There's just no way to sugar coat the impact of the economic
downturn on the machine tool sector. While U.S. manufacturing
technology consumption has picked up slightly from a 13-year
low seen in January, there are few signs that things will
strengthen markedly anytime soon. Even so, some are turning
their hopes to "greener" pastures.
Investment in U.S. manufacturing technology rose 22.3
percent to $162.9 million in March vs. February, according to
the latest data available, but still trails the March 2008
tally of $579.7 million by 71.9 percent, according to a joint
report by the American Machine Tool Distributors' Association
and the Association for Manufacturing Technology.
"There's no way or reason to try to sugar coat these
numbers. They are the lowest since reporting began in 1996,"
Peter Borden, president of the distributors association, said
of January's $95 million in investments, down 59 percent from
the previous month and off 72 percent from $338 million a year
earlier. Manufacturing technology investments totaled $397.6
million in the first quarter, down 68.6 percent from $1.26
billion in the same period last year.
"While a few small pockets of activity have continued, most
everyone will be on the sidelines until there is some
confidence and positive direction for the rest of the economy,"
Borden said. "No one knows where the bottom is and if a
recovery will occur this year."
The monthly report analyzes manufacturing technology
consumption as a leading economic indicator of manufacturers'
investment in capital metalworking equipment.
R. Thomas Buffenbarger, president of the International
Association of Machinists and Aerospace Workers union (IAM) in
Upper Marlboro, Md., spoke just as plainly. "Machine shops are
suffering. Most mom-and-pop shops do small-lot jobs, but they
are supplying companies serving large original equipment
manufacturers (OEMs)-automotive, agricultural and truck and
trailer equipment suppliers," he said, and each of those
sectors have curtailed production and closed plants.
Small shops also depend on community banks, which are having
a hard time lending because of the difficulty they have in
obtaining financing from larger regional and national banks,
Buffenbarger said. "The economic crisis has had a cascading
effect on small businesses" because it takes so much cash and
borrowing to capitalize equipment and inventory.
Neil Gladstein, IAM's director of strategic resources, said
he has "been getting calls once or twice a day from shops
losing lines of credit or about their customers credit
Some machine shops that service state and local governments
also are seeing business decline due to budget cuts. "There is
a lot of uncertainty out there. Many (shops) are hoping to hang
on, and if not they are afraid they must close their doors,"
One bright spot is that "those shops making tooling for
defense, especially engineering and prototyping, are doing OK,"
For members of the Precision Metalforming Association, many
of whom have tool and die and machining operations in addition
to stamping, forming and fabricating systems, "markets are
weak," PMA president William E. Gaskin said. "For our segment,
about half the industry serves the automotive market," followed
by agricultural and off-road equipment, truck and trailer,
appliance manufacturing, telecommunications and electronics,
industrial and consumer hardware. "Most of those are soft
except for defense and some residual strength in medical
In the automotive sector, build rates are expected to
continue to lag. Not for the next three years will build rates
match those experienced during the mid-2000s, Gaskin noted
during a PMA auto suppliers conference earlier this year
convened to compile build rate and vehicle sales forecasts
"During the last six months, the focus (for metalformers)
has been how to get to the other side of the current situation
while sales are off an average of 35 percent and shop
employment is down 38 to 39 percent," he said, noting that the
automotive industry business makes up about half the
consumption of metal stampings and assemblies.
For their outlook to improve, PMA members will want to see
home sales and housing starts pick up, leading to better white
goods sales, and a pickup in manufacturing that will lead to
plant and equipment investment. Meanwhile, many are exploring
opportunities in emerging or growing markets, including
alternative energy processes and medical consumables.
"We hope the flow (of orders) starts coming back, but it
won't be dramatic," Gaskin said.
Many PMA members worry that automakers and Tier 1 parts
suppliers will enter bankruptcy protection, which would have a
ripple effect, he said. "There could be a ton of bankruptcies
in six to eight weeks-or none."
But Buffenbarger said IAM members are hoping federal
infrastructure spending will create a need for fasteners,
fixtures, weldings and other machine tool products. "If the
money is disbursed quickly," maybe the squeeze on credit will
loosen, he said. "Those making tools will benefit. We are ready
to build them."
Gaskin hopes PMA members will find opportunities in the
"green" economy as it develops "because metal is the most
recyclable material." He cited a Cleveland roofing supplier
that is pursuing work in framing and anchoring solar panels.
For wind energy projects, opportunities include motor
laminations and other metal components in generators. "Within
the power grid, as they rebuild it into the Smart Grid, there
is a lot of metal switches and fuses and the cabinets that hold
all the electronic components, plus connectors."