

Whereas the market for Exploration and Production of fossil fuel is recognized to be very much an offshore operation, recent push towards both smaller and more remote fields have seen the growth of floating production systems: 154 new FPSO (Floating Production Storage and Offloading) ships have been identified as well as 5 FLNG (Floating Liquefied Natural Gas) projects that are fully financed.

Furthermore, LNG facilities that have been traditionally built onshore are moving offshore – under pressure of cost – with the increased use of Floating Storage and Regasification Units (FRSUs) located just offshore and connected by pipeline with the distribution facilities. This option is up to 50% cheaper than current onshore solutions.

It is important to note that the use of LNG has grown much faster outside of the US than it has domestically, therefore much of the research and development, design and testing activity has occurred in other countries. Consequently, the international standards applied to LNG operations – wherever they are located – have been heavily influenced by policies and regulations of countries such as Japan, South Korea and some European Nations. In the US LNG is regulated at a federal, state and local level, as well as by non-governmental regulators and standards organizations.

The market for the design and build of the FPSO and FLNG is dominated by a relatively small (but still …) number of players (KBR, TECHNIP, JGC, SBM Offshore, Modec, Bechtel, Teekay, Technip, Samsung, …) who are capable of delivering complex projects of this size, often operating as a consortium. Although often vertically integrated these FEED (Front End Engineering and Design) and EPIC (Engineering Procurement Installation Commissioning) capable companies rely on engineering specialist companies to actually deliver all the specific systems.

See you at OTC 2015!

Please contact me with any questions you might have,  phil.jafflin@cognegy.com

Where to start a Business in the US? One Example:

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Location, location, location! As my colleague explains in his post, the approach to select a corporate site should be articulated. Let’s focus on the Southeast for example.

After defining the target markets, the marketing mix, the partner or target profile, along with other appropriate criteria for the operation like sourcing, financing and funding needs, economical impact and organizational implication, etc., the entrepreneur might have a good idea about the right place for successfully growing a venture.

Other factors that might play a role include infrastructure, access to talented resources, cost of living, economic growth rate, local market size, taxes, economic incentives, schools, prospective partner location, the cost of doing business relative to the U.S. average, and the time difference between the location and the home country.

An article written in French by journalist Jean-Pierre Gonguet describes the Southeast‘s vision and the strategy for becoming a global logistic platform and high-tech hub. “Atlanta veut se mettre à l’air et a l’eau.” Read more in La Tribune (If you do not read French and want more information, let’s have a conversation.) Gonguet was part of the delegation from France during the France-Atlanta 3rd edition last November.

Without being specific on a business model, focusing only on the economic environment makes sense. The Southeast—Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee— is the leading market for population and economic growth in the U.S.

The Southeast:

  • 7th largest economy (GDP) in the world at $3.15 trillion,
  •  home of 70 million people (+8 million in the last 10 years),
  • Atlanta airport is ranked # 1 in world in passenger volume and has 19 cargo-only carriers,
  • headquarters for 12 Fortune 500 and 15 Fortune 1000 in Metro Atlanta,
  • More than 80% of U.S. consumers can be reached from Atlanta in two flight hours or two truckload delivery days,
  • 40% of North American manufacturing and distribution locations are located within 800 kilometers of Atlanta,
  • Atlanta ranks # 2 among America’s most wired cities.

Cost of doing Business in teh US 001

“Source: KPMG’S 2010 Competitive Alternatives Study, Guide to international Business Location”

Despite the statistics, the best business location for a business model might be in San Francisco or in the Mid-West. This is perfectly fine! In other words, the best location for establishing a new venture is a complex decision indeed but key to successful operations.

Adjust to local market conditions to penetrate the market …

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Learn more when Airbus Americas Chairman speaks at Georgia Tech on March 13.

By establishing a manufacturing presence in the U.S. today, Airbus also improves its chances of being selected in the future for U.S. defense contracts, according to business analysts. Read full article by Phil Bolton. Read more

The French American Chamber of Commerce organizes this event, and thanks to the Chamber, COGNEGY is a proud sponsor. Register here.

Strategy: The Airbus investment in the Southeast raises the region’s profile as a center for aerospace development, and suppliers have already moved to the area since the Airbus announcement about opening a facility in Mobile last year. Penetrating a new market by following the tail of one’s customers is a great way to mitigate the risks. Needless to say, it costs a lot less to retain a customer than acquire a new one.

“You can observe a lot by watching. “ Yogi Berra (Yogi was elected to the National Baseball Hall of Fame in 1972.)

Comment les investissements des sociétés Françaises à l’étranger impactent – ils la production et l’emploi en France ?

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En pleine crise économique, cette question parait encore plus légitime et apolitique à mon sens et toutes les parties prenantes d’une entreprise doivent se la poser. Mais comment répondre en faisant abstraction de certains préjugés et avec des faits ?

Dans son étude, l’Insee apporte une réponse. Son article évalue les performances des firmes multinationales dans l’industrie manufacturière Française, et les compare à celles des entreprises uniquement exportatrices et domestiques.

<< Les meilleures performances des entreprises implantées à l’étranger s’expliquent en partie par un effet de sélection : investir à l’étranger s’accompagne de coûts fixes importants et nécessite un niveau de productivité relativement élevé. Pourtant, l’implantation à l’étranger joue un rôle important dans la fragmentation des processus de production qui expliquerait en partie les bonnes performances à l’exportation des entreprises allemandes. (Fontagné et Gaulier, 2008).

EXPORT

Pour Crozet, Méjean et Zignago (2008), les exportateurs ont, en moyenne, une productivité supérieure de 11 % et cette prime se retrouve dans la différence de salaire moyen et de taux de marge. Pour Bellone et al. (2008), les firmes exportatrices produisent 2,5 fois plus que les firmes simplement domestiques ; elles sont deux fois plus grandes, plus intensives en capital de 24 % et versent des salaires plus élevés de 10 %. La productivité du travail serait supérieure de 40 % mais décroissante avec la taille de l’entreprise. En termes de Productivité Totale des Facteurs (PTF), la prime des exportateurs, qui se situe autour de 5 %, tend à augmenter avec la part de la production exportée.

IMPLANTATION

Les primes à l’implantation dépassent largement les primes à l’exportation, en tous points de la distribution.

Il apparaît que toutes les primes sont positives et significatives, et que les primes à l’implantation sont supérieures aux primes à l’exportation.

La prime de chiffre d’affaires s’accompagne d’une prime de valeur ajoutée : les entreprises implantées à l’étranger ne se contentent donc pas de revendre une production réalisée à l’étranger, mais se caractérisent bien par une contribution au PIB plus importante. Elles rémunèrent mieux leur personnel, ce qui reflète probablement un niveau de qualification plus élevé.

Enfin, la prime de productivité pour les entreprises implantées à l’étranger représente le triple de celle calculée pour les firmes exportatrices.

CONCLUSION

La comparaison exhaustive des performances des multinationales de l’industrie française avec celles des firmes seulement exportatrices et domestiques montre que les primes à l’implantation sont élevées et résistent à l’hétérogénéité de l’échantillon, comme à la prise en compte de caractéristiques non observables des firmes. Elles proviennent tout à la fois d’un effet de sélection et d’une amélioration des performances grâce à l’implantation à l’étranger. Ce dernier résultat est de nature à tempérer l’inquiétude que font peser les délocalisations sur l’emploi et l’activité en France. Il conviendrait toutefois d’approfondir ces résultats en décrivant plus précisément les mécanismes à l’œuvre derrière les effets d’apprentissage. >>

Il est clair que l’article provient d’un organisme statisticien mais cela permet de donner un éclairage dépassionné et factuel sur l’investissement à l’étranger.

En premier lieu comme pour tout investissement, il faut une réelle opportunité sur le marché qu’il convient de bien sélectionner et préparer au préalable.