Michigan’s publicly traded manufacturing companies consider competition and consolidation to be their biggest risks in 2014.
BDO USA conducted its first Michigan-based manufacturing risk factor survey this year based on 10-K filings of publicly traded companies and found that of publicly traded U.S. manufacturers headquartered in Michigan, “100 percent cite risks related to industry competition, consolidation and pressure on pricing.”
In comparison with the rest of the nation, Michigan manufacturers are slightly more concerned with competition and consolidation.
BDO’s national Manufacturing Risk Factor report, now in its second year, found 94 percent of manufacturers counted competition and consolidation as a concern.
“I think there is no question the No. 1 risk factor is competition,” said Fred Rozelle, central assurance regional managing partner at BDO USA, who works out of the firm’s Detroit office. “Competition is always at the top of the list.”
Rozelle said it doesn’t matter what the industry is, competition will always be a top risk factor for businesses. He said competition also is the driving force behind innovation and efficiency.
“I actually think it is healthy because it’s a free market enterprise and the competition really drives pricing and efficiencies across manufacturers,” he said. “The more efficient they are and competitive, the better the pricing (and) the better it is for the end consumer.”
Rozelle said overall Michigan’s risk factors were very consistent with the national survey.
He did note one big surprise from the survey, however.
“Skilled labor always hits the top of the list and it didn’t here, which really surprised me,” he said.
Rozelle said, overall, manufacturing continues to improve in Michigan.
“I think we’ve done a good job under our current political leadership to attract manufacturers,” he said. “Michigan is a leading state in growth of manufacturing jobs throughout the country since the recession. We are on top.”
He said the Right to Work law has improved Michigan’s attraction and retention opportunities, making it more competitive with southern states that previously have been able to pull some manufacturers away from the state.
He noted tax rates on businesses are still high in Michigan compared with other states, however.
“I think Michigan is a tougher environment, though we’ve seen significant improvements.”
BDO also conducts risk factor surveys in the life sciences, natural resources, real estate, retail and technology industries.
Michigan risk factors
Competition and consolidation in manufacturing — 100 percent
General economic conditions — 97 percent
Federal, state & local regulations — 94 percent
U.S. & foreign supplier/vendor concerns and distribution disruptions — 88 percent
Currency/foreign exchange fluctuations — 88 percent
Less demand for products — 85 percent
Threats to international operations — 85 percent
Management of mergers & acquisitions — 85 percent
Legal proceedings — 85 percent
Restrictive international trade policies — 79 percent
Environmental laws, regulations & liability — 76 percent
Commodity/raw material prices — 76 percent
Access to capital — 76 percent
Labor concerns; underfunded pensions — 76 percent
Failure to properly execute business strategy — 76 percent
Intellectual property violations/challenges — 74 percent
Product quality issues/recalls — 74 percent
Health of the major industries they serve — 74 percent
Ability to innovate to meet changing customer needs — 68 percent
Loss of key management/new management — 65 percent
U.S. risk factors
U.S. & foreign supplier/vendor concerns and distribution disruptions — 100 percent
Federal, state and local regulations — 99 percent
Labor concerns/underfunded pensions — 97 percent
General economic conditions — 96 percent
Commodity/raw material prices — 96 percent
Competition & consolidation in manufacturing — 94 percent
Threats to international operations — 91 percent
Management of mergers and acquisitions — 89 percent
Access to capital — 89 percent
Currency/foreign exchange fluctuation — 88 percent
Natural disasters, terrorism and geo-political events — 88 percent
Environmental laws, regulations and liability — 87 percent
Changes to accounting standards and regulations — 87 percent
Less demand for products — 86 percent
Failure to properly execute business strategy — 82 percent
Maintaining IT systems & operational infrastructure — 80 percent
Legal proceedings — 79 percent
Ability to innovate and meet changing customer needs — 78 percent
Privacy concerns related to security breach — 78 percent
Restrictive international trade policies — 77 percent