ARCHIVES HISTORIQUES 
DE LA COMMISSION 
 
 
 
COLLECTION RELIEE DES 
DOCUMENTS "COM" 
 
 
 
 
COM (85) 112 
 
 
 
Vol. 1985/0 035 
  
 
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Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the openi ng to the public of the historical archives of the European Econom ic 
Community and the European Atomic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), this f ile is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 198 3 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 vom 27 .9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
COMC85) 112 final 
Brussels, 21 March 1985
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL  
ADVANCED MANUFACTURING EQUIPMENT IN THE COMMUNITY
COM(85) 112 final

C & \*\  ό 1L
COMMISSION STATEMENT ON ADVANCED MANUFACTURING EQUIPMENT
ADVANCED MANUFACTURING EQUIPMENT  
SITUATION AND OUTLOOK

6L0SSARY
NC :  Numerical control
CAD :  Computer assisted design
CAM :  Computer assisted manufacture
CAE :  Computer assisted engineering
CIM :  Computer integrated manufacturing
FMS :  Flexible manufacturing system
MAP :  Manufacturing automation protocol (of GM)
AMRF :  Automated manufacturing research facility
OSI :  Open systems interconnection (of ISO)

CONTENTS
page
CONMISSION STATEMENT
1. Reasons and objectives 1
2. Standardization in the area of advanced manufacturing equipment 2
3. Exploitation of European technological potential 4
4. Structural and financial aspects 6
5. Human resources 7
6. Information on the evolution of industrial automation 9
SITUATION AND OUTLOOK
INTRODUCTION 1
A. FACTORS INVOLVED IN TECHNOLOGICAL DEVELOPMENT 2
(i) Main lines of technological development 3
(ii) Standardization 8
(iii) Research and development 9
B. STRUCTURAL AND FINANCIAL IMPLICATIONS FOR COMPANIES 11
(i) Financial aspects 12
(ii) Structural aspects: users of advanced equipment 14
(iii) Structural aspects: suppliers of advanced equipment 17
C. HUMAN RESOURCES 22
(i) Employment level 22
(ii) Education and training 24
(iii) Organization of the work 25
(iv) The two sides of industry 26
(v) Siting of companies 27
ANNEX I: ADVANCED EQUIPMENT AND ITS DISSEMINATION AMONG USERS
A. Overview 1
B. Advanced machine tools 1
C. Industrial robots 6
D. Flexible manufacturing cells, systems and transfer lines 12
E. Computer aided design 18
F. Industrial computing and other types of advanced equipment 22
G. Computer integrated manufacturing and the factory of the 24
future
ANNEX II: STATE SUPPORT FOR MANUFACTURING AUTOMATION
Germany 1
U.K. 3
Italy *
France 5
U.S. 6
Japan ®
ANNEX III: TABLES AND GRAPHS 
EXPLANATORY NOTES

COMMISSION STATEMENT ON ADVANCED MANUFACTURING EQUIPMENT
1. REASONS AND OBJECTIVES
This paper has been written in response to the request made by the Ministers  
for Industry at their meeting in Paris on 18 May. It follows on from the  
Commission's Statement on the machine-tool industry of 8 February 1983  
(SEC (83) 151) and takes into account the experience of the ESPRIT programme  
which includes a section devoted to computer integrated manufacturing.
The paper covers the field defined by the French word "productique", which  
was on the agenda of the Ministers' discussion and which refers to the inte­
grated automation of production processes that has been made possible by the  
application of new technologies and advanced manufacturing equipment arising  
from the microelectronic revolution.
The detailed implications of the automation of industry, taking into account  
the respective roles of economic actors and public authorities, are examined  
in the supporting document: "Advanced manufacturing equipment: situation and  
prospects", which follows the present statement.
The production of advanced manufacturing equipment is in itself a major 
issue for the Community, both because of the leading-edge technologies 
involved and of the need to maintain European competitiveness in the key 
sector of capital goods.
However, its strategic importance is far larger, as the use of advanced 
equipment is a potential source of spectacular improvements - sometimes by 
orders of magnitude - in the productivity of user firms, in particular  
because of the increased period of use of this equipment (going towards  
24h/24h). It introduces flexibility into large-scale production and for the  
first time allows automation of smaller batch production. In particular its  
use speeds up the production process (reduction of work in progress) and  
enables a faster response and adaptation to the market (reduction of stocks,  
securing of markets). It should equally be noted that this process of  
automation is not limited to production as such, but also integrates  
upstream and downstream functions, notably design (computer-aided design or  
CAD) and management (marketing, management and planning of production,  
distribution etc.).
At present metal working, processing and assembly industries such as 
automobiles and aerospace play a central part in industrial automation.
However the whole of industry is concerned, and the parameters in which  
traditional industries such as textiles, clothing and foodstuffs operate are  
undergoing

-  2 -
fundamental changes. The driving role of information technology (IT) should 
also be noted in this investment process. This process of automation is made  
possible by IT and also gives rise to an accelerated expansion of the IT  
sector. The challenges and problems go far beyond any narrowly defined  
sectoral limits and concern both so-called leading edge and so-called  
"mature" industries. In the longer run, the competitiveness of European 
industry and thus its world ranking is therefore at stake.
In the face of the on-going changes, the economic actors - i.e. enterprises 
and workers - must bear the main responsibility for responding to the 
challenges raised by the radical change in the European industry's operating  
conditions.
Nevertheless, public authorities at national and also at European level have  
their part to play in the changes that are vital if European competitiveness  
is to be maintained, for they are responsible for this economic environment 
and for creating framework conditions that enable economic agents to over­
come the new challenges. Clearly, the Community can and must make a  
significant contribution in this area. Thus the creation of a European 
industrial area is essential, as it will stimulate competition in a unified  
continental market, as is further monetary and fiscal integration.
2. STANDARDISATION IN THE AREA OF ADVANCED MANUFACTURING EQUIPMENT
The benefits of the use individually of different items of equipment is con­
siderable, but it is their integration into automated systems that allows  
full realisation of their potentia^. The resulting benefits do not simply  
add up but increase exponentially.
It is in this context that standard!sation is 50 important. The possibility of  
linking the various items of equipment and islands of automation becomes one 
of the key aspects of any automation strategy^ For this it is vital both to  
promote design rules and systems architecture giving rise to a framework  
of reference and to standard!sethe interfaces between the various elements  
making up automated systems.
The analysis demonstrates that modular standardization is involved because  
the elements to be standardised are not only individual items of equipment  
but also the different functional modules making up these items of equip­
ment. This is related to the variety of technologies involved as a result of
Benefits of the order of 250% have recently been described in the  
specialist journal "Usine Nouvelle", (3rd quarter 1984).
Work on this is already under way in the framework of the ESPRIT  
programme.

- 3 -
which standardisation allows of a significant potential for specialisation,  
increased production runs and therefore cost reduction (learning and scale  
effects).
Thus, there are two areas of impact of standardisation. From the user's  
point of view it permits the integration of the various elements in auto­
mated systems allowing them to draw full benefit from automation. From the  
point of view of producers it provides a base from which firms can lower 
their production costs provided that they can achieve production on a 
continental or even a world scale.
This demonstrates the importance of standards which have the widest possible  
geographical coverage. Standardisation of advanced equipment is therefore a  
priority area for action at the Community level.
These economic considerations explain the growing importance of standardis­
ation in all industrial countries. In the US, General Motors, having found  
that 30-50% of the cost of all additional automation was directly attribut­
able to equipment compatibility, has taken the initiative of imposing on its  
suppliers a series of specifications relating to interfaces between items of  
advanced equipment. These have been arrived at with seven of GM's main  
suppliers including IBM, DEC and Hewlett-Packard and are codified in the  
MAP (Manufacturing Automation Protocol). The MAP is already supported by  
more than a hundred US enterprises (including Ford, Chrysler, IBM, General  
Electric) and could rapidly become a de facto norm in the US. Moreover, the  
research facility of the National Bureau of Standards (Automated  
Manufacturing Research Facility or AMRF), which will become fully  
operational in 1986, will enable evaluation and testing of norms for  
advanced equipment in the US. In Japan MITI is financing a large  
experimental complex at Tsukuba (Flexible Manufacturing Complex with laser) 
in which some 20 Japanese firms in this area are participating. This will  
certainly play an important role in laser technology in industry  
(manufacturing, assembly, inspection) but it is equally based on modular  
standardisation of equipment. In 1984 and at the beginning of 1985 the  
prototype complex acted as a proving ground for evaluation, experimentation  
and testing by the participants and will be dismantled after the results  
have been transferred to industry.
Despite considerable expertise in the Community, Europe remains behind in  
comparison with the significant Japanese and US efforts to standardise  
advanced equipment. The Commission's discussions with associations  
representing the machine tool industry have not enabled progress on stand­
ardisation of interfaces, in particular because of the dispersed nature of  
the traditional mechanical engineering industry, which comprises a large  
number of firms of varying technological levels, most of which have not yet  
realised the importance of standardisation.
It is worth emphasizing that standardisation of advanced equipment differs  
significantly from traditional standardisation in the mechanical engineering  
sector. It comes within the area of IT standardisation and needs to be  
developed from the basic framework that is being set up at international  
level of which the OSI (Open Systems Interconnection) remains the principal  
example.
The existing specifications cover only part of the interconnection levels  
and work continues.

- 4 -
In the same way as for the launching of IT standardisation work*, it will be  
necessary to ensure that the initiative should take as its starting point  
th® principal actors involved in advanced manufacturing equipment* i.e.  
firms (manufacturers and users of advanced equipment) that exercise an  
important role in this area through their research and innovation efforts«
In view of the fragmentation of the industry structures and the national  
divisions characterising the European scene* the Commission must take the  
initiative here also* as it would be illusory to rely on industry standards  
developing spontaneously* as is happening in the US.
The Community role could take the form of the following three-stage  
procedure:
- with the assistance of the national administrations concerned with  
industrial standardisation policies, the first task will be to assemble in  
an informal gathering at a Community level, representatives of firms which  
have a direct interest in the issue;
- these firms must form a nucleus, which, on the basis of international work  
(OSI) and in the light of (and perhaps in liaison with) activities  
initiated in the US and of Japanese experience, is able to formulate a  
work plan defining the subsequent successive steps for development of  
European standardisation;
- when this work is sufficiently advanced and objectives defined clearly,  
the Commission and Member States should initiate a second phase in order  
to define procedures and working methods which* while taking into account  
the particular nature of this area* bring about what is required for all  
standardisation activity - the adoption through an open process of consen­
sus, of genuine European standards to be applied at national level.
A particularly important aspect of the system to be designed is that relat­
ing to experiment as well as conformance testing and certification. This is  
the final phase of a complex and wide-ranging process of standardisation.
3. EXPLOITATION OF EUROPEAN TECHNOLOGICAL POTENTIAL
There are a series of important national programmes for precompetitive  
research and automation which concern advanced equipment either directly or  
individually. Nevertheless it is open for consideration whether the  
separation of national efforts does not involve a loss of efficiency* in  
particular as a result of duplication, and whether it would not be worth­
while for Member States to examine, together with the Commission* means of  
pulling together public efforts in the Member States with a view to  
enhancing intra European synergies* and making best use of the potential  
that exists within Europe. This would allow a reduction of the comparative  
advantage enjoyed by the US and Japanese programmes (better use of  
resources, early launch, greater industrial involvement).

- 5 -
a Community dimension for R&D is important insofar as joint effort at a  
European level allows attainment of the "critical mass" of R&D which permits  
real progress. In this respect the ESPRIT programme is significant with  
regard to pre-competitive research in the area of computer integrated  
manufacturing.
It is in this same context that ESPRIT pilot projects are very important, as  
they will lead to the establishment of European centres of excellence  
favouring contacts and cooperation within the European research community,,  
thus at the same time reducing duplication of efforts.
The BRITE programme, which was approved in principle by the Council at the  
end of 1984, is designed (as is ESPRIT) to facilitate convergence between  
academic and industrial circles in the area of competitive research. The  
programme involves a series of priority R8D areas in the field of advanced 
equipment and integrated industrial automation (laser technology, CAD and  
mathematical models, new computer-aided test methods etc.). Moreover the  
BRITE programme envisages pilot and demonstration projects relevant to  
automation in connection with soft materials. This part of the BRITE pro­
gramme is of particular interest to an industry such as the clothing sector.  
It is worth following this work attentively to see if it can serve as a  
model for analogous action in other areas.
At the level of the individual firm the analysis shows that an increase in 
R8D is essential, particularly for suppliers of advanced equipment in the  
mechanical engineering sector. For a traditional machine-tool manufacturer,  
going over to the production of numerically controlled machine tools implies  
multiplying by two or even three, the percentage of his turnover devoted to  
R&D.
In the face of the powerful strategies being implemented by large American  
or Japanese groups belonging to the computer, electronic and electric  
industries, which, in view of the increased role of information technol­
ogies, aim to be supplying all parts of the factory of the future, an  
increase in intra-European cooperation would seem desirable. Such cooper­
ation could take advantage of European strengths, which are far from  
negligible. Among these, in the first place, is European expertise in the 
mechanical sector. In fact, at the current stage of automation the in-depth  
knowledge of the processes to be automated is a necessary criterion for  
success, as is demonstrated by the fact that it is machine tool manufact­
urers that have installed the majority of flexible manufacturing systems  
(FMS) during the last two years. In this context the objective of 
cooperation should be the drawing together of European industry, notably the 
electronics, computer, electrical and mechanical sectors.
In order to encourage such cooperation and in particular to dispel the legal  
uncertainty surrounding European cooperation Jhe Commission adopted on  
19 December 1984, a regulation exempting most research and development 
agreements up to the stage of joint indusrial exploitation of the results of 
such R&D, from restrictions under the Treaty of Rome.
* On condition that the cumulative total of the shares of the Community  
market held by the parties involved does not exceed 20%.

-  6 -
Finally it would be opportune for the Commission and Member States to  
examine the means of inproving contacts and increasing reciprocal exchanges  
of information between the various firms* institutions and research centres  
engaged in R&D on industrial automation.
4. STRUCTURAL AMD FINANCIAL ASPECTS
The introduction of advanced equipment and the progressive automation of  
industry is causing important changes to the underlying economic structures.
Insofar as mass production is concerned* classical automation using rigid  
production lines is giving way to a more flexible automation which enables  
profitable production in smaller batches and is therefore leading to a  
process of "dematurity" in an industry such as the automobile industry* long  
considered as mature. The traditional labour intensive industries are  
liable to become technology- and capital-intensive leading to changes in the  
pattern of international trade. Large firms can gain greater flexibility  
and their central management is able to react more rapidly to market  
signals; this reduces one of the main advantages of smaller firms, which has  
been their greater flexibility. Product innovation is accelerated and the  
life cycle of products is correspondingly shortened.
These changes also affect suppliers of advanced equipment. The competitive  
position of European firms active in this sector is often fragile* not  
because of a lack of technical know-how* but because they have neither the  
volume of production (linked to standardisation) nor the automated  
production methods of their competitors and are therefore seriously  
handicapped through higher costs. In order to overcome this handicap  
European firms will in many cases have to increase substantially their  
investments as much in equipment as in development of new products in order  
to cope with international competition. This is particularly true for firms  
belonging to the mechanical engineering sector which still contains too  
large a number of traditional small firms producing one machine at a time.  
The future seems bleak for those which cannot adapt.
Industrial automation requires significant investment on the part of users
and producers in order to replace traditional equipment. Even if, in terms  
of productivity, new equipment is capital saving, its purchase can pose  
significant financial problems (particularly of cash-flow) to firms because  
of the large up-front investment before there is any pay-back. Moreover  
traditional financial criteria do not take into account strategic advantages  
of advanced equipment, nor those that are hard to quantify (how does one  
value a halving of delivery time). This makes access to external finance  
more difficult.
While it is true that advanced equipment allows smaller batch production,  
a minimum volume of production is nevertheless necessary.

- 7 -
It is in this industrial and financial context that Europe has seen a rapid  
growth of state aids for automation over the last two or three years. This  
moreover helps to explain the acceleration of diffusion of advanced equip­
ment in industry in the Community. Thus with an average rate of growth of  
over 40% during recent years Europe's robot population is now larger than  
that of the US.
If in certain cases state support can play a positive role in anticipating  
the improvement in profitability of advanced equipment, thus facilitating  
the learning process for firms and allowing them to surmount cash-flow  
problems, the danger of distortion of competition must however be under­
lined. The Commission intends to be particularly vigilant in this respect.  
Moreover, the emergence of an "aid mentality" is to be feared. This would  
run directly counter to the objectives pursued by governments. The diffusion  
of advanced equipment and the development of industrial automation would  
then risk being determined by the availability of public funds rather than  
the dictates of the market.
There is therefore a need to consider whether public support is efficient  
and in particular whether the direct sectoral interventions of states are  
not in danger of inhibiting rather than accelerating the required industrial  
adjustment by artificially preserving inappropriate and obsolete economic  
structures. This adjustment depends on the convergence of a series of  
complex structural changes which can only be carried out at the level of the  
firm and the workforce and not by the state.
It is for this reason that preference must be given to measures of a general  
character - such as support for the take-up of equipment by SME's - which  
leave the economic actors entirely free to make their own decisions.
Moreover even if taken individually Member States' aid programmes are at a  
lower level than those of the US or Japan, it appears that the volume of aid  
being given in the Community as a whole is high. The impression is that 
European efforts are not fully efficient. One explanation is probably the  
national divisions in the Community. When large investment projects in  
European countries benefit from Government support, the firms involved are  
almost always either of national origin, or come from outside the Community.
There is therefore scope for reflection on the types of support that are 
efficient and on the best way of making full use of the European dimension, 
both as regards the private and public sectors. Some thought might be  
devoted to the possibility of encouraging joint projects from firms  
belonging to different Member States, to enable them to put together their  
varied capacities and to obtain the financial and organisational size that  
is too often lacking in Europe.
5. HUMAN RESOURCES
The dissemination of advanced equipment could potentially lead to a consid­
erable reduction in employment in industry and particularly in the manuf­
acturing sector. In overall terms, the effects of automation have up till

-  8 -
now been relatively unimportant. This is probably related to the fact that,  
up till now, advanced equipment has generally been introduced piecemeal with  
a fairly low degree of integration. As gains in productivity increase sub­
stantially with the integration of advanced equipment, it seems likely that  
the impact on employment will follow the same path. Consequently, the pace  
of redundancies is likely to speed up considerably in manufacturing industry  
when the integration process really takes off. At the same time, it should  
be noted that the job losses caused by advanced equipment will mainly affect  
companies not installing such equipment, whose market shares will dwindle as  
their competitiveness declines.
It would be wrong to conclude that industrial automation will necessarily 
cause large-scale unemployment. The production of advanced equipment itself  
will create a certain number of jobs. Some tasks, such as equipment main­
tenance, will be contracted to outside firms and thus transferred from the  
industrial to the service sector. The greatest source of jobs, however, is 
likely to be the expansionist effect of the gains arising from advanced 
equipment on the whole of the economy, and particularly on the development  
of services.
In order to achieve the redeployment of the workforce this implies, the  
European economies will have to see through a major transformation in  
qualifications and in the sectoral (and in all likelihood geographical)  
distribution of employment.
This change in qualifications at all levels is undoubtedly one of the 
greatest challenges raised by the introduction of advanced equipment.
Achieving it requires a massive effort in the field of training and  
education throughout the Community. There is already a shortage of certain  
skills, in particular of technicians and engineers in "mechatronics", which  
could act as a bottleneck for the further dissemination of advanced equip­
ment. This could in turn affect European competitiveness, especially in the  
case of SME's, which do not have the means to set up internal retraining  
programmes. It is essentially up to Member States and their regional and  
local authorities to implement the necessary measures, but the Commission  
can promote contacts and exchanges at European level^ and generally help to  
stimulate action. More specifically, the Commission has proposed setting  
up "partnership programmes” which correspond very closely to the needs that  
have been identified in the field of advanced equipment, in particular as  
regards the vital need for more multi-disciplinary qualifications.
The social partners have a crucial role not only as regards qualifications,  
but for all of the changes that will be brought about by automation, notably  
in the organization of work. In this area, increased flexibility is  
essential for maintaining competitiveness. Without replacing the necessary  
discussions at the level of firms and Member States, the Commission intends 
to play its part fully in stimulating the dialogue between social partners 
at European level.
C0M(84)6 final :  "Technological change and social adjustment" and  
Doc. V/1523/84 :  "Industry-university cooperation and technological  
change :  its role in the creation and development of firms".

- 9 -
6. INFORMATION ON THE EVOLUTION OF INDUSTRIAL AUTOMATION
Advanced equipment is an area of constant and rapid change. It is difficult  
to assemble consistent and comparable information in this field and, given  
the need for the decision-makers (industry and public authorities) to know  
how the situation is developing, the Connission proposes to entrust indepen­
dent institutes in different Neaber States with a aultiannual contract for 
coordinated annual reports, using a common methodology, on advanced equip­
ment and the evolution of industrial automation.

ADVANCED MANUFACTURING EQUIPMENT 
SITUATION AND OUTLOOK

SITUATION AND OUTLOOK
INTRODUCTION
The emergence of advanced manufacturing equipment as a result of the  
convergence of mechanical engineering and micro-electronics is leading to  
important industrial changes in permitting, for the first time, automation  
which is both integrated and flexible, of production processes.
The installation of this equipment and above all its integration into  
automated systems allows of highly significant gains for user firms, not only  
of productivity but also in terms of stock levels, work in progress as well  
as other aspects, more difficult to quantify, such as quality. The main  
impact of this advanced equipment is therefore at the production process  
stage. The graph below demonstrates this in the case of Germany, showing a  
significant increase in investment by German firms in the area of new  
production techniques.
Destination of investment by processing industry in Germany  
Percentage weighted by company turnover of investment destined for:
' : increase  in capacity including ■■■■■ introduction of new production  
introduction of new products ___ techniques _
i 
o I - .. ' ' . . . ■ ..■■i*"',.—  I , i  «
At the current stage processing and metal working industries such as the  
aeronautics and vehicle sectors are at the centre of this veritable  
industrial revolution which particularly involves manufacturing industry  
(defined here as discontinuous process industry (see note 1) - a concept  
covering manufacture in series, large and small) which represents some 60% of  
industrial value-added in the Community.

-  2 -
It is indeed a revolution since it involves the changeover from an economy  
structured on mechanical engineering principles (mass production, product  
uniformity and a limited degree of independence and intelligence in the  
various stages of the process) to an economy featuring flexibility, the  
capacity to react rapidly to market trends, product adaptability and low-cost  
distributed intelligence in the production process. These results cannot be  
achieved merely by grafting electronics onto existing machinery; there must  
be a genuine merger of mechanical and electronic technologies involving a  
completely new industrial culture marked by a comprehensive and multi­
disciplinary approach to production problems.
This technological revolution calls for a radical change in the economic  
conditions within which companies operate and in the organization of work  
within the firm. In addition to the technical ability to solve production  
problems, the economic and human aspects become of vital importance.
Advanced manufacturing equipment embraces advanced machine tools, industrial  
robots, flexible manufacturing cells, systems and transfer lines, mechanical  
handling, transport, automatic inspection and warehousing as well as computer  
aided design and manufacture, local communication networks and industrial  
computing in the widest sense of the term. It is difficult to illustrate the  
situation by statistics but by cross checking various sources of information  
a relatively consistent picture of the overall situation can be obtained. It  
shows that the existing Community market for this equipment - intended for  
discontinuous processes - maybe be estimated at close to 8,000 million ECU a  
year. The market is growing rapidly and while it is risky to state an overall  
rate of growth annual increases of 25% or 30% - and even more - are currently  
mentioned for certain items of equipment.
The analysis below is divided into three parts:
a) The factors involved in technological development (including standardiz­
ation)
b) The structural and financial implications for companies
c) The human resources
This examination of the issues is based mainly on the content of the three  
annexes. Annex I reviews the various types of advanced equipment (for each  
type of equipment - definition, economic return, extent of diffusion,  
situation of European producers and outlook for demand) in order to arrive at  
an overall picture of integrated automation in the factory of the future.  
Annex II attempts to provide details of state aids in the four largest  
Community countries and in the U.S. and Japan. Finally Annex III contains  
statistical tables and background graphs.
A. FACTORS INVOLVED IN TECHNOLOGICAL DEVELOPMENT
The content of Annex I brings out clearly the importance of technological  
development and shows that, despite the frequent references to the techno­
logical gap between Europe and the United States or Japan, Europe does not  
lack know-how in the field of advanced equipment, the problem being to  
exploit this know-how in industrial and economic life.

- 3 -
(i) Main Lines of technological development
Integration:  Since the integration of various types of advanced equipment
can increase productivity severalfold, the possibility of connecting them  
together, i.e. the existence of compatible interfaces, is of vital importance  
for the future success of the automation process. The importance of this is  
not yet fully realised by many European companies which are still introducing  
individual items of equipment and have not yet tackled the question of  
integration, but compatibility requirements are bound to become increasingly  
important as advanced equipment becomes more widespread. So far it is really  
only the major users that are acutely aware of these problems and therefore  
it comes as no surprise to learn that General Motors has taken the most  
significant step in recent years. When GM found that only 15% of the 40 000  
programmable machines it owns were capable of communicating outside their own  
processes and that 30-50% of the costs of any additional automation were  
directly linked to the compatibility of equipment, it decided to require all  
its suppliers of advanced equipment to meet a series of interface norms for  
both software and hardware known as MAP (Manufacturing Automated Protocol).  
The norms are developed by GM in cooperation with seven of its main  
suppliers, including IBM, DEC and Hewlett-Packard.
Modularity:  The existing or potential importance of modularity in reducing
costs is demonstrated on several occasions in Annex I. The principle of  
modularity is of almost universal application in advanced equipment - whether  
at the level of CAD software, the different parts of an FMS or the functional  
components making up a machine tool or a robot - and at the same time is  
indissolubly linked to standardization which allows the necessary production  
volumes to be attained. Hi-fi equipment provides an interesting parallel: a
few years ago record players were sold in the form of a single unit contain­
ing all the required functions. With the development of more complex  
technologies modular units swept the market and it is now easy to buy tuners,  
amplifiers, turntables and recorders of different makes in the form of  
modules that can be connected together. Consequently modularity also goes  
with specialization. One point of importance: it is the definition of the
modules that allows identification of the interfaces between the different  
modules and hence the level at which compatibility must be ensured.
Reliability:  One of the most immediate problems in installing ever more
complex and more integrated plant is reliability, an essential characteristic  
if machines are to be able to operate without interruption over long periods.  
In the case of machine tools the rate of utilization for conventional  
machines is close to 60% whereas in automated systems it is as high as  
80-90% according to Kearney and Trecker. It is therefore generally necessary  
to review the design of machines to be incorporated in a system. These  
machines will increasingly be equipped with instruments to measure tool wear;  
diagnose failures and even avert them by giving warning of malfunctions  
before they bring the system to a standstill. This is of great importance  
because it is much more difficult for a technician to trace a fault in a

- 4 -
complex system than in an isolated machine (in addition there is a shortage  
of qualified technicians - see section on human resources). At present  
hardware and software reliability problems are perhaps the main drag on the  
cost effectiveness of complex systems and tend to put off potential  
purchasers.
Intelligence: The concept of "intelligence" is applied mainly in the field
of robotics. The JIRA (Japanese Industrial Robot Association) is of the  
opinion that intelligent sensor-based robots with recognition facilities  
which accounted for 9% by value of Japanese robot production in 1979 will  
increase their share to 23% in 1990. In 1982 the Financial Times estimated  
that in Western Europe this share would reach 11% in 1986 starting from  
almost nothing in 1981. These robots are given intelligence by fitting them  
with vision and/or touch sensors and developing sophisticated software  
enabling them to adapt their behaviour in the light of the information  
transmitted by these sensors. With the steady improvement in robot vision  
brought about by technological progress, tkjere is likely to be very rapid  
growth in vision sensors; it is estimated that they were fitted to less  
than 5% of robots in 1984 but this will increase to over 10% in 1985. The  
world market- 5  in vision systems is likely to grow from 800 units in 1984 to  
7 000 units in 1990 and 14 000 units in 1992. In terms of cost, this means  
that the share of software and sophisticated electronics (sensors) will  
increase in comparison to more conventional components, including the  
mechanical side as the following tables show:
1980 1985 1990
%  %  %
% of robot population (all industries)  
equipped with
- recognition system - 2D 22030
- 3D 0110
- vision sensors 11025
- tacti le sensors 21020
% of robot population able to take strategic
decisions 51020
Robot control systems 198019831990
% %%
- no computer 602812
- mini computer 203338
- microprocessor 203950
Source:  Delphi Study. SME. University of Michigan, 1982.
Although all that has been said above concerns robotics, these developments  
are also obviously affecting all automated production systems, which are  
benefiting from this increase in intelligence.
Percentages not strictly comparable: in Japan they are based on a wider  
definition of robots (see Annex I).
Usine Nouvelle, 28 June 1984.
Science et Technique, February 1984.

Flexibility:  At all levels equipment is being developed to give greater
flexibility and versatility. One example is the FMS that Citroen installed  
in its Meudon works in 1983 to produce prototypes of mechanical components.
A very wide range of parts have to be machined in very short runs. In most  
cases each part has to be machined differently and therefore requires a  
different set of tools; the number of tools increases more rapidly than the  
number of parts because of the need to keep spare tools in case of breakage.  
There are 700 tools used in this system, 600 of them being kept in an  
auxiliary store specially designed by Citroen and connected to the machining  
centres by self-guided vehicles that also carry parts between the different  
machines. The push for flexibility (it appears that FMS's with 1000 tools  
are on the drawing board) necessitates increasingly complex software and  
perhaps above all hardware and tooling, which aggravates the reliability  
problem and hence increases the risk of stoppage (factors on which cost  
effectiveness depends). Here the use of the laser for machining appears to  
be very promising since lasers can perform a very wide variety of machining  
functions. This has not escaped MITI: one of its major R8D projects is the
Flexible Manufacturing Complex with Laser at Tsukuba. This project, which  
has been undergoing testing and experimentation by the groups participating  
in 1984 and early 1985, consists of a very sophisticated FMS built around a  
20 kW C02 laser and incorporating automated inspection of the parts produced  
at the end of the process.
Unmanned operation:  By combining the above improvements it should be
possible to obtain a .greater potential for unmanned operation allowing  
installations to run for long periods with a minimum of human intervention.
Development of software and data-processing capacity:  As various types of
equipment are examined and the main lines of technological development  
outlined it becomes clear that software will have to be further developed and  
will become more and more sophisticated thereby accounting for a growing  
share of the total cost of automation.
This is illustrated in the following graph which shows the cost trends for a  
machine tool numerical control system.

198 V.·
percentage of  
total costs
Source: Koch, Systematisches Softwareengineering für
Microcomputer, Elektronik, special edition No 53.time
At the same time larger information processing capacities will be required,  
i.e. more powerful computers and microcomputers (at the same cost), which  
appears to be in line with current developments. Although Europe plays a  
minor role in computer hardware, it does in principle have some real know-how  
in the software field.
Overall picture: Solutions to the various problems mentioned here already
exist in many cases, at least at experimental level. What must be done is to  
make them applicable.on an industrial scale, in particular by reducing costs.  
This enabled the OTA** to predict in a recent study the solutions to a number  
of technical problems relevant to automation which are shown in the following  
table.
Office of Technology Assessment of the US Congress.

Programmable automation: a few projections on the solution
kg^r~^7oblemS
Now (1984) 1985-86 1987-90 1991-2000 2000
1. Powerful low-cost 
terminals based on 
microcomputers for
a) electronic design
b) mechanical design& 9
kI
» ■
2. 3D vision in a 
structured environment 
designed to simplify 
visionA  ®a
3. 3D vision in a com­
plex non-structured 
envi ronmentà » a
4. FMS for b)
a) production of 
cylindrical parts
b) metal forming
c) 3D mechanical 
assembly
d) electronic 
assemblyà ·
à «
à
A f1i
B
0 a
5. Standardization 
of interfaces for a 
wide range of comput­
erized equipment in an 
integrated factoryâ a
6. Computerized fact­
ories operating regularly 
with only a skeleton 
management and design 
staffA
a) Terminals based on microcomputers are already on the market but, in the 
opinion of the technical experts consulted by the OTA^, they are not 
sufficiently powerful or cheap to be very widely used.
b) Almost all the FMS now in operation are used to machine prismatic parts 
(e.g. engine blocks)
A Laboratory solution 
• First commercial applications
I Widespread and easily accessible solution (requiring a minimum of 
specific adaptations by the customer).
Source: OTA

- 8 -
( i i ) Standardization
Standardization applicable to advanced manufacturing equipment has certain 
special features. What is needed is compatibility standardization, often at 
the forefront of fast-developing technological knowledge. Standardization 
work in the conventional machine-tool industry underwent a complex trans­
formation when NC machines appeared on the market. The changes likely to 
come about in the standardization of the most advanced manufacturing equip­
ment are radically different from the earlier ones.
Difficulties in normalization work arise from the need to simultaneously:
a) produce a systems architecture incorporating the different levels of 
communication between very complex systems and sub-systems, without which 
there is a risk of divergent interface arrangements;
b) produce norms and detailed technical specifications guaranteeing the 
inter-operability of systems without having to introduce new modifications 
for each new commencement of operations.
Normalization in this sector comes within the sphere of new information 
technology and the Commission has already underlined aspects specific to such 
sectors and their strategic importance (see doc. SEC(84) 796).
There is no need to repeat the detailed analysis made in that document but it 
seems useful to put forward a few key points concerning the standardization 
of advanced equipment:
Modular standardization:  It is important to determine the level at which 
standard!zation should operate. The above analysis shows that it is needed 
at the level of the various modules making up advanced equipment rather than 
solely at the level of the interfaces between the different equipment. It is 
quite possible that eventually some manufacturers will specialize in the 
production of certain modules rather than, for example, complete robots in 
view of the diversity of technologies involved and the very substantial cost 
reduction that specialization can offer.
Need for a consensus: If the standardization process is to be successful a 
consensus must be reached between the different parties involved (manuf­
acturers and also users). Although the electronic industry appears to have 
realized recently the importance of standardization and compatibility, it 
does not seem that the European mechanical engineering industry which is also 
very widely involved in advanced equipment is really aware of the scope of 
the problems and prepared to put in the necessary effort.
Verification of standards: Verification and certification may well give rise
to major material problems. Mention should be made of the significant work 
of the National Bureau of Standards in the United States which is setting up 
an automated manufacturing research facility (AMRF) to serve as a test bench 
for standards.
The scale of the problems involved in the standardization of new production 
facilities must also be borne in mind.
The introduction of new production facilities calls for the development of a 
software unit similar to the operating systems of computers but even more 
complex. The system has to operate in real time with extraordinary 
reliability. It is fully distributed, the peripherals it has to manage are 
themselves extremely delicate systems and the whole has to be meshed into 
industrial manufacturing processes in which man has his part to play so that 
allowance has to be made for an environment that cannot be 100Z automated.

Many examples show that progress here depends heavily on the alliances formed 
between the industries manufacturing and using this equipment. But differ­
ences between users and manufacturers are becoming blurred: the speed of
innovation and problems concerning the industrial ownership of the new 
software products and interconnection diagrams are factors that can lead to 
technical harmonization activities which can be promoted through mechanisms 
of consensus and public enquiry resulting in a process of European standard­
ization.
Standardization cannot be confined to the electronic and software aspects but 
must at the same time cover the mechanical aspects of the different inter­
faces.
In the face of this situation European manufacturers will have to decide on 
their own strategy, bearing in mind the numerous world links in manufacturing 
circuits (for example the motor industry). If standardization problems are 
not tackled rapidly, the prospects of reaching an agreed solution will 
dwindle and alternatives will no longer be available. The difficulty a heavy 
plant based industry has in grasping this situation and appraising the future 
in the light of the new software and interconnected systems architecture must 
not be underestimated.
(iii) Research and development
The ESPRIT programme has a section on computer-integrated manufacturing, the 
aim of which is to define the principles and basic rules governing the design 
of integrated manufacturing systems and to develop systems architectures 
enabling users to adapt to computer-integrated manufacturing at their own 
rate and in accordance with their own requirements, while ensuring that the 
development programme is equally applicable to short and long production 
runs. The specific objectives of the ESPRIT programme in this context 
include systems architecture, CAO/CAE, CAM, machine control systems, and 
sub-systems and components (including sensors).
There are also plans to set up pilot projects under ESPRIT on the basis of a 
preparatory study so as to focus the European R&D effort while at the same 
time serving educational and demonstration purposes.
The ESPRIT programme is now moving into its operational phase and, bearing in 
mind the importance of software as already demonstrated, the responses to the 
ESPRIT calls for proposals in this field leave something to be desired 
(software technology, like computer-integrated manufacturing, is one of the 
five priority topics of the programme). This is perhaps a sign that the 
European industry has not yet fully grasped its significance.

- 10 -
ESPRIT focusses on precompetitive research but an examination of the main 
Lines of technological development has also shown the importance of applied 
R&D, a field in which the links between industry and the research world are 
of crucial importance.
The BRITE programme which received the approval in principle of the Council 
in December 1984, concentrates on this link and focusses onmany of the key 
points highlighted in the examination of lines of technological development, 
in particular :
- reliability, wear and deterioration of materials, components and 
assembled products,
- laser technology and other new methods of metal shaping and forming,
- new testing methods including computer-aided testing in the manufacturing 
process,
- CAD/CAM and mathematical models.
Moreover the programme envisages pilot and demonstration projects on 
automated handling of soft materials and articles manufactured from such 
material, their automated assembly and transformation into finished products 
and the integration of these techniques in order to attain automated and 
flexible manufacturing. The clothing industry is particularly interested in 
these projects.
In parallel there are a number of national programmes directly or indirectly 
bearing on the advanced equipment sector, such as the Fertigungstechnik 
programme in Germany, the Alvey programme in the U.K., the productique 
programme in France, the Technologie Meccaniche programme in Italy, or the 
FLAIR programme in the Netherlands. Although there is often substantial 
funding for national programmes, ESPRIT and BRITE nevertheless remain 
significant in terms of precompetitive R&D and the number of participants 
induced to cooperate on Community-wide projects.
It is also worth pointing out that there are a number of institutes, 
universities and other organizations in the Community which undertake R&D in 
the advanced equipment area. It is perhaps worth considering whether the 
fragmentation of the work and the lack of coordination at a European level is 
not leading to under exploitation of the considerable potential present.

- 11 -
B„ STRUCTURAL AMD FINANCIAL IMPLICATIONS FOR COMPANIES
Although technological development factors are of vital importance for the 
automation process, it is a fact that manufacturing and user firms are far 
more interested in the short term, as tables 1A and 1B in Annex III show :  
technological problems fall far behind economic problems and the difficulties 
in obtaining skilled personnel stemming from the introduction of micro­
electronics,.
Although the companies themselves regard the financial aspects as the most 
important of these economic problems, the analysis conducted in Annex I 
demonstrates a number of features that could usefully be summed up before 
going on to a more systematic analysis of their structural and financial 
implications.
First of all, the installation of advanced equipment, whether machines or 
systems, is even now capable of substantially improving company profitability 
even if the technical productivity coefficients sometimes have to be viewed 
with caution. Even though the most complex FMS-type equipment often only 
shows a low financial return at the present time, one must not lose sight of 
the dynamic cost-reducing factor introduced by technological progress nor the 
often crucial importance of advantages difficult to quantify such as the 
reduction in design, manufacturing and delivery times when this equipment is 
used. However, these improvements can be obtained only at the cost of a very 
much higher initial investment than is needed for conventional equipment.
This high initial investment is a factor to be considered not only by users 
but also by suppliers of advanced equipment who have to put in a substantial 
research and, above all, development effort in order to perfect this 
equipment and who also have to modernize their own manufacturing methods in 
order to stand up to international competition, and especially in order to 
attain modular standardization of their equipment.
This modular approach (applicable to all advanced equipment) combined with 
learning effects can bring about a spectacular reduction in production costs 
once the market reaches a certain size. That is why considerations cannot be 
confined to national markets or even the European market.  Arguments must be 
based on the world market. Much of European production is too fragmented as 
it generally concentrates too much on the domestic market.
In many cases European suppliers of advanced equipment are still in a 
precarious position. Often the reasons lie not in a lack of techmcal know- 
how but in the difficulty of adapting to the new economic envi ronment brought 
about by the microelectronic revolution, which the engineering industry in 
particular appears to find hard to accept.
As far as the spread of advanced equipment is concerned, leaving aside CAD 
which is tagging well behind, Europe has made up a great deal of ground on 
the USA and Japan since the beginning of this decade, partly as a result of 
government support. This is particularly clear in the fiela of industrial 
robots and complex systems of the FMS type where installed capacity in Europe

- 12 “
now exceeds that of the United States although overall Japan still has a 
lead. Generally speaking high and sustained growth in demand for the various 
types of advanced equipment is predicted at least to the end of the decade.
(i) Financial aspects
European companies tend to see investment in advanced equipment mainly from 
the aspect of cost reduction, while their American and Japanese rivals are 
far more interested in the advantages of flexibility, customer service, 
product improvement, etc. This difference in approach reflects the generally 
defensive attitude of European manufacturing industry to these new 
technologies, and at the same time shows that in general it has not yet fully 
realized the advantages offered by advanced equipment and above all 
integrated automation.
Investment in automation differs greatly from traditional investment as it is 
a decision that involves the strategic reorganization of the companies' 
activities and structures, although it brings a number of benefits that can 
be quantified in material terms such as:
improved productivity of machines and labour
- reduction of work in progress and stocks 
savings in materials by reducing scrap
- reduction in defects
- elimination of costly prototypes
Many of its advantages are more difficult to evaluate in financial terms:
- improvement in product quality and performance as a result of better 
design, greater manufacturing accuracy and reduction in human errors,
- an often spectacular reduction in the time required to design a new 
product,
- an equally spectacular reduction in manufacturing times,
- an improvement in customer relations - for example, late deliveries can be 
avoided.
It is to be feared that the methods used by many firms to evaluate investment 
do not even take into account the easily quantifiable advantages of reducing 
stock levels even though it is often here that the major savings can be made. 
Clearly, then, it is even more of a problem to take into account advantages 
that are difficult to evaluate.
The experience gradually acquired by the user has a major influence on the 
advantages he is able to derive from automation so that, unlike conventional 
investment, the profitability of advanced equipment tends to improve with 
time.
Investment in advanced equipment therefore throws up a number of problems:
- purchase of advanced equipment requires a sizeable initial investment 
as for example with an NC machine tool in comparison with a traditional 
machine (Annex I). Even if, overall, the return on capital invested is

- 13 -
higher the need to employ significant funding at the outset can pose 
real problems especially to smaller firms.
- conventional methods of assessing financial returns on the investment are
no longer fully valid because of the existence of non-quantifiable 
advantages that increase with the degree of automation;
- to complicate the matter, the various types of equipment and systems offer 
fairly different levels of financial return;
- this type of investment calls for a longer-term economic view than is 
normal in Europe because of the need to integrate the advanced equipment 
and the importance of learning effects (cost effectiveness improves 
throughout the learning period).
All this puts difficulties in the way of European companies, especially the 
smaller ones. The situation as regards self-financing in European industry 
is not generally very good in comparison to Japanese and American firms. As 
regards access to outside financing, leaving aside problems specific to one 
or other of the Member States, there are analogous difficulties relating to 
financial evaluation criteria in particular to those concerning long-term 
strategic investments.
Although the use of advanced equipment in isolation or simple flexible 
manufacturing cells is without any doubt already profitable today, even this 
type of elementary automation comes up against financial problems as is 
demonstrated strikingly by a recent survey on investment by small businesses 
in Italy. It compares the investment plans of these firms over the next five 
years with the Level of investment they would consider ideal. Overall the 
level of automation (use of advanced machine tools and flexible manufacturing 
cells) in the latter case would be almost twice as high.
There remains state support which, as Annex II shows, takes various forms in 
most industrialized countries. When this aid helps directly or indirectly to 
finance investment in advanced equipment, it may be said to have the 
advantage of implicitly taking into account the strategic nature of the 
investment and its non-quantifiable benefits, By anticipating an 
amelioration of profitability thresholds it also encourages the use of more 
complex equipment and systems with which experience must be gained today if 
the even more complex and more integrated technologies of tomorrow are to be 
mastered. Nevertheless these direct investment subsidies must be regarded 
with some caution. Not only is there an obvious risk of distortion of 
competition with all the dangers which that brings, there is also the danger 
of artificially encouraging certain investment projects or certain types of 
equipment without at the same time creating the environment and basic 
conditions essential to complete the automation process. This, as the 
following analysis shows, depends on the convergence of a number of struct­
ural changes within companies. These may well have been impeded rather than 
accelerated by direct state support which all too often helps to keep non- 
viable industrial structures going.

Another comment on the effectiveness of the aid is called for. Even though a 
realistic international comparison of aid poses almost insurmountable diffi­
culties, a detailed examination of the different national systems in Annex II 
shows a rapid extension of aid programmes in the European countries. If the 
national programmes taken individually are clearly on a smaller scale than 
those of Japan and the US, the totality of programmes is certainly comparable 
with Japanese and US efforts.
At the same time there is an undeniable impression that funds are spread too 
thinly when the different European programmes are compared with those of the 
United States and above all Japan. In the United States aid is essentially 
concentrated on military or space objectives - which does not mean that it 
has no civil spinoff - whereas in Japan support activities are well struct­
ured to meet coherent industrial objectives and form part of a policy 
bringing together the main firms concerned and covering all the aspects 
involved. Robotics provides a striking example. MITI is developing a number 
of measures and activities designed to stimulate both production and demand. 
On the production side there are loans at reduced rates for the development 
of robots, the setting-up - at the instigation of MITI - of JIRA (Japanese 
Industrial Robot Association), the financing by MITI of a research programme 
on robot standardization, the formation of a research association (ATRA) 
financed by MITI and even a wider definition of robots to encourage tech­
nological progress by manufacturers of fixed maniupulators (see definition of 
robots in Annex I). On the demand side there are loans at reduced rates for 
the purchase of robots, financial support by MITI for JAROL (a robot leasing 
company set up by JIRA) and credit insurance systems. All these measures fit 
into the more general context of the MITI improvement programmes and the law 
for the promotion of the engineering, electronic and software industries 
(1978-85). In comparison, European aid programmes appear in many cases to 
have been set up in too fragmented a manner without any great effort towards 
consistency at a European or even a national level.
(ii) Structural aspects: users of advanced equipment
The first point to be made is that in one way or another advanced equipment 
is of relevance to almost all manufacturing firms (see note 3). Here the 
importance of compatibility of equipment must be emphasized yet again not 
only because of the many benefits to be gained from integration but also 
because the lack of interface standards can be a major deterrent to the 
purchase of advanced equipment by users, especially in Europe where the 
shortage of capital means that the automation has to be a very gradual 
process in many firms. For them the introduction of such standards could 
have a major psychological impact in encouraging them to go ahead. At a more 
general and more macroeconomic level the increase in the productivity of 
machines and the capital-saving effects referred to above give an improvement 
in the productivity of capital, which is a basic reversal of the downward 
trends recorded for more than 20 years. It is not going too far to expect 
integrated automation to provide the driving force to extricate the economic 
machine from the current crisis. At company level, however, this process 
will bring about a number of changes in the major balances underlying the 
industrial fabric of our societies.
In this context it is worth noting that President Reagen has just 
vetoed a Federal programme of civil R8D in the industrial automation 
sector.5

No longer "mature” traditional industries: The new possibilities of
automating small-batch manufacture may well affect most radically the 
"mature” industries which in fact have the greatest potential for 
improvements in competitiveness. Traditional industries such as clothing or 
furniture can progress from semi-craft production to partially or even 
extensively automated manufacturing. Labour-intensive industries will thus 
become capital-intensive ones in which factors governing competition are no 
longer labour costs but technological innovations, speed of response to the 
market, etc.
Changes in trade patterns:  This upsetting of production factors will modify
comparative advantages in a way that could bring about a radical transform­
ation of international trade patterns, especially vis-à-vis the low-wage cost 
countries. The motor industry is a particularly significant example of the 
impact of loss of maturity on trade patterns. Only two or three years ago it 
was widely recognized and accepted by manufacturers that the car was a a 
mature product in which technical innovation would play no more than a minor 
role and for which the most important factors were the length of production 
runs (on conventional transfer lines) and the possibility of writing off 
capital investment over a large production volume. This led to the concept 
of a world car to be marketed globally, the different components of which 
would be manufactured in different parts of the world on the basis of labour 
costs, the technical sophistication of the component concerned, the 
characteristics of the manufacturing process for the component, etc. so as to 
benefit from all the possible comparative advantages and economies of scale. 
This theory has been challenged by flexible automation which, as already 
shown, greatly reduces the length of the production runs needed for auto­
mation and at the same time allows a wider variety of products to be manu­
factured to the benefit - at least as far as production costs are concerned - 
of smaller and more specialized manufacturers whose production is of a more 
local nature.
Flexibility of companies: Even though within the manufacturing process
proper the introduction of advanced equipment shifts the balance in favour of 
smaller firms6 , as is shown very clearly in Table IV of Annex III, this is 
not necessarily true at all levels. According to various surveys small 
companies are more inclined than larger ones to view advanced equipment 
solely from the cost reduction aspects. Generally speaking large companies 
concentrate far more on process innovations than small ones but this also has 
a structural explanation since the gain in flexibility is more marked in 
large companies. In the past they had to decentralize in order to manage 
their numerous scattered operations whereas integrated automation combined 
with the computerization of management functions now provides them (even the 
large multi-nationals) with a tool that with central management is capable of 
responding very rapidly to market requirements. Consequently the larger 
companies are potentially in a position to cut back the advantage of 
flexibility which until now has been the main asset of the smaller firms.
Although of course a minimum batch-size is still necessary even for 
flexible automation.6* "  i J ~

- 16 -
Product innovation: In a growing number of areas the use of advanced equip-
ment is becoming essential to stay competitive not only in processes but also 
in products. Obviously a product such as a modern aircraft can no longer be 
designed without using CAD. However, advanced equipment has far greater 
implications for the product itself, at several levels.
To introduce integrated automation or even merely to use the standard CAD 
systems on the market, the user has to rethink his production processes from 
top to bottom, which often leads him to remodel his product as it can no 
longer be designed separately from the process. In this respect the 
aeronautical industry is a case in point. The production process is designed 
at the same time as the aeroplane and can represent 40-50% of the total R&D 
cost linked to a project. GM provides another striking illustration with its 
Saturn project (future medium-sized cars). From the outset it brought the 
teams and engineers responsible for the product together with those res­
ponsible for the process so that they could cooperate in designing the car 
and its production process simultaneously in order to optimize not only the 
vehicle performance and characteristics but also its manufacturing method 
(use of materials, assembly operations etc.) and consequently its production 
cost. The link between process and product is sometimes less direct but no 
less important, as is shown by the European machine tool manufacturers 
themselves. Only by using automated production methods can they cut their 
costs sufficiently to stand up to international competition but to introduce 
these methods they have to move from customized manufacture to modular 
standardization and a minimum production volume. Here again in product 
design and innovation the balance is shifting in favour of companies large 
enough to use CAD integrated with automated production methods and capable 
of fully exploiting the resultant speeding-up of the product cycle. It is 
now estimated that a delay of 12 months in the development of a product 
leads to a 50% loss ^n the revenue obtained from the sale of the product 
throughout its life.
Smaller stocks: Optimum use of advanced equipment leads to a substantial
and widespread reduction in stocks of materials, components and finished 
products held by manufacturing companies. Here a real revolution in 
industrial thinking is under way with a tendency to take as a model the 
Japanese practice known as "Kanban” in which all deliveries to the factory 
arrive just in time to be fed into the production cycle. This means that 
relations between the company and its suppliers must be reorganized (they 
often need to be located close to each other), and a structure of stable 
social relations must exist.
Subcontracting: Here developments are likely to be complex. On the one side
the introduction of overall product design, the more integrated management 
of the manufacturing process and the additional production capacity result­
ing from the installation of advanced equipment may tend to reduce subcont­
racting. On the other side, the complexity and growing diversity of the 
technologies involved and the difficulty, especially financial, in carrying 
on all the necessary develoment activities simultaneously, encourage 
companies to turn to outside suppliers. In actual fact these trends are not 
in conflict and the large companies are likely to step up their own pro­
duction of integrated components required in numbers exceeding a certain
7Source: FT 19.9.84 "New product development - a vicious race to get 
ahead".

threshold while making increased use of subcontracting for more complex 
items often requiring specific technological development or insufficient in 
number to be incorporated in a largely automated overall manufacturing 
process.
(iii) Structural aspects: suppliers of advanced equipment
Suppliers:  These are firms in the engineering, electrical, electronic and
computer industries or systems houses which put together various components 
from different sources around a software development capacity. The firms 
concerned in the engineering industry are either the traditional producers 
of capital goods, i.e. machine tool manufacturers, or major users such as 
the motor industry whose role in robot manufacture has already been 
mentioned.
R&D, reorganisation of production and financial resorces: In the
engineering industry above all, the production of advanced equipment calls 
for a substantigl increase in the R&D effort. To give a practical example, 
it is estimated°that the changeover from the manufacture of conventional 
grinding machines to NC grinding machines requires the share of turnover 
spent on R&D to ^e increased from 4-6% to 15%. This substantial increase in 
applied research*in turn requires a minimum level of financial resources. 
Capital availability is of even greater importance for the investment and 
basic reorganization needed to secure economies of scale associated with 
modular standardization and the learning effects typical of information 
technology. When the increase in the average value of the product is also 
taken into account, it is obvious that the development of advanced equipment 
encourages the concentration of production in the larger firms.
Strategy of the major American groups: The very extensive effort put in by
groups such as GE, Westinghouse and IBM to ensure that they are able to 
supply all the components of the "factory of the future" must be viewed in 
this context of the necessary increase in company resources. The efforts 
being made include R&D, investment, the take-over of companies specializing 
in the manufacture of certain types of advanced equipment, and the 
conclusion of licence and cooperation agreements for which these multi­
nationals enjoy a particularly favorable situation because of their size and 
geographical spread. By marketing all types of advanced equipment these 
firms are in a position to develop internal compatibility norms, an 
important selling point in the eyes of users, which (in the absence of 
generally recognized standards), have the advantage - from the suppliers' 
point of view - of forcing customers to remain loyal to them. However, 
these ambitions are thwarted by General Motors' recent decision to require 
all its suppliers of advanced equipment to adhere to the MAP (see page 3), 
since the MAP is sooner or later likely to become a de facto norm, at (east 
for the American industry, especially as it is supported by Chrysler and 
Ford has just emphatically endorsed it (the Automated Manufacturing Research 
Facility of the US National Bureau of Standards could play a significant 
role in the verification of standards). At the same time mention should be 
made of the efforts of major users such as GM or MacDonnell Douglas to 
become suppliers
Boston Consulting Group.
Even though Europe holds its own in international comparisons of R&D 
expenditure, it should be borne in mind that these include basic research 
which accounts for a larger share of the European effort.8
9

- 18 -
of advanced equipment. These are a logical consequence of the close inter­
action between suppliers and users during the design installation of 
advanced equipment. As a result the dividing line between suppliers and 
users is tending to become blurred. For example, GM entered into 
association with Fanuc to set up in the United States the firm GMF which 
rapidly became the leading American manufacturer of robots. In June 1984 
GM took over EDS (Electronic Data Systems), a company specializing in the 
reorganization of computerized systms, so as to implement the MAP. GM has 
recently obtained holdings in three robot vision companies and in another 
company specializing in artificial intelligence. Unlike GE or Westinghouse, 
GM started life in the mechanical engineering industry. This is a point 
worthy of mention because it might seem that thè growing importance of 
electronics and software would give the advantage to firms from the 
electrical or electronic industries. However, this does not appear to be 
the case as these firms apparently find it difficult to make the move from 
their relatively clean environment to the factory floor where equipment is 
exposed to far harsher conditions. Two of the three contracts for FMS in 
the United States last year were won by Cincinnati Milacron which is not 
only the largest American manufacturer of machine tools but has also become 
the second largest robot manufacturer in the USA (after GMF).
Another major firm in the United States is IBM which, despite setting up a 
group factory automation, had until recently adopted a wait-and-see 
attitude. However, IBM is showing increasing interest in factory automation 
and, among other things,it has just concluded an agreement with Cincinnati 
Milacron for the supply of control systems for advanced equipment. The 
lesson to be learned from this analysis of the situation in the United 
States is that at the current stage in the development of advanced equipment 
a knowledge of the process appears to be a vital asset for potential 
suppliers. Since the engineering industry dominates demand, this gives the 
advantage to firms in that industry, whether they be users such as the motor 
industry or suppliers such as the machine tool industry, provided they are 
able to acquire the essential know-how in the way of electronics and 
software (either by mergers and take-overs or by cooperation agreements). 
This does not rule out the possibility that in the later stages of the 
development of this market the assembly capacities acquired by GE and 
Westinghouse in particular will become of growing importance. One 
appreciable advantage enjoyed by the major groups which are themselves large 
users of advanced equipment is the availability not only of an in-house 
market but also of a test bed and field of application for the development 
of equipment and systems. As it takes at least a few months to install a 
complex system and even after that experience a further few months is needed 
before it can be used to its full potential, this in-house market is 
obviously a very great asset.
Japanese strategy :  Japanese suppliers may not have announced their general
ambitions as loudly as the Americans but they are nevertheless devoting 
massive resources to securing their foothold on tomorrow's advanced 
equipment market, using an approach of a more cooperative nature coordinated 
by MITI. One of the most important projects financed by MITI is the 
flexible manufacturing complex with laser at Tsukuba which in addition to 
experiments on the^yse of the laser will be developing standardized 
functional modules with the participation of many large Japanese firms 
(Mitsubishi Electric, NEC, Toshiba, Fanuc, Matsushita, Mitsubishi Heavy
It may be useful to point out that these modules are not only machines 
but also functional units making up machines: motor, transmission, 
milling and boring functions etc.10

- 19 -
Industries, Ishikawaj ina-Hasima and 12 other companies). As Annex I shows, 
the strategy of the Japanese companies focusses with great success on 
standardization and cost reduction at all Levels.
Also these Japanese firms often belong to large groups or large families of 
companies and therefore have the same advantages as their American 
competitors, i.e. the guarantee of a captive in-house market.
Position of European suppliers and equipment compatibility:  In Europe there
do not seem to be any major overall strategies similar to those being 
developed by some American companies or being introduced by MITI. (This 
should be viewed in the light of the fact that the U.S. and Japan are 
integrated economies).
European advanced equipment manufacturers stem mainly from the traditional 
engineering industry and, in view of the scattered structure of this 
industry consisting of numerous small or medium-sized firms, it seems likely 
that they will be exposed to intense structural pressures forcing them to 
form larger units capable of meeting the new market requirements and causing 
many of the smallest and least adaptable firms to vanish.
The greatest asset that the European companies could have in facing up to 
these changes would be the existence of modular compatibility standards for 
different types of equipment, enabling them to specialize while remaining 
independent. This development would also benefit assembly firms able to 
purchase supplies from all sources as opposed to the large integrated 
companies themselves producing all the components of the system, which could 
be no stronger than their weakest link. In the final analysis this approach 
would minimize upheavals in European industry even though it would obviously 
not do away with adaptation difficulties (if only in respect of outlooks and 
attitudes) nor prevent a shake-out of firms.
To take a realistic view, there is a risk that Euro^an companies, and 
especially small firms in the engineering industry, may give preference to 
a specialization strategy involving the supply of customized equipment and 
systems. However, this type of market slot may well become narrower and 
narrower with the spread of modular standardization and the resultant 
modernization of production methods, offering chances of survival to only a 
small number of firms.
Should this hypothesis prove true, the worst situation for European manu­
facturers would be one in which a large American or Japanese supplier 
succeeded in dominating the market and imposing its de facto standards (a 
situation similar to the domination of the computer market by IBM), with the 
following consequences:
Firms in the European electronics sector play a smaller role than 
their American or Japanese opposite numbers, reflecting a degree of 
weakness in this sector in Europe.11

- 20 -
- only a very few European companies would manage to continue supplying a 
more or less full range of equipment, probably with a reduced level of 
profitability and in a situation of technological dependence;
- a number of European manufacturers, perhaps 15-20% of the existing 
industry, would succeed in gaining a foothold in one of the market slots 
for customized production;
- a number of others would be reduced to subcontracting activities, working 
to specifications imposed by the dominant suppliers;
- a few would try to survive by offering equipment compatible with that of 
one of the large suppliers, a high risk strategy;
- a large number would disappear.
There is a second scenario that is both more probable and less dramatic: 
more general norms would be imposed by the major users, meaning as things 
stand at present most probably the large American multinationals (and in 
particular General Motors). Even in this case, however, the European 
manufacturers as a whole would have to use norms that they had not helped to 
produce and that would not, therefore, give consideration to their interests 
or their special features. Compelled to accept outside norms, which 
inherently have a high technological content, the Europeans will immediately 
find themselves lagging behind technologically if they do not adopt a more 
go-ahead attitude.
In both cases the capital goods industry is unlikely to be able to keep up 
its contribution to the European economy and in particular its exports.
Inter-company cooperation: One factor which should act to the benefit of 
European manufacturers is the increasing need, as a result of the integ­
ration of different types of equipment, for a local presence to handle the 
installation of and after-sales service for equipment and systems. This 
factor and the diversity of the technologies involved account for the 
numerous sales cooperation and licence agreements. Here it must be 
recognized that European firms show a marked preference for agreements with 
Japanese or American firms as is shown by a recent opinion poll of heads of 
European companies on technological cooperation:
- 27% cooperate with other companies in their country but only 21% wish to 
continue this,
- they do not wish to cooperate more than at present with other European 
companies (27%)
- 20% cooperate with Japanese firms but 27% would like to in the future
- 32% cooperate with US firms but 36% would like to in the future

-  21  -
The reason for these trends is the underlying idea that the US and Japan 
have a technological lead (at least in industrial application) and perhaps
also the fact that firms situated long distances away are not seen so much 
as rivals. Nevertheless, it does not seem up to now that the right con­
ditions exist for cooperation at European level, which could be an important 
factor in strengthening European industry (in terms of specialization/volume 
and opening up of access to the European market).
Outlook: One potential long-term consequence of these changes should be
mentioned: the capital-saving effects of this equipment make it plausible 
that there may be a substantial reduction in demand fo^advanced equipment 
once the integrated automation process is well in hand and the acceler­
ation of investment stemming from the renewal of obsolete machinery will 
have ceased. In sum there are prospects of a far-reaching and lengthy 
industrial adjustment in the production equipment sector.
Even if it is postulated that the resultant improvement in productivity 
will lead to the creation of new industries and thence to new demand 
for goods and equipment or that a new flow of innovation in relation 
to equipment will reactivate demand.12

-  22  -
C. HUMAN RESOURCES
Obviously the improvement of productivity and radical changes in manufacturing 
industry will have a substantial impact on the level and structure of employ­
ment and on the organization of work.
Before these aspects are analysed, it should be pointed out that the general 
level of education of the work force is of vital importance in introducing 
advanced equipment. Because of its very intensive industry orientated 
educational system Japan has a definite advantage in this respect.
(i) Employment level
It is difficult to evaluate the impact of advanced technologies on employment 
partly because technology is only one of the factors involved and it is 
difficult to single it out from the general background and partly because the 
various technical evaluations disagree. Estimates of job losses caused by the 
introduction of robots vary from 0.5 to 6 jobs per robot.
This point should be examined in detail despite the difficulties involved in 
such an analysis.
Although the initial evaluations of potential job losses based amongst other 
things on technical data from systems suppliers (see the table on the Yamazaki 
factory at Mimokamo in Annex I) were decidely alarming, more recent 
information is reassuring. According to the PSI study mentioned on several 
occasions in Annex I, the net job losses after the introduction of advanced 
equipment in British user firms totalled 34,000 between 1981 and 1983, only 
5% of total job losses over that period. Various case studies, in particular 
in Japan, confirm this type of evaluation. However, the limitations of this 
basically microeconomic approach covering only firms which have introduced 
advanced equipment should be pointed out. The framework of the analysis should 
be identified more clearly.
In any firm considered individually, the use of advanced equipment improves 
productivity, especially labour productivity, leading to job losses, but it 
also improves competitiveness, leading to increased market shares and boosting 
employment. The latter effect is likely to cause job losses to be sub­
stantially under-estimated in case studies as it may be taken that the firms 
introducing this equipment are amongst the most enterprising, taking manu­
facturing industry as a whole. It must therefore be concluded that job losses 
caused by advanced equipment will mainly affect companies not installing such 
equipment, whose market shares will dwindle as their competitiveness declines.
Continuous and discontinuous processes, firms with over 20 employees.13

- 23 -
The lesson to be learned here is that if Europe holds back the introduction of 
advanced equipment in an effort to preserve jobs, its loss of competitiveness 
in comparison with the United States and Japan will in the end destroy far 
more jobs than the use of advanced equipment would have done.
There is another point to be considered: up till now advanced equipment has 
been introduced piecemeal in Europe with a fairly low degree of integration.
As gains in productivity increase substantially with the integration of 
advanced equipment it seems likely that the impact on employment will follow 
the same path. Consequently, the pace of redundancies is likely to speed up 
considerably in manufacturing industry when this integration process really 
gets going.
If manufacturing industry is considered from the macro-economic angle, taking 
a medium and long-term viewpoint, potential job losses in manufacturing are 
probably extremely high. This is confirmed in a study by the IPA of March 1984 
covering asseip^ly (one of the most labour-intensive functions) in six of the 
main sections of manufacturing industry in Germany. It comes to the con­
clusion that automation could abolish up to 250,000 assembly jobs out of the 
650,000 or so covered by the study, or almost 40%.
Should it therefore be concluded that advanced equipment is a threat to 
employment? Nothing is less certain as the above arguments are all based on 
"other things being equal" and do not take into account:
- job creation as a result of the new technologies themselves, the scope 
of which should not be over-estimated. H i ^  technology productiotji^does 
not necessarily generate many direct jobs or immediate profits v .
It does, however, set the scene for future prosperity;
- the displacement of a number of jobs outside the manufacturing company 
as some tasks, such as equipment maintenance in many cases, are no 
longer carried out by the company itself but are contracted to outside 
firms, the jobs in question thus being transferred to the services sector;
- above all the expansionist effects that productivity gains in manufactur­
ing industry could have on production, investment and therefore job 
creation, not only in manufacturing itself, but in the whole of the 
economy.
The study which best takes into account all the facets of the problem appears 
to be that by Professor Leontief on the global impact of automation on 
employment in the U.S. by the year 2000 (see note 4). This extremely detailed 
study comes to the conclusion that automation will not cause
Mechanical construction, electrical engineering, automobiles, metal­
working, precision instruments, optical and other instruments, office 
machinery for information processing.
Since 1965 high technology industries in the U.S. have only created 
6 million new jobs out of an industry total of 35 million.
Globally the IT industry made a loss each year for 30 years and only 
started to become profitable at the beginning of the 70's.'15
16
17

- 24 -
significant unemployment, provided the necessary changes in skills and 
qualifications, the sectoral distribution and the geographical location of 
employment can be carried through successfully. Under these circumstances 
mobility and adaptability of the workforce will obviously play a vital role. 
The flexibility that exists in the U.S. is perhaps one of the greatest 
competitive advantages that the Americans have over their international 
rivals. It is also certain that the profile of the jobs created will not be 
the same as that of the jobs that disappear. Although part of the process of 
updating skills that then becomes essential can be covered by suitable 
training for young people starting working life, the pace of the developments 
under way will make it necessary to retrain a large proportion of the 
existing labour force. The ability of the workers concerned to acquire the 
generally more advanced skills that will be needed tomorrow is a cause for 
concern. In this respect the higher level of education of workers in Japan is 
certainly an advantage. For these very different reasons the U.S. and Japan 
are better placed than the Community to tackle the employment changes that 
will be caused by the widespread introduction of advanced equipment.
(ii) Education and training
This finding confirms the vital role of education and training in the 
transformation of the European economies in the years ahead.
A few figures are sufficient to demonstrate the scope of the future changes. 
In France the BIPE (Bureau d'informations et de prévisions économiques) 
estimates that about one in four jobs in French industry will be affected by 
the changes in skills and qualifications called for by advanced equipment 
over the next 10 years. It concludes that a 250% increase in further training 
will be required. In Germany the VDMA (the mechanical engineering federation) 
recently stated that the rapid spread of CAD/CAM made it necessary to retrain 
about 250,000 people, 100,000 of them in the engineering industry alone.
The memorandum of 25 January 1984 on technological change and social 
transformation (C0M(84)615) analyses in detail the problems of education and 
skills resulting from the introduction of new technologies and applies to a 
very large degree to advanced equipment.
Without repeating this analysis, it must be emphasised that both the produc­
tion and the use of advanced manufacturing equipment call for a multi­
disciplinary approach to problems, ig particular to bring about the essential 
merging of mechanical and electronic engineering (known in Japan as 
"mechatronics"), by both technicians and engineers.
As tables 1A and 1B in annex 3 show, the shortage of technicians and 
engineers having the necessary "mechatronic" know-how is already apparent, 
especially engineers for automated production systems and technicians for 
their maintenance. This could in the near future create a bottleneck 
hampering the spread of advanced equipment, even though some efforts are now 
starting to be made, such as the establishment of a robotics institute at 
Besançon and the introduction of a course for production system engineers at 
Karlsruhe University. The large firms are able to train and retrain their 
workforce themselves, and it will be above all the small and medium-sized 
firms that will suffer from a shortage of personnel with the necessary 
qualifications.
* Including computer science.

-  25  -
Another aspect of the multi-disciplinary approach required in the automation 
of industry is the disappearance of the rigid dividing line between product 
design engineers and production engineers, because of the ever closer links 
between product innovation and the design of the manufacturing process, both 
carried out with the help of CAD.
An example of this change is the Saturn project of GM (already mentioned 
earlier) where from the outset the product engineers and process engineers 
were brought together to develop simultaneously both the car and its 
manufacturing process.
In Europe and the U.S. production engineers traditionally have an inferior 
role to product engineers who enjoy greater esteem. This is not true in Japan 
where, probably because its industrialisation owed much to foreign 
contributions, industry considers the production engineer to be just as 
important as his colleague in charge of product design. This gives Japan a 
marked advantage at a time when industry is forced to concentrate on the 
production process and the process-product link.
(iii) Organization of work
To revise the design both of the production process and of the product it is 
necessary to adopt a fundamentally new approach to factory tasks and hence to 
the organization of work.
The organization of work which has now become the conventional pattern 
involves production line working with operations broken down into individual 
tasks carried out respectively by workers specializing in a specific task; 
flexible automation completely reverses these trends:
- fragmentation and specialization are replaced by multi-disciplinarity,
- instead of specific narrowly defined tasks carried out by an individual, 
there are broadly defined tasks carried out by teams (the tendency being 
to allocate a team of workers to a group of machines),
- manual tasks are replaced by supervisory tasks which reduces physical 
effort but increases mental strain.
This revolution in the organization of work is accompanied by an increasing 
demand for flexibility on the part of workers. The more complex systems 
generally have to operate almost continuously and, even when they can operate 
unmanned for several hours, new arrangements have to be examined, especially 
as regards working hours (for example schedules of 4x10 hours a week).

- 26 -
One phenomenon often said to be the outcome of flexible automation is the 
polarization of skills with a few highly qualified persons carrying out all 
the supervisory tasks and leaving to the rest of the work-force only the 
lowest-level jobs for which no skills are required. Most analysts agree that 
this is not an outcome of automation and that the structure of skills in the 
company depends on the policy it follows. The company has a number of choices 
open to it as regards both the type and level of automation and the 
organization of work around the new production system, for example, it can 
just as well adopt a policy of retraining existing middle management for 
promotion as relegate them to inferior jobs; Although there is plenty of 
room for manoeuvre in the short term when the company can juggle with the 
degree of automation of the different functions, it remains to be seen how 
much scope there is in the longer term.
(iv) The two sides of industry
All this shows that technological innovation must be accompanied by 
innovation at work, for which there must be consultation and negotiation 
between the two sides of industry.
Despite the direct threats to employment in manufacturing inustries, it is by 
no means sure that the manual unions are the main source of opposition to 
flexible automation. According to a survey conducted by the PSI in the U.K. 
in 1983, 6% of the firms questioned considered the unions or workers to be an 
obstacle to the introduction of advanced equipment but 4% also saw the 
attitude at management level as an obstacle. The questionnaire was addressed 
to heads of companies.
As already mentioned in the economic analysis, the failure of European 
company managements to realise the importance of advanced equipment and the 
strategic nature of this type of investment is often a major impediment to 
its introduction.
As for the blue collar unions, caution must be exercised in extrapolating the 
above results to the Community as a whole as they reflect an attitude of 
principle rather than practical fact; in addition, there are slight 
differences in union attitudes from one country to another. Although 
fundamentally the French unions are in general favourably disposed to new 
technologies, there are more reservations in Germany, especially concerning 
changes in the organization of work.
One thing is clear, however: the two sides of industry must talk to each 
other if flexible automation is to succeed. If this dialogue is non-existent 
or inadequate there can be major confrontations, as CITREON and PEUGEOT have 
discovered in recent months, whereas a long-term policy of consultation can 
prevent mishaps like that, as VOLVO's experience shows. Even though this 
type of comparison must be qualified to some extent because the situation and 
environment of the firms concerned are different, there is a valuable lesson 
to be learnt.

-  27  -
It is, of course, perfectly possible to create the conditions for fruitful 
discussion: advanced equipment can free workers from dangerous or 
disagreeable tasks, a retraining plan can lead to a higher level of training, 
and if planning is done sufficiently far in advance, mass redundancies can be 
avoided and it can be ensured that the organization of work and structure of 
skills will be attractive to workers and employees in the company - provided 
the two sides of industry view automation as an opportunity and not as a 
threat to employment or a way of reducing workers' influence.
(v) Siting of companies *  1 5
The fact that the jobs created will not correspond to the jobs destroyed by 
the introduction of advanced equipment in manufacturing industry has already 
been mentioned in the context of skills and qualifications.
The same is likely to be true as regards geographical location. To an 
increasing extent the key factor will be the availability of qualified staff 
and proximity to systems maintenance companies since grey matter will become 
an important production factor, in addition, the importance of reducing 
stocks and hence the advantages of "just-in-time" delivery systems (see page
15) give manufacturers of intermediate products for incorporation in other 
products an incentive to set up close to their customers, a factor that is 
likely to accelerate and accentuate the clustering of industry around new 
centres of technology.

ANNEX I
ADVANCED EQUIPMENT AND ITS DISSEMINATION AMONG USERS
A. OVERVIEW
The approach adopted in this Annex involves examining one by one the 
different types of advanced equipment, in the light of the mass of partial, 
dissimilar and often hardly comparable information available, in order to 
bring together sufficient data to paint a consistent picture of the overall 
si tuation.
The first two sections relate respectively to machine tools and robots, 
which constitute the basic components of the various types of automated 
manufacturing systems considered in the subsequent section. The scope of 
the study then broadens to include computer-aided design (CAD), before 
finally encompassing all the activities both upstream and downstream of 
actual production.
Each of these different subsectors is of interest per se and deserves to be 
the subject of a detailed individual study. However, it should be stressed 
that the whole exceeds the sum of the parts and that the real impact of 
advanced equipment will make itself felt above all when such equipment is 
integrated into automated systems.
B. ADVANCED MACHINE TOOLS
(i) Definition
The term "advanced machine tools" as used here refers to numerically 
controlled (NC) machine tools.
The first NC models, developed during the fifties, were cumbersome and 
costly, while since the mid-seventies, microelectronics has brought about a 
number of significant developments. Thanks to DNC and then CNCT, the mode 
of operation of numerical control has been streamlined considerably, by 
doing away with the punched card and making it possible very swiftly to 
amend the program controlling the machine. As a result of the increased 
power of microprocessors, NC can now be linked to a CAD (computer-aided 
design) facility, which makes it possible to introduce modifications not
1 DNC (Direct Numerical Control) :  the machine is linked directly to 
a central computer (which controls one or more machines);
CNC (Computer Numerical Control) :  an individual microcomputer controls 
each machine.

- 2 -
only to the processing sequence, but also to the product design, with a high 
degree of flexibility.
NC has played an extremely important role by paving the way for the 
development of multi-purpose machines such as machining centres, which 
require the simultaneous control of more than two directions of movement, an 
achievement which was not possible before NC machines were introduced. The 
latest progress in microelectronics makes it possible to fit machine tools 
with sensors for measuring torque, detecting tool breakages and recognizing 
parts, as well as to equip them with tool-changing systems, thus giving them 
a hitherto unheard-of potential for unmanned operation.
Lastly, there is an increasing trend towards fitting NC machine tools with 
automatic loading/unloading systems, which give an individual machine tool a 
capacity similar to that of a small flexible cell (composed of a machine 
tool and a loading/unloading robot).
(ii) Productivity and economic return
2It is widely acknowledged that the changeover from a conventional to an NC 
machine tool enables physical productivity of the machine to be increased by 
a factor of three chiefly as a result of the reduction in down time. 
Nevertheless taking into account its greater complexity (incorporation of 
software and electronic components) the cost of an NC machine is nearly 
double that of a traditional machine. As an initial estimate the return on 
capital employed would then be half as much again for an NC machine as for a 
traditional machine. However a proper evaluation of economic return should 
also take into account the greater wear on NC machines because of their more 
intensive use, the higher maintenance costs of a sophisticated machine, but 
also gains particularly in so far as stocks are concerned, resulting from 
the reduction of down time. Another aspect which should not be ignored is 
that the investment per machine is doubled.
The need for a sizeable investment for purchase of an NC machine can 
represent a significant obstacle for a small firm or for one with a weak 
financial structure.
2 The term NC is used in the broad sense in order also to include more
sophisticated types of control, such as CNC.

- 3 -
Ciii) Dissemination among users
The following table highlights the proportion of NC machine tools in the 
total machine-tool population in various countries:
Year Percentage of NC Machines j
in the total population j
j  United States 1983 4.7 |
I  Japan 1981 2.9 |
|  Federal Republic of Germany 1980 2.2 |
|  United Kingdom 1982 3.3 |
I  France 1980 1.6 j
Source :  MTTA, 1984 statistics
According to these figures, and if allowance is made for the differences 
between the dates on which the various surveys were conducted, no single 
country appears to have a taken a significant overall lead in the use of NC 
machines.
From a sectoral standpoint, it should be pointed out that in those countries 
which have an aviation industry, the latter exerts a particulary strong 
driving force in the demand for advanced machine tools.
(iv) Situation of European manufacturers
Traditionally, the Community machine-tool industry has been in the forefront 
of the international scene, with some 20% of the world market but nearly 
30% of world production. Nevertheless, this position has deteriorated in 
recent^years, and the competitiveness of the European - and in particular 
German - industry has declined, as can be seen from Table II in Annex III. 
This loss of ground, which is particularly heavy with respect to Japan, is 
closely linked with the introduction of the new information technologies.
Since the middle of the last decade, the Japanese industry has made a major 
investment effort aimed at standardizing its machine tools through modular 
design of both the machine itself and of its numerical control. This has 
enabled the Japanese to reduce the number of mechanical parts, while 
increasing the length of manufacturing series. This strategy, which, if 
maximum advantage is to be gained from scale and learning effects, requires 
a significant initial investment and the production of a large volume of 
machines and numerical controls, enables Japanese manufacturers, who have 
broadly concentrated their efforts on small machining centres and
3 The Federal Republic of Germany accounts for more than half of Community
production.

- 4 -
NC U t t o  arrive at unit prices welt below those of their competitors.
Xn· market ing these two types of small machines,, and on the basis of con­
ventional manufacture, the Europeans have a price handicap with respect to 
the Japanese of betwee^ 10% and 40% on the European market and of up to 60% 
o,u the American market .  The result is a spectacular penetration by Japanese 
manufacturers of the market for small standard NC machines, facilitated by 
the fact that the other machine-tool producers were at the time fairly inac­
tive in these fields, since only standardization together with volume 
production made it possible tc arrive at prices which have created a real 
market.
The spectacular penetration of Japanese NC machine-tool manufacturers is 
illustrated by the following figures:
Production of NC machine tools (units)
1975 1980 1983
Japan 2.182 22.052 26.398
USA 4.136 8.856 8.000
FRG 1.085 4.743 8.000
U.K. 739 1.240 1.800
Ita ly 800 2.700 3.000
France 500 1.100 1.300
(Source :  JETRO, IPA, CECIMO)
The lower rate of increase between 1980 and 1982/83 is to be associated with 
the drop of some 20% in total machine-tool production during the same 
period.
It should be stressed that machining centres and NC lathes - nearly all of 
small capacity - account for nearly 70% of Japan's total NC machine-tool 
production and that as far as the other types of machine tool are concerned, 
the European industry generally retains a strong position. Thus, to take the 
example of reaming machines, only 6-7% of Japanese production is equipped 
with numerical control, whereas the corresponding figure for the Federal 
Republic of Germany is nearly 50%. Furthermore, Japanese penetration of the 
European market in NC lathes and machining centres has slowed down 
considerably over the last two or three years, thanks to the restraint 
imposed by MITI in the form of minimum prices for exports of machine-tools , 
which are thought to have had the effect of increasing the prices of 
Japanese machine tools sold in Europe by between 30% and 40%.
Nevertheless, while action of this nature makes it possible to paper over 
some of the cracks, genuine and lasting solutions can only come from the 
European side. Despite encouraging signs (see note 1) that European 
manufacturers are making an effort in order to face up to the challenge of 
the new information technologies, their underlying situation remains 
vulnerable, since they have not yet reached the volumes nor introduced the 
automated production methods which would enable them to compete in economic 
terms with Japanese manufacturers of machining centres and NC lathes at the 
lower end of the market0 .
4 Analysis of production costs forming part of the strategic study of the 
Community machine-tool industry, which is in preparation.
5 These prices have been applied to exports to the United States and Canada 
since 1978 and to the EEC since 1981.
6 Annual production of these types of machine amounts to between 150 and 375 
machines in Europe, as against some 1 500 machines in Japan.

- 5 -
European manufacturers can continue producing this type of machine only with 
the aid of the cash-flow generated by the remainder of theire activities. 
Furthermore, increasing possibilities are emerging for applying these^ 
production techniques to other types of machine, in particular machining 
centres and medium-range NC lathes: this is liable in future to expose 
European manufacturers to fiercer competition in these sectors also.
From the automation standpoint, it is also necessary to stress the 
increasing importance of machining centres, since they constitute one of the 
basic components of flexible manufacturing cells and systems.
(v) The outlook for demand
The machine tools market underwent the worst recession of the postwar period 
between 1980 and 1983, and the majority of experts expect to see a marked 
recovery in the years ahead. The American analysts Frost and Sullivan make 
the following forecasts for the overall demand for metal-removing machine 
tools :
($ US)
1980 1983 1985 1987 1990
5.642 3.900 4.650 5.870 7.440
Within overall demand, the share of NC machines has been steadily increasing 
in recent years. An indication of that fact is given by the increasing share 
of NC machines in total machine-tool production: between 1980 and 1982, that 
proportion (in value terms) rose:
- from 17% to 27% in the Federal Republic of Germany;
- from 15% to 23% in the United Kingdom;
- from 29% to 35% in the United States ;
- from 50% to 54% in Japan.
In more concrete terms, the London based Policy Studies Institute conducted 
a survey in 1983 of the intentions of a representative sample of British 
industry. According to the results of that survey, the population of CNC 
machine-tools in the United Kingdom should increase from 17 000 units in 
1983 to 27 000 units in 1985, which represents an annual growth rate of some 
25%, a figure that does not conflict with the other indications in the 
Commission's possession, (see note 6)
It can therefore be expected that the population of advanced machine tools 
will continue to increase sharply in the years ahead, as they replace less 
sophisticated conventional machines. Nevertheless, in the longer term, this 
period of rapid growth could possibly be followed by an appreciable decline, 
as a result of the combined effect of several factors:
- the slowing-down of the process whereby conventional machines are 
replaced by NC machines;
- the greater productivity of NC machines in comparison with 
traditional machines, which makes it possible to reduce the 
investment and the number of machines installed for an identical 
volume of production (this factor being partly offset by the fact 
that machines are used more intensively and therefore have to be 
renewed more quickly);
7 Machines costing more than $US2 500.
£ In firms employing a workforce of more than 20.

- 6 -
~ the increasing integration of NC machines into automated systems in 
which, for an identical production capacity, the number of machines 
required can be reduced to one-third of conventional needs and whose 
impact, for a constant level of investment, can, according to the 
Boston Consulting Group, be evaluated as follows :
Proportion of NC machines
sold as part of a system 5% 10% 25% 50%
Reduction in the demand for
NC machines - 5% - 9% - 20% - 33%
- the decline in the need for machining as a result of better product 
and component design;
- the emergence of metal substitute materials and new manufacturing 
processes.
C. INDUSTRIAL ROBOTS  
(i) Definition
The term "robotics" is often used very loosely to cover the entire process 
of manufacturing automation. The intention in this section is, however, to 
deal specifically with industrial robots, which can be defined in several 
ways, i.e. either from an overall standpoint, or according to their specific 
characteristics (degree of sophistication), or according to functional 
categories. In contrast with what could be expected, the definition of 
robots is far from being a purely academic question: a few years ago, the 
JIRAV proposed a very broad five-category definition of robots (see note 3), 
which was adopted in 1979 as a Japanese Industrial Standard (JIS). According 
to this definition, there were a total of 76 500 robots installed in Japan 
in 1980, as against 4 500 in the United States and 4 000 in western Europe. 
On the basis of the European and American definitions, the figure for Japan 
would in fact be closer to 5 500 units. It can, however, be imagined that 
the psychological impact of announcing such a lead in Japan has been 
considerable. Adopting such a broad definition also made it possible to 
include among Japanese producers of robotic equipment a Large number of 
manufacturers of fixed manipulators, who thus received considerable support 
from the MITI, the effect of which was to stimulate them to develop more 
sophisticated equipment, and thus to venture into markets they would 
probably otherwise not have tackled.
In the following analysis, the use of the term "robot" will correspond to 
the definitions adopted by the ISO, the Robot Institute of America and the 
British Robot Association (see note 3), which are fairly similar and from 
which it emerges that robots display the following features :
- they handle parts, tools and specialized implements;
- they are reprogrammable;
- they are multifunctional;
- the programming of their motions is variable.
9 Japan Industrial Robots Association, a manufacturers' federation founded
at the MITI1s instigation.

- 7 ~
This nevertheless covers a large range of robots, from the simple playback 
r ï b o t ,  which stores in its memory a sequence of a c t i o n s ^ ^ o f  U s
operator, to the intelligent robot, which is capable - by virtue of its
sensorial capacities - of reacting to the working environment.
(Ü) Productivity and economic return
Given the diversity of robots and the fact that they were introduced into 
manufacturing procassas only recently, it is difficult to quantify the
productivity or efficiency of robots in general.
A yardstick with which to gauge the productivity of a robot can, however, be 
given by the time it takes to pay back capital invested. Operating on the
basis of two shifts a day, the initial investment can °® vpars
recovered, in favourable cases, within about two-and-a-half to three years 
for handling/transfer robots, welding robots and paint-spraying robots, n 
the last analysis, however, it should be stressed that the productivity of 
t h e  robot musï be'considered in terms of its contribution to a partly or 
fully automated production system, in which the robot plays a vital r0^e 
providing flexibility by virtue of its versatility and its ability to be 
reprogrammed. Again,"idle time is reduced considerably, in P®rticu.r during 
machine-tool loading/unloading operations, as a result of the elimination 
the safety precautions necessary for human operators.
(iii) Dissemination among users
I
i  FRGEstimated robot population in various countries 
7g '  go 81 82 83 Average annual growth, IvoU/oo
„ 450 1.200 2.300 3.500 4.800 41 %
|U .K .  125 371 731 1.152 1.753 4 7 %
|France n.a. 580 790 1.385 2.010 *
!  T t a I  v n.a. 400 450 790 1.800  4 6 % -----------------
TT
otaT----nTëTT.551 4. ' ^ 1 0 1 2 ^ ^  ----------
|  
Japan O W  6.000 9.500 13.000 16.500  29 /.
Iu.S-  2.500 3.500 4.500 6 . 2 5 0 ^ 8 . 0 0 0 ^  23 Â
I  Sweden 8 0 0 ^ 1 . 1 3 3  1.700 1.300 .1.900___________ n^a^---=-----s ----_---
So
urce :  OECD'2, British Robot Association and Association Française de
Robotique Industrielle
This comparison clearly demonstrates that, after a relatively slow start, 
the dissemination of robots in European industry has continued at a 
faster pace, enabling the Community to make up part of the ground lost to 
Japan and even to overtake the United States in 1982/83. Nevertheless, in 
order to make the comparison more realistic, these absolute figures con 
cerning the robot population should be related to employment m  industry. 1 0  1 1  1 2
10 Figures revised downwards after a definitional modification.
11 Figures revised downwards after a definitional modification.
12 The OECD has gathered its data from different sources (the BRA, the BIPE, 
Diebold and the STT), so they are not necessarily entirely comparable.

Number of robots per 10 000 workers in industry (NACE2/4)
1978 1980 1983(a) I
Federal Republic of Germany 0.5 1.4 6.3 I
United Kingdom 0.2 0.6 3.4 I
France n.a. 1.1 4.1 I
Italy n.a. 0.7 3.4 I
Japan 2.3 4.4 11.8 I
United States 1.1 1.6 3.9 I
Sweden 7.8 11.0 20.3(b) I
(a) Comission estimate for employment in 1983.
(b) Not comparable with previous figures (see preceding table).
The lead taken by Sweden and, to a lesser extent, by Japan, in the use of 
robots therefore remains significant. Taken as a whole, this table con­
firms that the Community has caught up with the United States, and the 
particularly rapid dissemination of robots in the Federal Republic of 
Germany since the beginning of the eighties is worthy of special mention.
It is also of interest to examine the dissemination of robots sector by 
sector.
|  Distribution of robots according to user industry (%)
FRG U.K. Japan Sweden |
(1981) (1980) (1980) (1979) |
|Transport, including 46 39n.a. 22 |
|  -motor vehicles n.a. 34 30n.a. |
|  -other n.a. 5n.a.n.a. |
|Electrical 14 5 36 9 I
|Mechanical 12 10n.a. 15 |
|Metal Products 16 17 551 |
llnjection moulding of plastics 6(a) 14(b) 10n.a. |
j  Other 16 15 19 3 |
j  Total TÖÖI 100% 100% 100% |
|  (a) Plastics and other materials I  
|(b) Plastics and rubber I
Source: OECD, Commission presentation.
This table shows the major role played by the transport industry, and in 
particular the motor industry, in the Federal Republic of Germany and the 
United Kingdom. The same applies in France, where 958 out of a total 
robot population of 2 010 in 1983 were installed in the motor­
manufacturing industry; the proportions were probably similar in Italy.
It is interesting in this context to set out an international comparison

- 9 -
of the use of robots in the motor industry, classified in decreasing 
order of utilization rate. The first four places in this classification 
are occupied by Community firms (it would, however, have been interesting 
to include Volvo), three of which are German, which helps explain the 
rapid growth of the robot population in the Federal Republic of Germany.
Manufacturers Number of vehicles Number of Number of robots
produced (1982) robots per 100 000
(1982) vehicles
Mercedes (D)
BMW (D)
Volkswagen-Audi (D) 
Fiat (I)
GM (USA)
Toyota (J)
Nissan (J)
Mazda (J)
Chrysler (US)
Ford Europe 
Renault (F)
Peugeot SA (F)
Ford (USA)480.000 550 114
360.000 350 97
1.538.000 950 62
1.186.000 640 54
4.630.000 2.300 50
3.145.000 1.400 44
2.408.000 1.000 41
1.110.000 430 39
967.000 360 37
1.233.000 400 32
1.719.000 450 26
1.423.000 350 25
2.192.000 500 23
Source: Peugeot SA
(iv) Situation of European Manufacturers
In the early stages of the development of industrial robots, the world 
robot market was dominated above all by independent American 
manufacturers. In first place among the latter came the firm Unimation 
subsequently absorbed by Westinghouse ~ which in 1982 still held 32 A of 
the American market, nearly 25% of the European market and approximately 
15% of the world market in robots.
Nevertheless, the situation has changed since the middle of the last 
decade: Japanese production has developed rapidly under the impetus of 
coordinated action by the MITI aimed at developing both the production of 
and the demand for robots in Japan (see p.14 of the main document). The 
results have been spectacular and can be illustrated by the following 
comparison:
Production of programmable robots in 1982
Japan 7000
Europe 3200
USA 1800
Source: Frost 8 Sullivan
In Europe, independent Scandinavian manufacturers such as ASEA and 
Trallfa, which have just concluded an important cooperation agreement 
(also including their Japanese and American partners) have been at the 
forefront of the world scene for several years, as can be seen from the 
following table:

- 10 -
Share of the western European market in 1981
Unimation (USA) 23% 
Trallfa (Norway) 20% 
ASEA (Swedeç) 15% 
Electrolux ^ (Sweden) 5% 
Volkswagen (FRG) 12% 
Kaufeldt (Sweden) 4% 
Others 21%
Source: OECD
The substantial market shares held by the Scandinavian manufacturers 
partly reflect the extremely high utilization rates in those countries, 
and particularly in Sweden. Since 1981, European producers have grown, 
notably in spot welding (Kuka in Germany, ACMA in France, COMAU in Italy) 
with a strong showing by ASEA and a weakening of Unimation.
In spite of the foregoing, all the signs indicate that robot production 
in the Community has developed appreciably since that date, and this 
development can largely be associated with the more rapid introduction of 
robots in the European motor industry. Community motor manufacturers are 
themselves largely responsible for the manufacture of these robots (which 
are intended for captive markets). The firms ACMA (a Renault subsidiary), 
COMAU (a Fiat subsidiary) and Volkswagen can be mentioned in this 
connection. Given the dominant role of the motor industry in the demand for 
robots and the rapidity with which the Community industry is introducing 
them, this process should boost production within the EEC considerably.
From a different standpoint, a remarkable example is provided by Italy, 
where robot production, which represented only 30% of domestic demand in 
1975, rose to nearly 140% in 1979. Italian manufacturers succeeded in 
taking full advantage of a rapidly-changing market on which there are a 
large number of highly-specialized applications (see the list set out in 
note 7). Such applications lend themselves well to individualized pro­
duction, to which the structure of Italian industry is geared very 
effectively. At the other end of the scale, in the United Kingdom, the 
proportion of demand covered by domestic production increased from 23% in 
1980 to 34% in 1983. It should not, however, be forgotten that these 
figures also incorporate American or Japanese robots manufactured under 
licence in Europe. Although the overall position of Community manufacturers 
is weak, the emergence of a series of European manufacturers and European 
know-how in the area of assembly - DEA and Olivetti in Italy, Bosch and 
Mantec (Siemens) in Germany, SCEMI (CGE) in France - makes it possible to 
face the future with some optimism.
Although economies of scale have so far not played an important role for 
European manufacturers, it should nevertheless be pointed out that the 
Japanese industry, adopting here the same approach as for NC machine tools, 
is pursuing a strategy aimed at lowering costs through series production 
based on modular standardization. Instead of attempting to construct highly 
sophisticated - and therefore costly - robots that can carry out a large 
number of functions, the Japanese industry is concentrating its efforts on 
the development of modular structures and simple, fast and inexpensive robots 
(of the Scara type), each of which is capable of performing only a limited 
number of tasks, but can be combined in order to obtain the desired result.
At the present time, Japanese robot exports remain scarce, since Japanese 
manufacturers appear to prefer trade agreements and, to a lesser extent 1 3
13 The interests of Electrolux in the robot field have since been taken over 
by ASEA.

- 11 -
Licensing agreements, which involve Less risk in a market that is still 
relatively limited and on which local presence (for maintenance purposes) is 
highly important. Unless this situation is the result of a deliberate policy 
aimed at avoiding frictions in trade, there is still a genuine likelihood 
that competition from outside the Community will become much fiercer in the 
years ahead.
As far as licensing is concerned, although many agreements have been 
concluded between European firms, on the one hand, and American and Japanese 
firms, on the other hand, one cannot fail to be struck by the virtual non­
existence of intra-European agreements. In the last analysis, it should be 
borne in mind that of all types of advanced equipment, robots have attained 
the lowest level of maturity, and that this is therefore a highly volatile 
and rapidly expanding market on which no position should be taken for 
granted, (see footnote 9)
(v) The outlook for demand *  I I
From a quantitative standpoint, the OECD has compiled in its 1983 study a 
whole set of forecasts from different sources of the growth of the robot 
market in a number of OECD countries. These forecasts are set out in Table
II in Annex III.
In general, forecasts for the total annual growth of this market range 
between some 25% and 30%, which does not appear unrealistic in view of 
previous growth rates.
The current world robot market is estimated at approximately $US500 
million.'^ In the Light of data compiled by the OECD, the size of the market 
could attain the following figures by 1990:
- between $US1 500 million and $US2 000 million in the United States;
- nearly $US1 000 million in Europe;
- approximately USD 700 million in Japan.
From a qualitative standpoint, a sizeable increase can be expected in the use 
of robots for assembly work, as witnessed by the following forecasts:
Robot functions
- Spot welding
- Handling/loading and unloading 
of machines
- Surface treatment
- Assembly
- Arc welding
- Other1981 1990
40% 3%
29% 32%
11% 4%
6% 35%
6% 16%
8% 10%
100% 100%
Source :  Arthur D. Little
These changes must be interpreted in the light of the considerable growth 
of the market which is expected between now and 1990. As far as the user
14 According to a financial Times survey dated January 1984.

sectors are concerned, the motor industry will probably remain one of the 
largest robot users. It is to be expected that the use of assembly robots 
in the microelectronics sector will develop swiftly and that, in general, 
the use of robots will progressively take hold in most branches of 
industry.
The growing importance of assembly should, furthermore, be beneficial for 
European manufacturers, who possess international know-how in this field 
(robots and assembly gantries).
D. FLEXIBLE MANUFACTURING CELLS, SYSTEMS AND TRANSFER LINES
(i) Definitions
Definitions play an important role here, as elsewhere, and the differences 
between them go a long way towards explaining the discrepancies - and even 
contradictions - that appear in the various studies on flexible systems.
In the rest of this paper we propose to use the following definitions:
Flexible manufacturing cells are composed of a number of machine tools (often 
standard machines) which are interlinked but work in a fixed sequence accord­
ing to an operational programme. In its simplest expression, a flexible 
manufacturing cell (FMC) will consist of a machine tool coupled with a robot, 
but it can also comprise a number of machine tools (normally less than five) 
with or without a robot. Such cells will normally process series of between 
20 and 500 workpieces.
Flexible manufacturing systems (FMS) are also composed of several machines, 
like the cell, but possess a software capacity that enables the routing of 
workpieces to be variable and optimized. The FMS requires a business 
computer, part-recognition algorithms, loading times, etc. The software is 
much more sophisticated than that of a flexible manufacturing cell, since the 
FMS has ten times more computing power. Variable routing of workpieces 
presupposes the need for a sophisticated transport system, which is often 
composed of self-guided vehicles. Series normally consist of between 50 and 
2 000 workpieces.
Flexible transfer lines:  As in the case of conventional transfer lines, the 
work proceeds along a rigid line and according to a fixed sequence with 
specific machines for each operation, but the different stations become 
numerically controlled and possibly linked to a central computer. This is 
what gives the line its flexibility, making it possible to modify the 
positioning or size of the workpieces very swiftly. In comparison with a 
conventional line, on which a single workpiece is machined, the flexible line 
makes it possible to process a small family of workpieces, but the length of 
series remains large: between 1 000 and 10 000 workpieces.
By putting these definitions alongside those of advanced machine tools and 
robots, it becomes possible to define the entire range of current machining 
possibilities, in terms of productivity and flexibility, as illustrated by 
Table IV in Annex III. This table shows how advanced equipment makes it 
possible to combine productivity and flexibility in order to arrive at the 
partly or fully automated manufacture of small series, which becomes 
feasible for the first time. Another feature of this type of flexible 
system, and above all of the FMS, is its capacity to operate unattended,-  12  -

- 13 -
sometimes for about ten hours. The latter aspect is extremely important in 
the case of equipment that often has to be operated continuously, 24 hours a 
day.
The preceding three definitions have been presented in increasing order of 
the size of machining series, but not in increasing order of systems 
complexity and therefore cost. It should be noted that the FMS, with its 
highly sophisticated software, offers the greatest degree of complexity and 
flexibility in terms of the rapidity with which it can adapt to the market. 
It is at this level that definitions take on not only theoretical, but also 
practical importance: the Americans include flexible transfer lines in the 
FMS category, whereas the Japanese tend to group together the three types of 
system under the heading FMS, thereby systematically giving a broader 
interpretation. Even in Europe, experts often tend to regard the larger 
flexible manufacturing cells (i.e. those comprising a larger number of 
machines) as flexible manufacturing systems, even if they do not fulfil what 
is in our view the decisive criterion, namely that the routing of workpieces 
must be optimized and variable.
Cii) Productivity and economic return
The situations vary according to the type of system concerned.
Flexible manufacturing cells
Flexible manufacturing cells have now attained a high degree of profit­
ability and make it possible to reduce unit costs appreciably, possibly by 
some 25%. The main reason for this saving is the reduction in labour costs. 
It is again worth noting that a sizeable initial investment is necessary.
FMS
The analysis has to be much more subtle. Technical calculations often quote 
spectacular results, as illustrated in the following comparison:
|  Comparison of the Yamazaki Factory at Minokamo (four inter- |
|  connected flexible manufacturing systems) with a traditional |
I  plant of the same capacity
Minokamo Conventional plant |
|Number of machine tools 43 90 |
IWorkforce, 39 195 |
|  including :  - workers 36 170 I
I  - supervisory staff 3 25 |
(Manufacturing time 30 91 j
|Surface area Cm2) 6.600 16.500 |
Source :  VDI - Z (January 1984)
The economic facts nevertheless urge one to make a much more cautious 
assessment, since the size of the investment - which increases more than 
in linear proportion to the complexity of the system - is such that the

- 14 -
economic return is generally acceptable only if the system operates without 
any problems - and therefore without too many stopages - and does not lead 
to additional external costs (e.g. redundancy payments). There are often 
still technical problems, which increase exponentially with the complexity 
of the system, concerning workpiece handling, tool control, machine 
reliability and software. Furthermore, a fall in the demand for the finished 
product suffices for it to be necessary to continue operating the system on 
the basis of only two shifts instead of three (16 hours instead of 24 hours 
a day), thereby considerably reducing its profitability. It emerges from 
these facts that in the absence of tax incentives or other government 
measures, the profitability of FMS is still fairly marginal in the majority 
of cases.
There is, however, one exception to this rule, namely that to the industries 
in which there is a wide variety of workpieces to be machined, which have a 
high unit value and for which the production sequence cannot be foreseen 
with certainty. In these cases, of which the aviation or machine- 
construction industries are good examples, the only way of holding down 
delivery time hitherto consisted in keeping large stocks. FMS makes it 
possible precisely to eliminate - or at least considerably reduce - the 
amounts of stocks and work in progress and is thus fully justified from an 
economic standpoint, since the return on investment is multiplied by a 
factor of four or five in comparison with other cases. If an FMS is to 
attain maximum efficiency, it must therefore often be associated with an 
automatic handling and storage system. The latter may be composed either of 
a central store in which, under the control of the central computer, self- 
guided trucks fetch the components required from the different parts of the 
store, or from a series of smaller stores. In addition to the advantages 
associated with FMS, automatic stockkeeping brings about major savings in 
terms of accuracy, stock control, the floor area required, security and the 
reduction in the number of rejects.
To conclude, it should again be stressed that all benefits of FMS do not 
necessarily lend themselves to conventional financial analysis, since 
account should be taken of aspects such as the competitive edge gained as a 
result of the reduction in delivery times, the reduction in the number of 
human errors and therefore the improvement in the quality (and in particular 
the manufacturing tolerances) of the finished product.
Flexible transfer lines
In comparison with conventional transfer lines, which are already widely 
disseminated, the design of flexible lines is much more modular, since 
control is exercised at each work station rather than centrally. Modular 
design makes for greater standardization of the control components and, to a 
lesser extent, of the mechanical components and therefore reduces the cost 
of a transfer line by up to 25%. To this are added the benefits deriving 
from the greater versatility of this equipment, which have already been 
mentioned.

- 15 -
(ii i) Dissemination among users
The confusion surrounding definitions makes it difficult to interpret 
statistics relating to flexible systems, particularly when comparing different 
countries. The following table, which traces the evolution in the number of 
FMS systems in Europe, Japan and the United States, is therefore presented 
with major reservations. The figures, drawn from a study in progress on behalf 
of the Commission, have been taken from various sources. Moreover, they are 
based on a definition of FMS which also encompasses the larger flexible cells.
Year Europe U.S. Japan
'  T9 67 1
1969 2
1970 4
1971 1(1)
1972 5 4
1973 6
1974 2(2) 6
1975 20
1976 6(4) 7 24
1977 7(5) 26
1978 9( ) 8
1979 15(9) 14
1980 17( ) 17 28
1981 21(11) 21 35
1982 31(17) 27(a) 45
1983 41 ( ) 34(a) ______ -  -  ·----- 1
( 
) = FRG (a) figures incomplete
This evolution could be broadly broken down into three phases:
(1) the initial lead taken by the Americans at the beginning of the 70s
(2) the spectacular breakthrough by the Japanese from 1975 onwards;
(3) the intense effort made by the Europeans since the beginning of 
the eighties with a view to making up lost ground.
Given the importance of Government incentives in determing whether FMS is 
profitable, the Japanese breakthrough and, more recently, the accelerated 
pace of development in Europe are associated with the major stimulation 
policies implemented by governments, which are analysed in Annex II. There 
are no comparable figures for flexible cells and transfer lines. Mention is 
often made of a figure of 100 or even 200 flexible manufacturing systems in 
Japan, according to the scope of the definitions assigned thereto.
As far as transfer lines are concerned, a trend is currently under way 
towards the rapid, large-scale replacement of traditional lines by flexible 
lines. In Europe in 1982, only 10% of lines were flexible, whereas half of 
all new orders in 1984 were for flexible ones.
Transfer lines are used above all in the motor industry. The Commission does 
not possess any statistics on the sectoral distribution of flexible cells. As 
far as FMS is concerned, the following table gives an insight into the 
distribution of flexible manufacturing systems among the various branches of 
industry, on the basis of an international sample.

16
Motor industryJapan U.S. FR Germany
(including components) 3 
Agricultural and construction2 5
machinery 4 8 1
Construction of machines 15 1 4
Heavy engineering 4 - -
Precision engineering — 1 1
Electricity and electronics 2 1 2
Aviation — 4 2
Source :  Boston Consulting28
GroupT? T 5
(iv) Situation of European manufacturers
Given the importance of maintenance and after-sales service in the case 
of complex systems and the length of startup periods (often nearly two 
years) in the case of FMS, local presence proves indispensable for the 
sale of systems. This explains why the vast majority of the systems in 
existence in Europe have been installed by European firms. German and 
Italian manufacturers have taken the lion's share of this market. Italy's 
good performance is worthy of special mention, since despite a very weak 
domestic base (there are reported to be only four or five flexible 
manufacturing systems installed in Italy), there are several major 
manufacturers (Comau, Olivetti, Berardi, Mandelli and SAIMP), who have 
been highly successful on the European market.
While a statement of the number of flexible manufacturing systems 
installed (see the preceding two tables) gives an initial insight into 
the relative position of manufacturers in the different regions of the 
world, account should also be taken of qualitative criteria: the number 
of different parts produced, the size of the system, the degree of 
integration and potential for unmanned operation.
I|Number of parts produced
I
|  Number of systems 5-10 11-100 101-200 over 200
j  United States 12 2 1 -
|  Japan 6 8 3 2
|  Federal Republic of
j  Germany
I2 3 11 2
Source :  Boston Consulting Group.
This comparison should be approached with caution, since it possibly also 
reflects differences in definition. It nevertheless highlig^s the strong 
position of the German industry as regards the flexibility provided by 
the capacity to machine a wide variety of different workpieces (which is 
a gauge of the complexity of the software).
15 In the context of FMS the concept of flexibility has two aspects - number 
of parts machined and flexibility of stocks (inventory flexibility) which 
is considered above.

- 17 -
As far as the size of systems and their degree of integration is concerned, 
jaDan appears to have taken the lead and possesses four extremely large .  
systems comprising more than 15 machines (in particular_Fujitsu Fanuc, Mon 
Seiki and Yamazaki), as compared with two such systems in Europe and one in 
the United States. Subject to the same reservations concerning definitions, 
we have compiled data from different sources in order to arrive at the 
following sample:
Number of machines 
5
6-10
11-15
16-20
20Number of FMS
United States
2
10
4
1Japan
12
7
1
1
3EEC*
6
7
3
1
1
(*) Federal Republic of Germany, France and United Kingdom.
Furthermore, the different sources concur regarding the higher degree of 
integration of Japanese installations, which is reflected in their large 
potential for unmanned operation: there are reported to be 15 flexible 
manufacturing systems in Japan that are capable of operating unattetycjed for 
approximately 10 hours, as against only two such systems in Europe.
As regards less complex systems, i.e. flexible manufacturing cells, inter­
national competition appears to be on the point of becoming keener, since 
Japanese manufacturers, adopting their usual strategy have developed 
standardized cells which they are preparing to export and which have already 
obtained a measure of success in the U.S. Unless they react speedily European 
and U.S. manufacturers of "tailor made" cells risk being overtaken as they 
have been with machining centres and NC lathes.
(v) Outlook for demand
This varies appreciably depending on the type of equipment under 
consideration.
Flexible cells are of proven profitability and represent an investment in 
principle financially within the means of medium sized firms (over 500 
employees). There are practical problems as emerges from the financial 
analysis in section B of the main document but the scope for expansion is 
nevertheless considerable.
In the case of flexible transfer 
ventional Lineslines a process of substitution for con- 
is involved. In this respect the speed of this process has 
already been noted. It is forecast that in 1995 no more than 10% of demand 
will be for conventional lines, while the remainder will be for flexible 
lines and to a more limited, but nevertheless, unpredictable extent, by 
flexible cells and FMS. 1 6  1 7
16 NED0 Advance Manufacturing Systems; Yoshikawa, Rathmill and Havatny: 
Computer Aided Manufacturing; VDI-Z; A.D. Little; I.S.I.; study under way 
for the Commission.
17 Study on FMS under way for the Commission.

- lb ~
The scale of the investment necessary in order to install flexible manuf­
acturing systems means that only large firms can do so (nine flexible manu­
facturing systems out of ten are set up by firms with a workforce of more 
than 2 0 0 0)  :  this therefore considerably limits the potential market. Since a 
large propotion of the savings made by FMS are associated with the reduction 
in idle time, which is proportionally shorter in the case of large work- 
pieces, FMS is chiefly suitable for small workpieces, and this further 
reduces the potential for expansion.
Nevertheless, under the impetus of measures taken by governments, it can be 
expected that the rapid growth in the number of flexible manufacturing 
systems in service will continue, as can be seen from the following figures, 
which are of value above all as a guide.
Flexible production systems(a) in Europe
Operational Planned Total 
Belgium 4 4
France 3 15 18
Federal Republic of Germany 5 26 31
United Kingdom 4 21 25
Source :  NEDO, 1984
(a) Definition which could include flexible manufacturing cells.
E. COMPUTER-AIDED DESIGN (CAD)
(i) Definition
CAD covers a wide range of applications, throughout the whole of industry, 
based on computerized graphic systems and associated with product and pro­
cess design activities.
At product level, CAD ranges from simple units making it possible to produce 
two-dimensional drawings or plans to systems equipped with complex three- 
dimensional modelling software. Analyses and definitions are often confined 
to this aspect of CAD, which, however, encompasses much more than the 
functions mentioned. Still at product level, CAD may be associated with CAE 
(computer-aided engineering) i.e. software making it possible to analyse the 
design and assess the performance of parts (e.g. deformation under heat, 
shear strength, etc.). In certain cases, CAE can make it possible to dis­
pense with costly prototypes. There are also major applications of CAD st 
process level, in the planning of the use of machines and of their operating 
sequence, chiefly in what is termed the "group technologies". The principle 
underlying the.iatter is simple: the idea is to exploit the opportunities 
offered by CAD18 in order, on the one hand, to identify and collect together 
the parts to be manufactured, not on the basis of the product for which they 
are intended, but according to their inherent similarities, and on the other 
hand, to classify the different processes so that they can be organized into 
cells, each assigned to the manufacture of a set of parts belonging to one^ 
and the same family, as defined with the aid of CAD. CAD can also be used in 
order to establish the manufacturing programmes for NC machine tools.
18 By creating data banks providing a highly detailed geometical description
of parts and allowing for classification of parts and also of processes
used in their manufacture.

19 -
(ii) Productivity and economic return
The benefits of CAD are difficult to quantify. Clearly, CAD brings about an 
often spectacular reduction in the lead times for designing and developing a 
product, with a corresponding shortening of the latter's life cycle. Never­
theless, the savings made are also due to the lowering of production costs, 
not only as a result of process planning and group technologies, but also 
through the optimization of product design and use of materials. The 1977 
Peugeot 305 thus comprised 3 700 spot welds, whereas this figure was reduced 
to 2 500 in the Peugeot 205 launched in 1983. To this should be added the 
improvement in quality that is achieved as a result of better design, as 
well as the increased flexibility afforded by CAD. Lastly, it should be 
stressed that a whole set of products, ranging from advanced microelect­
ronics components to the latest generation of aircraft, could not have been 
produced at all, were it not for CAD.
On the basis of an enquiry into American users Fine ControJ^Data has 
presented a series of coefficients of productivity for CAD :
Productivity coefficients 
(average statistical value)
Electronics applications
Establishment of logic circuits 
Wiring diagrams 
Design of printed cards 
Integrated circuits3.0
3.5
3.5 
10.05.0
4.5
4.5
20.0
Mechanical design
Detailed desi gn 
Establishment of drawings 
Designs
Production of sheet metal 
Piping design 
Tender documents 
Production of NC punched tape
Other sectors
3.0
3.04.0
6.0Layout planning
Data processing, calculation and utilization
These productivity coefficients tally with indications obtained from other 
sources (see Note 8). Nevertheless, in terms of economic return, such 
technical calculations should perhaps be moderated, since the high cost of 
CAD systems apparently often results in amortization periods being fairly 
long (Boeing reckons that it will recoup its investment in CAD equipment over 
a period of seven years), while standard software packages often appear
19 At a seminar organized by the German mechanical engineering industry 
in September 1983.2.0 - 3.0
2.0 - 4.0 
2.5 - 3.5
3.5
2.5 - 3.5
3.0 - 5.0
4.0 - 6.0

-  20  -
ill-adapted to the needs of firms unable to develop their own software.
In reality, the benefits for the firm will depend heavily on the latter's  
individual situation and on the number of operations to be carried out on CAD  
equipment. CAD can thus be highly profitable for a small design office with a  
few employees, whereas it would not be justified for a large firm with only  
limited CAD work to be carried out. Furthermore, these benefits are to a  
great extent difficult to quantify.
Lastly, account should be taken of the rapid technological progress in this  
sector, which is leading to a constant reduction in the cost of hardware and  
software, the marketing of an ever-increasing range of standard software  
packages and the emergence of companies offering specialized CAD services to  
small users who are unable to acquire their own equipment.
Ciii) Dissemination among users
The world CAD market, which amounted to $US1 600 million in 1983, has grown  
at a rate of 30% a year over the last two years, and should againnincrease by  
45-50% in 1984 in order to reach the figure of $US2 300 million. Never­
theless, CAD is still employed on a very small scale in Europe in comparison  
with the United States and Japan.
21By way of comparison, the VDMA estimates that some 50% of Japanese firms in  
the mechanical engineering sector are currently using CAD. The corresponding  
figure for the Federal Republic of Germany is approximately 3%. Another more  
general indication is given by the following table:
Estimated levels of CAD utilization (1982)
Number of CAD systems CAD systems as a
percentage of GDP
Norway 70 1.6 
Sweden 208 2.4 
France 562 1.2 
Federal Republic of Germany 375 0.6 
United Kingdom 620 1.6 
United States 6.600 3.5
Source :  Arnold-CADCAM International - August 1984
Unquestionably, therefore, European firms are lagging far behind the United  
States and Japan in the use of CAD. The lead taken by the latter countries  
is all the greater when it is borne in mind that a period of between several  
months and two years is necessary in order to learn how to use CAD and reap  
all its benefits.
20 Source: Merril Lynch.
21 German mechanical engineering industry association.
22 The author states the need for caution concerning the validity and  
comparability of these figures.

-  21  -
(iv) Situation of European manufacturers
The world CAD market is dominated far and away by the major American  
manufacturers :
Shares of the world CAD market
1983 Market-,§hare
7$US
million)
Computervision 403.0 23.3
IBM 332.0 19.2
Intergraph 255.0 14.7
GE-Calma 159.0 9.2
Schlumberger-
Appli con 103.0 6.0
McDonnell
Douglas Auto 70.0 4.0
Auto-Trol 53.0 3.1
Control Data 49.2 2.8
Source :  Daratech Inc.
As far as the European market is concerned, American manufacturers hold  
approximately a two-thirds share, as can be seen from the following figures:
I
|  Shares of the European CAD market held byvarious suppliers (%) |
I
ISupplier France (1982) FederalRepublic United j
I............Iof Germany (1981) Kingdom(1981)|
I
lApplicon (US) 21 10 3 |
|Computervision (US) 36 32 29 |
|IBM (US) n.a. n.a. 12 j
jothers (US) 5 18 20 j
|Secma (F) 12
|Matra (F) 6
|Siemens (D) 8
IRacal (GB) 11 7 15 |
jcompeda (GB) 6 I
|Ferranti (GB) 2 I
|Quest (GB)  
|CIS2410 j
2 I
|Share of local 23 11 36 |
|manufacturers
jShare of European 38 40 36 |
|manufacturers
jshare of American 62 60 64 |
|manufacturers
Source :  Arnold-CADCAM International - August 1984
23 Market estimated by Daratech Inc. at $1,700 m in 1983.
24 Since taken over by Computervision.
25 Caution required regarding the validity and comparability of the  
figures.

-  22  -
These figures reveal that German manufacturers are lagging seriously behind,  
a fact which is also reflected in the low level of penetration of CAD in the  
Federal Republic. The situation in France and the United Kingdom is slightly  
more encouraging, although generally speaking, it is particularly striking to  
note the extent to which European manufacturers concentrate on their domestic  
markets.
The strength of American manufacturers and the high level of penetration of  
CAD in the United States can be ascribed to the pull exerted by military  
research and the support given in the form of the large market provided by  
the aerospace industry (both a leading-edge and a volume market).
There is, however, considerable know-how in Europe, especially in the soft­
ware field. The European aviation industry, and in particular the Airbus  
programme, is acting as a catalyst in this area. Certain European firms are  
highly successful in specialized outlets, to such an extent that big American  
firms use them (as in the case of IBM, which markets the Catia system
developed by Dassault) or buy them out (e.g. CIS in the United Kingdom, which
was taken over by Computervision).
Another important factor to be borne in mind is that in many instances, the  
most higly sophisticated CAD systems are developed for internal use. This is  
the case, in particular, not only of IBM and other large American firms, but  
also of certain major Japanese industrial groups. Where such systems are  
eventually placed on the market, it is with considerable delay, since the  
firms concerned are more anxious to take advantage of the overall competitive  
edge they derive from using such CAD systems than to market them.
(v) The outlook for demand
As far as the other types of advanced equipment are concerted, pundits
generally expect there to be a high level of market growth^ .  As regards the
Community, the only concrete indication we had related to the United Kingdom  
market: the number of CAD terminals in industry should increase from 9 000 in  
1983 to 14 000 in 1985, which represents an annual growth rate of some 25%.
F. INDUSTRIAL COMPUTING AND OTHER TYPES OF ADVANCED EQUIPMENT
The term "industrial computing" is used here fairly loosely in order to refer  
to a range of computerized industrial management tools.
Upstream of manufacturing, computer-aided design - which, as we have seen in  
the preceding section, makes it possible to optimize the way in which the  
production process is organized - can be associated with computerized plan­
ning of material and component inputs, whereas downstream, customers' orders  
can also be made, via the data-processing network, to mesh with the produc­
tion process. A'striking example in this connection is given by Fiat, which  
has introduced a system whereby the placing of the order with the distributor  
automatically triggers manufacture of the desired model.
26 According to A.D. Little: 28% in the U.S. between 1982 and 1992.

- 23 -
Furthermore, computerization is also spreading to all aspects of the economic  
management of the firm's activities, whether they be in the accounting,  
commercial or financial management field.
The following table gives an insight into all these aspects:
Integrated information technology in an industrial firm  
Overall management (scenarios, planning, computer assisted decision making)
External data  
base 1985-95production  
management 1980-95
10+-»CO■o
4-O
+->C(1)ECDo>a>(0WCCD(0X)cC Dc0 )
t oE4-> C C O < U  · « - E 4->0 )  OO) 3 
A3 “Oc oCD (- E Q. _
control of.pack-
A n aand stocks+-
o
4-Jc_»
EÎ0<
D•I“O)(0<Dc+->CDCOEE1
cor -  O) 
CU t-D Cro c O c 0 —> o. a
overall 
controlsub-
controlsoverall manage­
ment 1970-85
(Ö c•r- tvU £ < 1 )<d cn 
E CO E C O ( D o E—* C 
<0 <D r- E u cd 
c o>
to 03c cr -  < 0+ - >cd >  0 ) C E C <U O O) in to 
t- c 0 )  1 0 a s
Source :  BIPE
Clearly, the benefits derived from computerization in this area vary according to the  
circumstances and situation of the individual firm. As far as order inputs are  
concerned, a computerized system installed in the Federal Republic of Germany (by  
Heidelberger Druckmaschinen) paid for itself within three years- As regards stocks,  
Arthur D. Little mentions average reductions of one-third, together with the virtual  
elimination of errors and shortages- Other benefits are derived as a result of the  
reduction in direct and indirect labour costs, the elimination of late deliveries and  
the general improvement in the service rendered to customers-

- 24 -
It should be borne in mind that some 80% of the industrial and scientific  
computers used in Europe were built in the United States.
Lastly, it should also be pointed out that there exists a range of special­
ized machines adapted to the needs of specific industries and intended to  
form part of automated systems (flexible centres for the injection moulding  
of plastics, automatic cutting machines for the manufacture of furniture,  
automatic sewing or knitting machines in the clothing industry, and automatic  
cutting machines in the footwear or clothing industry).
G. COMPUTER INTEGRATED MANUFACTURING AND THE FACTORY OF THE FUTURE
An attempt has been made in the preceding sections, despite numerous diffi­
culties associated with definitions and the comparability of statistics, to  
portray the current situation for the different types of advanced equipment.
It is essential, however, not to lose sight of the fact that this is only a  
snapshot of a number of sectors which have attained different stages of  
development (see note 5) and are all evolving rapidly. Thus, taking the  
example of FMS, this type of system is not truly profitable at the present  
time for the majority of potential users, but improved reliability of  
machines, software developments, learning effects and economies of scale  
should be expected in the fairly near future to bring about reductions in  
costs that could justify recourse to FMS by a wider range of users on  
economic grounds. In the case of CAD, new standard programmes are becoming  
more common, while the cost of terminals is continuing to fall - as indeed is  
that of all types of data-processing equipment. Many such examples could be  
given: decisions taken today should therefore not only take account of the
current situation, but also bear in mind foreseeable future developments.
It should, however, also be stressed that the range of approaches and  
solutions available is already so varied in terms of technological standard  
and cost, that virtually all firms can find proven advanced equipment  
matching their requirements.
If the study has demonstrated that considerable increases in productivity can  
be achieved through the use of these different technologies on an individual  
basis, it should be emphasized that the real benefits emerge above all when  
the different types of equipment are integrated :  where such is the case,  
individual benefits are not merely added together, they are multiplied. This  
leads to computer-integrated manufacturing (CIM), in which the entire  
industrial activity in the broad sense of the word, is managed in an  
integrated fashion by computer. By surveying the different sections of this  
first part, it is possible to identify the aspects that will go to make up  
the integrated factory of the future: computer-aided design of both product  
and process, computerized planning of external purchases and of stocks of  
materials and components, automated manufacturing with a tool wear measure­
ment and tool changing system and a trouble-shooting system, automatic  
monitoring of product quality, automatic storage and a direct link with  
demand in the form of orders placed by suppliers, without forgetting  
computerized economic and financial management of the entire operation.

- 25 -
Although no factory yet exists which groups together all these functions in  
an integrated manner, this is no utopian dream of the distant future, since  
the constituent parts of such a factory are already actually operating, at  
different levels of sophistication, and no insuperable technical obstacle  
remains even though many solutions still have to be found.
As regards the becj^fits flowing from CIM, a recent assessment in the  
specialized pressc reports an increase in productivity of approximately  
250% in the case of advanced integration. Whatever the value of this type of  
assessment, and even if improvements in the physical productivity of the  
equipment are spectacular, it should not be forgotten that equally large - if  
not larger - gains can be made in a number of other areas. In the factory of  
the future, stocks - whether they consist of finished products, work in  
progress, or parts and raw materials - will be reduced to a fraction of what  
they are in a conventional factory. (In order to illustrate the impact of  
such a reduction: an antique dealer who takes a margin of 300%, but keeps his  
furniture for two years, makes less profit than a supermarket that takes only  
3% but whose stocks turn in two days). Furthermore, toolwear will be reduced  
by automated permanent monitoring systems (as will be machinewear thanks to  
automatic troubleshooting systems), automatic quality control will lead to  
much lower reject rates, while computerized control of the entire production  
line will bring about a substantial improvement in quality, delivery times  
will be shortened dramatically (the advantage of making deliveries within two  
weeks rather than two months is perhaps difficult to quantify, but will  
clearly be a decisive factor), and the introduction of new products as well  
as the renewal of the range of products on offer will be speeded up  
considerably.
These are changes which will, in the long run, revolutionize current economic  
conditions and the environment surrounding European firms, which will have to  
take up a number of technological challenges, cope with sweeping structural  
and financial changes and overcome the associated human problems.
27 Usine Nouvelle, third quarter, 1984.

ANNEX II
State support for manufacturing automation  
(Europe - USA - Japan)
Introduction
This paper provides a resumé of measures introduced by national government for  
support of use and manufacture of automated production engineering equipment.  
The paper describes measures in Germany, U.K., Italy and' France, the U.S. and  
Japan.
It should be borne in mind that the paper does not take into account assistance  
through defence spending in EC member states (which are Tnore reticent than the  
U.S. about assistance to manufacturing automation through this medium). Nor do  
they fully take into account regional (or Lander or U.S.-State) or export aids  
which exist in all the countries cncerned. Incentives t(Though the tax system  
are also not taken into account except in the case of Japan- Certain specific  
research contracts placed by governments with industry are not covered (e.g.  
those placed by BMFT in Germany). In the EC context these do not currently have  
to be notified to the Commission. Furthermore the paper does not deal with  
expenditure on production automation by public bodies siith as PTTs for their  
own benefit but which may have a wider repercussion. Finally relevant  
educational expenditure is largely excluded.
Germany |
Much of the support for manufacturing automation provided by the German  
government has been through the medium of broadly based programmes such as the  
"Harmonisation of the Workplace Programme" (Programm Humanisierung des  
Arbeitslebens).  While support for use of robots was not presented as the first  
priority of this programme this was an important aspect. A total of 700 mio DM  
was spent between 1974 and 1983 of which 100 mio DM was levoted to robotics.
The first production technology programme (Programm Fertigungstechnik)  financed  
research and development over a range of activities - planning of construction,  
layout and management systems, quality, machine control, flexible manufacturing  
and technology transfer. 80% of expenditure was on small firms. Expenditure was  
163 mio DM between 1980 and 1983 (1980 - 39.2 mio DM; 1981 39.5 mio DM; 1982  
46.1 mio DM; 1983 38.5 mio DM) but this represented an underspend in comparison  
with the planned budget for the period of 255.6 mio DM.
A further, revised programme - "Fertigungstechnik" was started in 1984. This  
programme aims at supporting development for industrial implementation  
of computer aided design and manufacturing, robots and related aumation  
systems by means of grants of up to 40% of project cost (maximum grant is  
400 000 DM for CAD/CAM and 800 000 DM for robots and systems). Assistance is  
also available for cooperation projects between enterprises and research  
institutes on development of machines and processes for FMS and inspection

-  2 -
systems. Finance is also available for publications, workshops, seminars  
etc., training and study of such aspects as manpower requirements and working  
conditions. A total of 530 m DM is budgeted between 1964 and 1988 for the  
programme, with the following annual breakdown:
1984 1985 1986 1987 1988
in m DM 70 125 130 135 70
The 1984-6 Fertigungstechnik programme is part of a broader "Informations­
technik programm" for which expenditure of 2,960 m DM is planned between 1964  
and 1988. Parts of this broader programme, in addition to
"Fertigungstechnik",  appear to have some relevance for fostering automation  
and thus are likely to provide further support in this area.
The funds available are broken down as follows:
410 m DM is to be spent on fibre optics and high definition TV, with the  
remaining 2,020 m DM on: computer compatibility (100 m DM), basic research  
(100 m dM), peripherals in microelectronics (320 m DM), CAD (90 m DM), key  
components (90 m DM), sub-microelectronics technology (600 m DM), new chips  
(200 m DM), CAD manufacture, new computer structure (160 m DM) and complex  
data processing (200 m DM).
Federal support for R&D comes mainly from the BMFT and is channelled  
through two bodies:
(i)  For fundamental research,  through the Deutsche Forschungs-
Gemeinschaft (DFG), which groups most universities, the Max-Planck  
foundation and the large scientific institutes. The DFG has an  
annual budget of 20 m DM for research on manufacturing automation.
(ii) For applied research, through the Fraunhofer Gesellschaft which
groups 25 institutes. In particular, it gives support to the IPA  
(Institut für Produktionstechnik) in Stuttgart, which set up an  
experimental automated production system in 1977. IPA has an annual  
budget of about 65 m DM of which some 40 m DM came from the Federal  
Government and Länder sources. Another important institute that is  
supported by the Fraunhofer Gesellschaft is the IPK (Institut für  
Produkt!onsanlagan und Konstruktionstechnik) in Berlin, which also  
has an experimental automated system (with emphasis on testing and  
quality control), set up in 1976. The ISI (Institut für  
Systemtechnik und Innovationsforschung) is also worth mentioning:  
it organizes workshops and seminars dealing notably with the  
manufacturing automation and acts as a consultant, especially for  
SME's, in this area.
Other assistance has been available or is still being given:
(i) A microelectronic programme (Sonderprogramm Mi kroelektroni k) pro­
viding assistance, especially for small and medium industries, for  
application of microelectronics. Of the 1982-5 budget of 450 m DM  
machine builders will receive some 90 m DM.
Bundesministerium für Forschung und Technologie

- 3 -
(ii)  Provision of grants for expenditure by small and medium  
firms on R&D staff.  A total of 1,407 m DM was spent in  
1979-1982 of which about 35% went to the engineering sector  
(i.e. 492 r n  DM for the period).
(iii) Provision of grants of 4.6 m DM to firms in the engineering  
sector for grants for external research in 1982.
Although there is little information available on this subject, the  
individual Lander are also in some cases giving considerable support to  
automation. In particular the Land of Baden Wurttenberg has designated a  
Commissioner for technology transfer, paying consultants' fees, offering  
technical consultancy through a network of 16 technology institutes,  setting  
up technology factories, organizing training and supporting Karlsruhe  
University, which is in the process of establishing its own automated  
production system and has just opened the first production systems engineer­
ing course (what the Japanese would call mechatronics engineering).
The German preference for broadly based schemes has been noted. Within  
these schemes there is a clear preference for RD rather than direct invest­
ment encouragement, although, at a time of rapid technology change where  
increased RD spending becomes an absolute necessity for companies' survival,  
distinctions between RD and other types of expenditure lose much of their  
meaning.
Another point to be noted is the sharp increase in support to automation  
that is presently taking place. This is in fact a common feature of European  
countries' public support in this field.
United Kingdom
After a period in which the U.K. supported development and investment in  
specific sectors (including the machine tool (£30 m programme), textile  
machinery and printing machinery industries) the U.K. has since the beginning  
of the 1980s tended to support usage of specific technologies although also,  
in some cases, their manufacture.
Thus approximately £10 m was allocated to the Robot Support Programme  
between 1981 and 1984 to assist application and production of robots and  
consultancies for these activities. £80 m is allocated for 1982-6 to the  
Flexible Manufacturing Systems scheme for support for installation of FMS  
and consultancies to this end. £25 m of this is in fact from Support for  
Innovation Funds (see below) while £20 m is a new allocation granted in March  
1984. Since 1982 the applications section of the iobot support programme has  
been financed under the FMS scheme and the consultancy aspects of the two  
schemes were merged on 1 August 1984 to form the Advanced Manufacturing  
Technology Scheme.
£27 m is available for 1982-4 under the following three schemes:
(i) CAD/CAM.  Feasibility studies, demonstration seminars and R&D  
projects in CAD.
(ii) CAD/MAT (Computer aided design manufacture and test). Grants for  
seminars and demonstrations.
(iii) CAPTES (Computer aided design and test equipment).

- 4 -
Application of microprocessors to products and processes throughout  
manufacturing industry is being assisted under the Microprocessor Application  
Project to which £55 m was allocated for 1978—83 and to which a further  
£20-£30 m is expected to be allocated. A further £55 m was received for  
1978-83 for the sectoral Microelectronic Industry Support Programme which  
aimed to expand the U.K.'s ability to manufacture standard and specialist  
integrated circuits. The U.K. has also recently proposed a £25 m scheme for  
take up of advanced equipment by the textile industry.
The two SEFIS (Small Engineering Firms Investment Scheme)  programmes '  
provided £130 m between 1981 and 1984 for one third grants for small firms to  
buy NC machine tools and some other items of advanced equipment.
Grants for R&D are available from Support for Innovation Funds which  
apply generally to manufacturing industry. Some of the funds are allocated  
to specific programmes (e.g. parts of robot and FMS schemes) but assistance  
has been given to automation outside the medium of specific schemes, e.g. to  
the machine tool and welding equipment industries. The Mechanical and  
Electrical Engineering Requirements Board (MEERB) also provided R&D support  
to the engineering sectors in general. Funding in the field of CAE was, for  
example, £5.1 m in 1978/9 and £2.3 m in 1980/1. This funding was granted by  
a predecessor of the MEERB, the Mechanical Engineei ing and Machine Tools  
Requirements Board. The MEERB is now an advisory body in connection with  
overall funding of CAE. Research into future generations of robotics is  
financed by the Science Research Council through a £2.5 m programme of joint  
industry/university research which commenced in 1980.
The U.K. has general provisions for investment encouragement outside  
specific sectoral or technology based schemes. It is difficult to ascertain  
the amount of funding involved for manufacturing automation, but, for  
example, £4.3 m was provided for establishment of aUnimation robot  
manufacturing facility in the U.K.
Thus the U.K. has a large number and wide variety of schemes. An  
increasing preference for technology based rather than sectoral schemes is  
discernible, although the latter continue to exist and be proposed.
Investment assistance predominates (although frequently, for instance  
under the FMS scheme, investment is associated with development) but  
assistance remains available for R&D. While most programmes are specific in  
nature, funding procedures of a very general type exist. However it is  
difficult to determine to what extent these provisions are used to fund  
automation.
Italy
Italy does not have the profusion of support measures for automation that  
exist in other countries. The "Sabatini law" enacted in 1965 allowed for  
deferred payment of up to 5 years for purchase of machine tools but figures 
for the amount of assistance involved sire not available. There are three  
relevant progreimmes under the overall Progetto Finalizzato framework of the  
National Research Council for which it is believed that 56,000 m Lira has  
been allocated:
(i) "Informatica" - 13,000 m Lira was made available for work on
advanced process control, CAD in mechanical engineering and machine  
interfacing.

- 5 -
(ii) "Technologie Meccaniche".  This programme has a budget of 30 902 m Lira
for 1983-88« Concentrating on manufacturing technology its main objective  
is the development of machine tools and their integration into flexible  
manufacturing systems. There are three sub-programmes: flexible systems,  
integrated technology and components and industrial experimentation (proto­
type site). From the technological point of view the laser represents an  
important part of the programme which will be managed by the CNR and involves  
a close liaison between research centres and industry.
(iii) "Roboti ca".  It is not known if this programme has gone beyond the feasibility  
study stage.
Two general funds are of relevance. The Fund for Innovation which supports  
introduction of technological developments leading to new or improved products  
or processes stood at 1,600,000 m Lira for 1981-3. This fund applies to the  
automobile, electronics, iron and steel, aeronautics and chemical industries.
Law 696 of 19 December 1983 has taken over from the Sabatini Law and has now  
become a major vehicle for the support of manufacturing automation. This law, under  
which 100 m Lira has initially been made available (taken from the Fund for  
Innovation), provides for a subsidy of 25% of the cost (not including VAT) to SME's  
of buying or leasing advanced manufacturing equipment.
The IMI special fund for applied research stood at an amount of 1,700,000 m Lira  
for 1982/3, which was available in grants and loans. This fund applies to all of  
industry.
F rance
France has a wide variety of measures for support for automation and advanced  
equipment relating both to industry sectors and to technologies.
The machine-tool plan provides for expenditure of 2,300 m FF for 1982-85.
Its aim is to restructure the machine-tool industry and make it internationally  
competitive, through development contracts whereby companies agree to fulfil certain  
targets related to investments, R&D, capital increases, retraining etc..., in  
exchange for access to public funds. These in fact come from existing institutions  
and funds, such as ANVAR, etc. The machine-tool plan also provides for coordination  
of the various public agencies involved in technological innovation and assistance  
for purchase of NC machine tools and advanced equipment by educational establishments.
There have been a series of public agencies and programmes aiming to encourage  
innovation and investment:
a) "Roboti cs bi 11ion" - a 1,200 m FF programme for favourable loans for  
purchase of robots during 1982-5.
b) MECA procedure which permits small and medium firms to test automated equip­
ment and finances subsequent acquisition. 500 m FF has been allocated for  
1982-5 (of which 150 m FF in 1982). The procedure is run by the Agence  
Nationale pour la Développement de la Production Automatisée (ADEPA).
c) DAP (Développement de l'automatisation de la production) encourages innovation  
in automation by small and medium enterprises and has a budget of 14 m FF in  
1981 and 20 m FF in 1982.
d) Efficacité des équipements et maîtrise des débouchés.  The fund which stood at  
2,500 m FF in 1982 encourages investment programmes through favourable loans  
of up to 70% of expenditure.
e) CODIS (Comité des Industries Stratégiques) provided credits for selected  
companies in selected areas of technology. There was a concentration on
FMS.  In 1982 the fund stood at 110 m FF and was projected to stand at 455 m FF  
in 1983 and 715 m FF in 1984.

-  6 -
f) PUCE (produits utilisants des composants électroniques) haB a budget  
of 40 m FF for 1963-4 to encourage small firms to incorporate  
electronics in their products.
g) Special loans to industry. Soft loans of 30-70 m FF to industry for  
application of equipment in line with national priorities (inc.  
production automation).
FIM (Fonds Industriel de Modernisation) was created in 1983 to provide  
favourable loans to users for modernisation of manufacturing processes and  
development of new products. It also takes into account office technology  
and biotechnology. FIM has taken over the activities of CODIS and possibly  
DAP and the fund "Efficacité des équipements et maîtrise des débouchés".
Only 1,000 m FF was spent out of FIM's 1983 allocation of 3,000 m FF. The  
remainder was brought forward to 1984 as part of a total allocation of  
7,000 m FF. It has recently been reported* that ar >ther 1,000 m FF has been  
added to top up the fund.
A "programme productique" for 1983-6 has been launched; it functions  
along the same lines as the "plan machines-outils" i.e. through the use of  
development contracts providing for privileged access to existing funds, such  
as the FIM as well aB a training programme, assistance to supply of equipment  
through CODIS contracts and stimulation to public and private research.
100 m FF has been allocated to this latter aspect but details of other  
financial arrangements are as yet unknown.
The following assist RBD:
a) ARA (Automatisation Robotique Avancée) coordinates some 50 research  
laboratories and 20 large companies for research on FMS and  
robotics. 5 m FF was budgeted for 1981, 15 m FF for 1982 (another  
15 m FF derives from another agency) and the programme lasts until  
1985.
b) ANVAR (Agence Nationale pour la Valorisation de la Recherche) had a  
budget of 200 m FF in 1983 (out of a total of 900 m FF) for aids to  
innovation for production of advanced equipment in the field of  
manufacturing technology.
Thus France has a large number of arrangements for funding in similar  
fields concentrating both on technologies and industry sectors of general and  
specific types and dedicated to users and producers. It should be stated  
that budgets relating to these financing arrangements have not always been  
fully drawn on. The FIM funds were not fully spent in 1963.
United States
The Department of Defence has a "MANTECH" programme with expenditure as
follows :
US $ m
1976
1979
1980
1981
1982
1983118
126
139
156
209
300 (estimate from non US source)
Financial Times 9.6.1964

- 7 -
A significant part of this programme is managed by the U.S. A irforce with  
the overall purpose of assisting productivity in the aerospace industry and  
developing advanced manufacturing technology. The USAF programme has the  
following eub-aectors:
generic manufacturing technology
ICAM (integrated computer aided manufacturing)
manufacturing science
technical modernisation
air-force logistics command initiative
The importance of CCAM is worth noting. Among other activities it includes a  
demonstration project at Boeing - the Integrated Sheet Metal Centre CISMC).
This will incorporate the features of the four areas of emphasis in CCAM -  
system development, information management, planning and control and product  
and process definition. The purpose of the ISMC is to demonstrate and validate  
the benefits of computer aided integration of quality assurance, production  
planning and control in batch manufacturing and to show clearly the size and  
source of these benefits.
The following sums are involved in the USAF programme:
US $ m
1980 56
1981 69
1982 84
1983 95
1984 108
As much expenditure as possible is made through placement of R&D con­
tracts with private equipment producers. There is a system of dissemination  
and exchange of results, thus implying general benefit to the civilian sector.
In addition NASA- spends some $2 m p.a. on research into robotics.
Other government bodies are active in research. The National Science^  
Foundation has devoted the following sums to basic research in automation:
US $ m
1980 2.5
1981 2.8
1982 3.1
1963 3.5
1984 4.6
The foundation's small business programme cost $2.6 m in 1961 and $3.1 m
in 1962 for research into grinding and optical gauging. Final y e ---—
En
gineering of„the National Enginee^ng Laboratf^ w iC1  
comes under the National Bureau of Standards, spent $5.6 m in 1982. m m
1983 and $11.1 m in 1984, on basic research im:o automation. This in  
development of advanced NO systems, as well as setting up a fully auoma 
research facility, to enable the NBS to develop interface standards for  
integrating advanced equipment, and also to act as a test- e or  
standards.
In a recent study++) the Office of Technology Assessment of.theJJ^S^  
Congress has presented a table showing how much of the various programmes  
mentioned above are devoted to automation and splitting them between  
military and civilian sub-totals, although the importance of this distinction  
should not be exaggerated in view of the substantial civilian fall-out rom  
military programmes.
++) Computerized Manufacturing Automation - Employment, Education and the  
Workforce.

-  8 -
Federal funding of research and development  
in Programmable Automation - Fiscal Year 1984
Military agencies:
-MANTECH" Programme
- Defence Advanced Research Projects Agency  
(DARPA)
- Office of Naval Research  
Military sub-total:
Civilian agencies:
- National Bureau of Standards (NBS)
- NASA
- National Science Foundation (NSF)
Civilian sub-total:
TOTAL FEDERAL FUNDING:million $
56.00
3.50
4.10
63.60
3.85
5.90
6.90 - 9.20
16.65 - 18.95  
80.25 - 82.55
Source:  OTA
This description, however, relates only to Federal funding, and takes no  
account of support from individual States, about which we have practically no  
indications. It is also worth noting that the practical effects of military  
development contracts can go far beyond the R&D stage, since military orderB  
often provide subsequently a large, stable market for the product that has  
been developed. This very real support cannot be quantified.
Japan
The Japanese government provides certain tax incentives, which because  
they are specific to machinery are described here. It should be borne in  
mind however that tax incentives to industry are a common form of support in  
the industrialised countries dealt with in the paper, but are elsewhere not  
so specifically targeted and are hence not described under other country  
headings. From April 1978 special depreciation in addition to the ordinary  
depreciation, amounting to 14% of the acquisition cost has been allowed for  
machinery and equipment including industrial robots purchased by small  
businesses capitalised at Y100 m or less.
From the same date special initial depreciation, in addition to ordinary  
depreciation, amounting to 10% of the cost of acquisition of designated  
products in the case of users and 10% of the value of capital investment for  
manufacture of designated products in the case of manufacturers has been  
allowed. The designated products are important machinery system components  
including industrial robots and CNC machine tools. A special rate of 25% was  
applied between FYs 1978-79 and of 13% between 1980 and 1981. Under this  
scheme an estimated Y40,000 m of tax relief was given in FY 1978. Since  
April 1982, under the Mechatronics Investment Promotion Tax System for Small  
Business,  special initial depreciation, in addition to the ordinary depreci-  
aton, amounting to 30% of the acquisition cost or tax exemption equivalent to  
7% of the acquisition cost in the accounting year of purchase, with an  
allowable exemption limit of 20% of the amount of corporate tax in the same  
year has been given to small firms capitalised at Y100 m or less for acquis­
ition of products in the area of mechatronics machinery and computers. Tax

- 9 -
exemption equivalent to 7% of 60% of a total lease commitment value in the  
accounting year of lease with an allowable exemption limit of 20% of the  
amount of corporate tax for the same year is provided for lease of products  
in the same areas. An estimated Y27,000 m of tax relief is being given under  
this system in FY 1984.
The Japanese authorities provide incentives to users and manufacturers of  
automated production equipment in the form of low interest loans.  The Small  
Business Finance Corporation has from April 1980 provided loans of up to  
Y300 m per enterprise capitalised at Y100 m or less or with a total of 300  
employees or less over a 13 year period with a 2 year grace period at  
7.1% p.a. for the first three years and 7.6% p.a. thereafter. The loans are  
for purchase of equipment enhancing industrial safety and hygiene including 
designated industrial robots. In FY 1983 Yll,651 m was given for 556  
projects. The People1s Finance Corporation has from April 1980 given loans  
on the same terms and for the same purpose of up to Y33 m per enterprise  
capitalised at Y10 m or less or with a total of 100 employees or less. In  
FY 1983 Yl,410 m was lent for 201 projects. Under the Small Business  
Facilities Modernisation Fund established in April 1980 prefectoral  
governments provide no interest free loans, half subsidised by the State to  
small businesses (100 employees or less) for purchase of machinery and  
equipment contributing to modernisation. The maximum loan amount is Y15 m  
per enterprise and the maximum loan period is 5 years. In FY 1982 Y38,789 m  
*  was lent for 6,855 projects.
The Japanese Development Bank provides loans to large businesses  
(capitalised at more than Y100 m or with a total of more than 300 employees)  
for certain types of capital investment for manufacture of products  
designated by MITI.  These include industrial robots and selected NC machine  
tools,  for which interest rates at the most favourable rate under the scheme  
of 7.1% are available for loans of 50% of project costs over a 10 year period  
with two years of grace. The loans have been available from September 1978  
and Y16,800 m was provided in FY 1983. The Small Business Finance  
Corporation has since September 1978 extended its loan system to capital  
investments aimed at manufacturing the products designated by MITI for the  
Japanese Development Bank Loans,
Business capitalised at Y100 m or less or with a total of 300 employees  
or less are eligible. The maximum loan amount is Y300 m, but otherwise the  
terms are the same as those for JDB loans. In FY 1983 Y 1,290 m was given  
for 12 projects.
The Japanese authorities also assist hire purchase and leasing of capital  
equipment.  Under the Small Business Modernization ^und non profit making  
prefectoral leasing institutions have since April 1980 purchased industrial  
robots and loaned them to small businesses with 20 employees or less on a  
hire purchase basis. The maximum loan value is Y20 m per enterprise, the  
maximum period of redemption is 54 months while the hire rate is 5% of the  
outstanding debt. In FY 1982 Y14.676 m was spent on 1,725 cases. In April  
1980 leading manufacturers of industrial robots created the Japan Robot  
Leasing Company (JAROL) with financial back-up from the Fiscal Investment and  
Loan Programmes of the Japanese Government. This leases industrial robots  
and flexible manufacturing systems made by 66 leading Japanese manufacturers  
to businesses capitalised at Y'lOm or less or with a total of 1,000  
employees or less. In FY 1983 approximately Y10.000 m was expended.
The Japanese Government also provides domestic credit insurance schemes.  
The Machinery Credit Insurance System for Instalment Sales and Loan Sales  
Contracts inaugurated in-June 1961 is designed to cover sellers' risk

-  10 -
accompanying instalment sales of or bank loans for sale of 25 types of  
machinery including industrial robots. The premium is 0.83% of the sales  
value for a 36 month insurance of industrial robots. A Machinery Credit  
Insurance System for Lease Contracts was established in June 1961 to cover  
the lessor1s risk accompanying the lease of 32 types of machinery including  
industrial robots. In the case of industrial robots the maximum insurance  
period is 37 months and the premium is 0.363% for a 36 month insurance. In  
FY 1983 the insured amount under the above two schemes was Y519.000 m. A  
further government scheme is the Credit Extra-Insurance System of the Small  
Business Credit Insurance Corporation which insures debt guarantees made by  
Credit Guarantee Societies to small businesses and credit guarantees extended  
to loans associated with the "Elevation Programmes” drawn up by MITI in the  
light of the Law for Promotion of Machinery, Electronics and Software  
Industries (see below).  The maximum insured value is Y30 m, coverage is 70%'  
and the premium is 0.57% p.a. In FY 1983 the insured amount under this  
scheme was Y5,505,000 m.
Up to 1970 technological support on the production automation area aimed  
at Japan's catching up of front runners in machine tool technology,  
production facilities and industrial structure.
Subsequently the Law for Promotion of the Machine Tool and Electronics  
Industries (1971-77) shifted the emphasis to "mechatronics".  Under this law,  
especially : in the 1976-77 period, MITI produced "Elevation Programmes" for  
various NC machine tools. These programmes set out technological require­
ments, projected market size and investment volume and provided for tax area  
financial incentives (these are among the measures described above), joint  
R&D activities and exemption from anti-monopoly law. These measures enable  
development and commercialisation of products and production facilities in an  
atmosphere of confidence and with reduced initial risk. The 1971-77 law was  
replaced by the Law for Promotion of Machinery, Electronics and Software  
Industries, 1978-85.  MITI has now become less concerned with targeting and  
prefers to construct "visions" as a base for policy measures. These present  
structural information about an industrial sector and indicate the basic  
direction of medium or long-term policy, but it is up to industry how to  
interpret or use a "vision",
MITI's research project - "Research and Development of FMS with Laser" -  
is now in its final stage. The work is undertaken by a private association  
specifically established for the task and consisting of 20 private companies  
(9 machine tool companies, 4 from heavy industry especially forging and 7  
companies from the electronic industry. Three MITI laboratories are also  
involved). A total number of 400 researchers is involved.  The total budget  
is some Y13.7 billion 1977-84 for which Y1,197 m is allocated  for 
FY 1983 and Y627 m for FT 1984. The association is now conducting its final  
project - the practical use of its test plant, a self contained automated  
gear box manufacturing facility.
The Advanced Robot Technology Research Association (ARTRA) was founded in  
February 1984 to undertake the MITI project - R&D Project of Robots for  
Critical Work - in cooperation with MITI's research institutes and univer­
sities. This aims to develop technologies necessary for a new type of  
sophisticated robot capable of deep sea and nuclear plant work and of rescue  
work in disasters. 6 firms from heavy industry, 8 electrical and electronics  
companies, 2 industrial associations and 2 robot makers are participating. 
Some Y20 m is budgeted for an 8 year period.

-  11  -
The research associations of the Ministry of Construction started a  
project in 1983 entitled "Construction Robots and Automated Systems" for  
development of a prototype automated construction system, The FY 1983 budget  
was Y10 m, that for FY 1984 is Y40 m. A further MITI project is for "R&D of  
Automated Sewing Systems". This has a budget of Y 1 3 0 bittion for 1982-89 with  
an allocation of Y717 m for FY 1984. This involves a total computerised  
system for sewing preparation, sewing and assembly, fabrics handling and  
production control.
Local government plays a role in technological development as is apparent  
from the prefectoral involvement in some of the schemes noted above. Most  
local governments in Japan also maintain technological research facilities  
including facilities for mechanical and metallurgical engineering. MITI has  
established the "Inter-Industries Cooperation Scheme" in 1984 which provides  
Y3.5 m to each "inter-industry association" for which local governments must  
pay half the subsidy. There are 14 such associations of which at least two  
are in the production technology area (one for development of robots for  
under water work;  the other for R&D of precision dies production technology).
Japanese industrial assistance is therefore usually targeted to part­
icular sectors and is characterised by financial incentives to purchase of  
production equipment by users; for enhancement of manufacturing facilities of  
manufacturers of advanced production equipment and for clearly defined and  
closely coordinated R&D projects.
Conclusion
Germany, the U.K., Italy, France, the U.S. and Japan all have significant  
public aids to manufacturing automation.  The U.S., while it has some  
civilian publically financed R&D, is different to the other states in  
channelling the bulk of its funding through defence spending. Italy has by  
far the lowest funding and fewest schemes although the general nature of  
these schemes makes it difficult to determine exactly what funding is devoted  
to automated pro­
duction equipment. France and the U.K. both have a large array of schemes  
with different targets and Germany concentrates on a few broadly based  
schemes.
Japan has a large number of schemes but these can be grouped into a very  
few similar types and have common targets. Japan's state funded R&D is much  
more closely coordinated and targeted than that in the other countries -  
certainly the EC countries - and is not dominated by military requirements as  
in the U.S.

ANNEX III
I A: NAIN DIFFICULTIES ENCOUNTERED BY BRITISH NICROELECTRONlCS
USERS* (1983)
%
General economic situation 43
Lack of qualified staff 39
High development costs 29
Lack of funds for development 30
Higher production costs 15
Software problems 14
Problems with sensors 10
Difficulties in communicating with subcontractors  
or suppliers 9
Problems with microelectronic chips 7
Opposition from workers or trade unions 6
Opposition from management 4
Opposition from other groups 4
Source :  PSI
* Industrial firms employing a workforce of more than 20.

-  2 -
I B -  BARRIERS TO INNOVATION IN GERMAN INDUSTRY IN 1982
j  Data given as a percentage of replies (multiple replies possible)
All firms in the Including
processing industry machine-
I tool
Non- |  Innovating industry**
|Barriers to innovation innovating*
I  ]
|- Lack of equity capital 50I
I  30 47
|- Access to external finance 17|  5 13
I" Insufficient profitability of
I  the innovation made, as a
I  result of : 70I  76 80
I  .  excessively high development I
I  costs 49|  48 58
I  .  excessively long amortization I
I  period *I  19 I  45 25
I  .  market uncertainty 74I  69 58
I  - Internal resistance to inno-
I  vat ion 15|  10 20
j- Organizational problems 7I  14-
I- Difficulty in finding staff
j  qualified in the field of: 13I  24 40
|  .  RD 64|  80 100
|  .  Production 31I  27-
|  .  Sales 27|  28-
i-Problems in converting technical I
I  know-how into saleable products 13I  16 27
|-No opportunity for innovation I
I  since the technology has I
I  reached maturity 7|  11 
I7
Source :  IFO
* Defined as firms which have not introduced any innovation in 1982.  
** Firms defined as innovating.

THE CAUSES OF THE VARIATION BETWEEN 1977 AND 1982 IN THE PRODUCTION  
OF MACHINE TOOLS IN THE DIFFERENT PRODUCING COUNTRIES_________ __
Ch
ange in national consumption of machine tools  
produced domestically (USD million at 1982 prices)
FRGJAPAN
change in vulume  
of exports (US t 
at 1982 prices)
in production
ume of production equivalent to US 8 1 000 m at 1982 prices.
Source:Boston Consulting Group

- 4 -
III: FORECASTS FOR THE ANNUAL GROWTH OF THE INDUSTRIAL ROBOTS MARKET
Japan:
United States:
Sweden:
France:
United Kingdom:
Federal Republic  
of Germany:
Italy: 
Australia :1980-1985
1980-1985
1980-1995
1979-1984
1985-1990
1981-1986
1980- 1985  
1985-1990
1981- 1986
1981-198635-40%
30%
10 -20 %
35%
26%
36%
20 %
17-26%
26%
27-35%
21-24%
49%
58%
1981-1986 46%
1981-1986 56%
1982-1990 30%Bacho, Halsey Stuart  
Shields)
(JIRA)
(CREI-Lettre 2000)
(Wall Street brokers)  
(CREI-Lettre 2000)  
(Predicast)
(Swedish Computers  
and Electronics Com­
mission 
(ibid)
(Creative Strategies  
International)
(Diebold)
(Diebold)
(Creative Strategies  
International)
(Creative Strategies  
International)
(Creative Strategies  
International)
(Creative Strategies  
International)
(Australian Science  
and Technology Coun­
cil
Source :  OECD

Flexibility: number of  
different parts produced
2 5 G 0  
1 COGCONVENTIONAL  
MACHINE TOOL
500-
25G-
1 0 0 -
50-
25
10-
5-NC MACHINE TOOL  
~7
MANUAL
LOADING
L-----------^
yy
y„^
AUTOMATIC
LOADINGFLEXIBLE CELL
F MS FLEXIBLE
TRANSFER
LINE
.1CONVENTIONAL  
FLEXIBLE LINE
1020 50 100 200 500 1  000 2  000 5 000 10 000
Productivity annual  
volume per part
produced

Explanatory notes
On the basis of the NACE industrial classification, the following  
categories are regarded as having discontinuous processes:
31 Manufacture of metal articles
32 Mechanical engineering
33 Manufacture of office machinery and data-processing machinery
34 Electrical engineering
35 Manufacture of motor vehicles and of motor vehicle parts and  
accessories
36 Manufacture of other means of transport
37 Instrument engineering
43 Textile industry
44 Leather and leather goods industry
45 Footwear and clothing industry
46 Timber and wooden furniture industry
472 Processing of paper and board
48 Processing of rubber and plastics
49 Other manufacturing industries
Size of the market for advanced manufacturing equipment
(i) According to a report by BIPE (Bureau d'informations et de Prévisions  
Economiques) carried out on behalf of the French Ministry for industry,  
entitled "la Productique et les Industries Manufacturières" and dating from  
December 1982, the French advanced manufacturing equipment market totalled  
FF 8 000 million in 1982. By extrapolation based on France's share of  
Community added value from non-continuous industrial processes (about 20%),  
this gives a Community market of close to 6 000 million ECU in 1982.
(ii) According to IPA in Stuttgart (Fraunhofer Institut fiir Produktions-  
technik und Automatisierung), the six main German industries using  
production line assembly (mechanical engineering, motor industry,  
electrical engineering, instrument engineering, manufacture of metal  
articles and manufacture of office machinery) are at present allocating on  
average 25% of their capital expenditure to the assembly side, 40% of this  
going to automation. By 1987 these percentages are likely to rise to 29%  
and 50% respectively. A more general idea is given by the IF0 which shows  
that at the present time almost 60% of capital investment by processing  
companies in Germany is going to the introduction of new production  
processes or new techniques.
(iii) According to a Financial Times survey published on 12 January 1984,  
it is likely that by 1990 more than $US 100 000 million (128 000 million  
ECU) will be spent in western Europe and North America on automating  
manufacturing industry. Assuming that the EEC accounts for 40% of this  
total, it will be spending about 51 000 million ECU on automation over the  
next six years.

A recent survey by the PSI in London shows that in the United Kingdom 94%  
of British companies with a workforce exceeding 1 000 use microelectronics  
in their manufacturing process, while the corresponding figure for  
companies with a workforce of from 500 to 1 000 is 83%.
The same survey shows that British companies with a workforce of over 1 000  
use three times as much microelectronics in their manufacturing process as  
small firms with 20 to 49 employees.
This study dating from September 1983 was carried out by Professor  
Wassily Leontief on behalf of the National Science Foundation and contains  
three scenarios for the spread of automation. The analysis is based on a  
series of detailed input-output tables for each sector of the US economy.
As can already be seen from the tables set out on pages 4 and 5 of Annex I  
European manufacturers are unquestionably making an effort to modernize  
their machinery and equip it with numerical control. It should be noted  
that the acceleration in the pace at which numerical control is being  
installed corresponds fairly closely to the termination of the Siemens-  
Fanuc exclusive distribution agreement for numerical controls following the  
action taken by the Commission of the European Communities. Termination of  
this agreement is said to have enabled a substantial reduction to be made  
in the cost within the Community of Fanuc numerical controls, which  
represent 50-60% of the world market.
Furthermore, press reports and European successes at recent machine tool  
exhibitions are signs of marked progress in the incorporation of micro­
electronics in European machine tools.
Similar results were forecast by a study carried out by Consultronique on  
behalf of the Commission, dated December 1981. The following annual average  
growth rates were forecast for the first half of this decade:
Community production
in value terms in units
All NC machine tools T9ÜZ --T7Z—
Wo
rld production  
All NC machine tools  
Machining centres  
NC lathes
The French plan for machine tools predicted - admittedly, on the basis of  
resolute government action - that the size of the French NC machine tools  
market would increase from 10 500 units in 1981 to 26 500 units by 1985,  
representing an annual growth rate of 26%.
All these forecasts have proved inaccurate, as a result of the unexpected  
seriousness of the recession, which has caused an overall drop in European  
production of some 30% in value terms between 1980 and 1983. Nevertheless  
the share of NC machines in the total number produced has continued to  
increase considerably, while European production of this type of machine  
has continued to grow slightly, despite the recession. In view of the  
widespread upturn in the demand for machine tools which began to make  
itself felt in 1983, average annual growth rates of approximately 20% for  
NC machines in the Community as a whole during the years ahead do not  
therefore appear unreasonable.17%
24%
16%12%
15%
10%

- 3 -
More specific indications should shortly become available on this topic,  
since the results of surveys coordinated with that of the Policy Studies  
Institute and carried out according to the same methods should be available  
for France and the Federal Republic of Germany by the end of 1984.
7. Definitions of robots
ISO:  "The industrial robot is an automatic position-controlled reprogramm-
able multifunctional manipulator having several axes and capable of  
handling materials, parts, tools, or specialized devices through variable  
programmed operations for the performance of a variety of tasks."
Robot Institute of America (RIA):  "A robot is a reprogrammable multi-
functional manipulator designed to move materials, parts, tools or  
specialized devices through variable programmed motions for the performance  
of a variety of tasks."
UK Department of Trade and Industry:  "A robot is a reprogrammable  
mechanical manipulator." Nevertheless, according to the British Robot  
Association, "an industrial robot is a reprogrammable device designed both  
to manipulate and transport parts, tools or specialized manufacturing  
implements through variable programmed motions for the performance of  
specific manufacturing tasks."
The JIRA (Japanese Industrial Robot Association) defines five categories of  
robot:
(1) Manipulators: devices controlled directly by an operator
(2) Sequential robots: manipulators operated according to a pre-  
established sequence
i) a fixed sequence: a sequence that cannot be easily modified
ii) a variable sequence: a sequence that can be readily modified
(3) Playback robots: manipulators which store in their memory a  
sequence demonstrated by the operator
(4) NC robots: manipulator robots which receive instructions from a  
numerical controlled station
(5) Intelligent robots: robots capable of understanding the tasks  
required of them thanks to the capacities of a sensor and means of  
recognition
The majority of the devices belonging to the first two categories are not  
regarded as robots according to the other definitions set out in the  
foregoing.

- 4 -
Definition according to categories of application:  The list of applications  
is extensive and includes the following in particular:
Each of these applications requires slightly different robot configurations  
and specifications, as regards the arm geometry, the propulsion system,  
dynamic performance and precision, reliability and safety.
Arm geometry may be classified into four major types: geometries with  
Cartesian, cylindrical or spherical coordinates and articulated robots.
The propulsion systems are generally pneumatic for light work, hydraulic  
for heavier work and electrical for precision work.
8. In its survey of automation dated 12 January 1984, the Financial Times  
takes the view that on average, CAD systems multiply productivity by a  
factor of three. A.D. Little estimates the multiplication factor at between  
three and four.
9. A graphic description of the stages of development of the different  
technologies concerned has been set out in the following table by  
Arthur D. Little.spot welding  
arc welding  
surface treatment  
heat treatment  
paint spraying
injection moulding (of plastics)
dye-casting
investment castingassembly
palletizing and packing  
handling and transfer (loading/  
unloading of machine tools)  
pressing 
foundry work  
forging
measurement and inspection
COMPUTER INTECRATED MANUFACTURING
1982 MATURITY
EMBRYONIC GROWTH MATURE A G IN G
TIMS — >