U.S. manufacturers should profit from new opportunities

October 13, 2004

The passage of the American Jobs Creation Act of 2004 will create new opportunities for manufacturers, according to the marketing firm Provident Partners.

Manufacturers should be planning to act on three fronts as a result of this change in the tax law, which will provide nearly $77 billion in relief: Invest in capital equipment programs, obtain greater penetration or expansion into new markets with integrated marketing programs, and develop strategic plans for evaluating foreign markets, such as China.

"The legislative package will reduce the top tax rate from 35 percent to 32 percent, which will free up funds for manufacturers to grow their businesses aggressively," said Albert Maruggi, Provident Partners president.

Ken Kedl, executive director of Technomic Asia, a consulting firm that advises U.S. manufacturers Asian market opportunities, believes midsize manufacturers will gain from the tax package.

"U.S. manufacturers are becoming aggressive in evaluating the China market and how they can profit from either exports or strategic alliance ventures in Asia," Kedl said. "This tax package will challenge U.S. manufacturers to determine how best to expand their revenue opportunities as part of a global supply chain."

In 2003 China received more than $53 billion in foreign direct investment, much of which came from second- and third-tier suppliers responding to the desires of their major customers.

"This tax-relief package is a good first step upon which U.S. manufacturers must build," said Peggy Smedley, author of the book Mending Manufacturing. "U.S. manufacturers will do well to invest in the technology and capital that keeps their competitive edge, but they can't stop there. Continued pressure on political leaders to keep U.S. manufacturers at the top of their agenda to rebuild the economy is critical in this election season.

"Additional improvements in productivity with initiatives in lean manufacturing and, most importantly, greater collaboration among U.S. manufacturers about competing globally also are critical elements for further success," Smedley said.

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