MRO Today - Manufacturing Industry News archives

Manufacturing Industry News:
News from the week of March 21, 2005

Machine tool consumption falls in January
Durable goods orders climb in February
Importance of exports increases among manufacturers
Kennametal begins construction on Chinese facility
Johnson Controls to purchase Delphi battery business
Industrial production climbs in February

Machine tool consumption falls in January
January U.S. machine tool consumption totaled $217 million, down 29.1 percent from December, but up 20.8 percent from $179.6 million in January 2004, according to the American Machine Tool Distributors' Association (AMTDA) and the Association For Manufacturing Technology (AMT).

"Keeping pace with December was not going to be easy due to the end of bonus depreciation," said Ralph J. Nappi, AMTDA president. "Yet we start the year 20 percent ahead compared with January 2004, which is evidence that manufacturing still recognizes the benefits of investing in new capital equipment."

U.S. machine tool consumption is also reported on a regional basis for five geographic break-downs of the United States.

Northeast machine tool consumption in January stood at $26.3 million, 40.7 percent less than December's $44.4 million, but 13.9 percent ahead of January 2004.

At $42.9 million, Southern machine tool consumption in January was off 20.6 percent from December's $54.1 million, but 63.9 percent higher than the total for January a year ago.

Midwestern machine tool consumption in January totaled $74.5 million, down 35.5 percent compared to December's $115.5 million and off 0.2 percent compared to last January.

Machine tool consumption in the Central region in January stood at $43.4 million, down 16.9 percent compared to December's $52.1 million, but up 50.1 percent compared to January a year ago.

At $29.8 million, Western machine tool consumption in January was down 24.9 percent compared to December's $39.7 million, but up 11.7 percent compared to January 2004.

The United States Machine Tool Consumption (USMTC) report, jointly compiled by the two trade associations representing the production and distribution of manufacturing technology, provides regional and national U.S. consumption data of domestic and imported machine tools and related equipment.

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Durable goods orders climb in February
New orders for manufactured durable goods increased $600 million, or 0.3 percent, to $200.8 billion in February, according to the Department of Commerce. This followed a 1.1 percent January decrease.

Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders increased 0.2 percent.

Transportation equipment had the largest increase, $900 million, or 1.6 percent, to $53.6 billion, due to nondefense aircraft and parts, which increased $1.7 billion.

New orders for machinery were down 1.1 percent to $27.4 billion in February from $27.6 billion in January. February orders for capital goods increased 0.6 percent to $77.5 billion, a $500 million increase.

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Importance of exports increases among manufacturers
The 2005 National Manufacturing Week survey showed employers continue to be upbeat about manufacturing in 2005. Two-thirds of survey respondents expect manufacturing to grow as fast or faster than the overall economy this year.

“This survey tells us the manufacturing recovery that gained real momentum last year will continue to strengthen in 2005,” said John Engler, president of the National Association of Manufacturers.

Sixty-five percent said they export their products to foreign markets, Engler said.

“The Department of Commerce and the NAM have been working together to help more small and medium-sized manufacturers take advantage of opportunities for exports created by new free trade agreements and the movement of the dollar back toward its historical level," he said. "It appears our efforts are beginning to pay off. In the long run, expanding exports is the best way to improve our trade imbalance."

Seventy-five percent of respondents expect exports to either remain at current levels or increase this year.

“This is most encouraging, given that almost half said they had been adversely impacted by the unfair trade practices of other countries," said Engler. "Only 3 percent of respondents said they expected foreign sales to decrease in 2005.”

Engler said the survey offers some encouragement on the employment front, with 40 percent of respondents saying they intend to add new workers, up from 31 percent last year.

“Almost half of the respondents, 47 percent, expect employment to stay the same,” Engler said. “Only 12 percent said they expected to reduce their payrolls.

“The emerging employment problem in manufacturing is not a shortage of jobs, but rather a shortage of qualified applicants,” Engler said. “A full 36 percent of our members said they have employment positions unfilled right now because they cannot find qualified workers. This confirms what our members have been telling us in recent years – that the people applying for manufacturing jobs today simply do not have the math, science and technological aptitude they need to work in modern manufacturing.”

The survey of 3,000 NAM members of all sizes in diverse industries and geographical areas generated a response of 976, or almost 33 percent. The survey results are available at www.nam.org/nmwsurvey.

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Kennametal begins construction on Chinese facility
Kennametal Inc. broke ground March 15 for the firm's new Chinese manufacturing plant located in the Tianjin Economic Development Area (TEDA). Initially sized at 49,500 square feet, the facility will employ about 200 people in manufacturing and advanced engineering and design activities.

This facility could grow to 115,500 square feet and employment could reach 400 people. Estimated investment in this new plant will be between $30 million to $40 million, which is in addition to the approximately $35 million Kennametal already invested in its China business.

Kennametal, a global company headquartered in western Pennsylvania, began operations in China in 1991 via a wholly owned foreign Beijing company now named the Kennametal Xuzhou Co. Ltd.

In the ensuing 14 years, Kennametal established Kennametal Ltd., a manufacturing plant in Jinqiao Export Processing Zone in Pudong, Shanghai, and completed the purchase of what is now Kennametal Hardpoint Inc.

It is from this center that Kennametal offers world-class products, engineering, design services and training activities to a broad customer base in China.

"We are accelerating our growth in China in order to more effectively serve this rapidly developing market as well as to support our global customers in China," said Markos Tambakeras, Kennametal chairman, president, and CEO. "Our TEDA plant will support the growth inside China producing our latest products utilizing state of the art equipment, advance engineering and design. We are also very appreciative of the guidance, support and professionalism of the TEDA organization and other senior government officials. This plant will form the corner stone of our ambition to become the undisputed market leader in China by the end of this decade."

"The size and importance of this rapidly expanding market demands that we enhance our presence," said Kennametal executive vice president and chief operating officer Carlos Cardoso. "Our global and local customers expect us to be there with them, and to serve their needs with world class products and services. Our presence promotes customer intimacy, shorter lead times, global quality/local availability, and positions Kennametal well to succeed in this market."

Currently, Kennametal annual sales in China top $50 million, with more than 400 employees serving customers in many market segments, including automotive, aerospace, heavy industry, electronics, and mining and construction.

Plans for the design and construction of the new TEDA facility are underway, and Kennametal expects to begin serving customers from the new plant my mid-2006.

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Johnson Controls to purchase Delphi battery business
Johnson Controls Inc. signed a non-binding letter of intent to acquire Delphi Corp.'s global automotive battery business for approximately $212.5 million, subject to adjustments.

Additionally, in conjunction with the acquisition, Johnson Controls anticipates receiving a global long-term contract to supply General Motors with original equipment batteries.

The business to be acquired, which has annual consolidated revenues of approximately $600 million, would include Delphi’s battery operations in more than 10 countries, including joint venture interests in China and South Korea.

Delphi’s U.S. automotive battery manufacturing locations are not included in the transaction. Delphi will supply batteries from its New Brunswick, N.J., and Fitzgerald, Ga., operations through a contract manufacturing relationship with Johnson Controls during a transitional period through 2007.

The acquisition enables Johnson Controls to participate in the rapidly-growing Asian automotive battery market, particularly in China. The total vehicle population in China is expected to double in the next five years, with new car production expected to grow at double-digit rates. The business being acquired has a leading position in original equipment batteries in China, as well as a presence in the Chinese aftermarket.

"We expect that this acquisition will enable us to extend our technology and grow our business globally, develop a leadership position in Asia, and become the primary supplier of original equipment batteries to the world’s largest automaker," said Gregg Sherrill, vice president of Johnson Controls’ automotive group - battery. "We’re very pleased about the potential these opportunities provide, and look forward to delivering our world-class quality and service to General Motors, and new original equipment and aftermarket customers around the world."

The transaction is expected to close in the summer of 2005, subject to satisfactory completion of due diligence procedures, negotiation and execution of a definitive acquisition agreement, receipt of necessary regulatory approvals, and a supply contract with General Motors.

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Industrial production climbs in February
Industrial production increased 0.3 percent in February after an upwardly revised gain of 0.1 percent in January, according to the Federal Reserve. The November and December increases were also slightly revised upward.

At 118.4 percent of the 1997 average, overall industrial output in February was 3.5 percent above its February 2004 level. The rate of capacity utilization for total industry in February rose 0.2 percentage point, to 79.4 percent, a rate 1.6 percentage points below its 1972-2004 average.

Manufacturing production rose 0.5 percent in February, and the factory operating rate advanced 0.3 percentage point, to 78.5 percent, the highest rate since November 2000.

Nevertheless, the factory operating rate was still 1.3 percentage points below its 1972-2004 average.

In February, the production of durable goods increased 1 percent, largely because of a jump of more than 5 percent in the output of motor vehicles and parts and a rise in the production of computer and electronic products.

Among selected high-technology industries, the output of computer and peripheral equipment again rose about 0.75 percent, and the production of communications equipment posted a 2.3 percent gain.

The indexes for most of the other major durable goods categories were little changed or down.

“Despite evidence of slowing growth among key U.S. trading partners and recent increases in domestic interest rates, the February industrial production report shows that the manufacturing expansion continues along its moderately strong and sustainable path,” said Cliff Waldman, economist for the Manufacturers Alliance/MAPI. “Strong domestic demand, particularly for business equipment and software, continues to underpin a solid manufacturing recovery. And while capacity utilization is now approaching historic norms, global competitive pressures will likely mute any price pressures that may arise from the industrial sector.”

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