MRO Today - Manufacturing Industry News Archives

Manufacturing Industry News:
News from the week of May 3, 2004

Manufacturers Alliance sees positive road ahead
UAW workers ratify new contract with Boeing
Specialty chemical manufacturer fined $18 million
Jobless claims plummet in recent week
Factory orders jump in March
Planned job cuts increase in April
Coke appoints chairman, CEO
Timken raises steel bar prices
PMI slips in April
MEP selected as finalist for prestigious Harvard award
Kennametal becomes preferred supplier to Tyco
Feds deny AFL-CIO 301 petition on China

Manufacturers Alliance sees positive road ahead
The Manufacturers Alliance/MAPI sees solid growth in the next two years for the U.S. economy and the manufacturing sector as the current recovery gains traction.

The Manufacturers Alliance/MAPI Forecast for 2004 and 2005 predicts inflation-adjusted Gross Domestic Product (GDP) growth of 4.9 percent in 2004 and 3.7 percent in 2005. The forecast is updated every February, May, August and November.

“We incorporated the findings of our recent April Business Outlook Survey of large manufacturers as well as our own expertise in developing the forecast,” said Daniel J. Meckstroth, Manufacturers Alliance chief economist.

Manufacturing activity should continue to grow faster than the general economy, with industrial production growth expected to increase 5.7 percent in 2004 and 6.6 percent in 2005. The largest percentage gains will come from a rebound in the high-tech sectors of manufacturing. Computers and electronic products are expected to rise 19.8 percent in 2004 and 18.1 percent in 2005. Non-high-tech industries will grow moderately this year and next.

Capital investment will also play a role in sustaining growth for the first time since 2000.

Real investment in equipment and software should increase 14 percent in 2004 and 8.8 percent in 2005, growing several times faster than the general economy. Net exports also will contribute to economic growth.

Inflation-adjusted exports should rise 11.1 percent this year and 14.1 percent next year, while imports will increase at a more moderate 8.1 percent in 2004 and 6.3 percent in 2005.

The forecast also envisions the unemployment rate drifting down, averaging 5.5 percent in 2004 and 5.3 percent in 2005.

“The strong growth in business capital equipment and renewed export competitiveness, thanks in part to a significant decline in the dollar, are major contributors to the current industrial rebound,” Meckstroth said. “Our members are generally very positive about near-term business prospects."

He added: "Going forward, however, the economy cannot rely on fiscal and monetary stimulus to keep the expansion on track; businesses must create new jobs. The Manufacturers Alliance/MAPI predicts that consumer spending will be grounded on wage and employment growth vs. debt and tax cuts.”

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UAW workers ratify new contract with Boeing
Boeing employees represented by the United Auto Workers (UAW) in Long Beach., Calif., and Melbourne, Ark., voted May 2 to ratify a new three-year collective bargaining agreement. The vote came after six weeks of negotiations and the company’s best and final offer, which was made April 29.

The contract covers approximately 2,850 production workers on the Integrated Defense Systems’ C-17 program and Boeing Commercial Airplanes’ 717 programs in Long Beach. It also covers about 60 BCA Fabrication Division employees in Melbourne.

“Our employees are the heart and soul of this company,” said Jim Phillips, vice president and general manager 717 Program and Long Beach Division. “This agreement signals recognition by our union workers that this was a fair and competitive offer worthy of a world-class organization.”

The Long Beach workers will receive a $2,500 signing bonus, wage increases of 3 percent in the first and third years of the contract, plus a $2,000 lump-sum payment in the second year.

The Melbourne workers are part of the Commercial Airplanes’ Fabrication Division. They will receive a 3 percent increase in the first year of the contract and a lump-sum payment of $1,800 in the second and third years of the agreement.

Significant pension increases and cost-of-living protections were won for both sets of workers.

“Negotiations are difficult in today’s bargaining environment, but our members have spoken,” said UAW vice president Cal Rapson, who directs the union’s Aerospace Department.

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Specialty chemical manufacturer fined $18 million
Rhodia Inc. was sentenced April 29 for its conviction on two felony counts of violating the Resource Conservation and Recovery Act at its Sliver Bow, Mont.-based elemental phosphorus manufacturing plant.

Rhodia will pay a $16.2 million fine, $1.8 million in restitution and serve five years probation for illegally storing carbon brick and precipitator dust contaminated with elemental phosphorus waste at the closed plant between January 1999 and August 2000.

Rhodia manufactured elemental phosphorus at the Silver Bow plant from 1986 until its closure in 1996.

Rhodia also admitted that following plant closure, it illegally stored elemental phosphorus sludge at the site in a large concrete tank. Waste elemental phosphorus is highly reactive, can ignite when exposed to air, and presents a significant risk to human health and the environment.

The case was investigated by the Denver Area Office of the Environmental Protection Agency's (EPA) Criminal Investigation Division and the Montana Department of Environmental Quality with the assistance of EPA's National Enforcement Investigations Center, and with legal and technical assistance provided by EPA Region 8's offices in Denver and Helena, Mont. It was prosecuted by the U.S. Attorney's Office in Missoula, Mont.

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Jobless claims plummet in recent week
New claims for unemployment insurance fell 25,000 during the week ended May 1 to 315,000, according to the Labor Department. The four-week moving average also declined, by 3,750 to 343,250.

The four-week moving average is generally considered by economists to be the more reliable of the two because it smoothes out week-to-week volatility. Both rates remained below 400,000, which is the level economists use to define a weak labor market and a stable one.

Continuing claims for unemployment insurance declined 69,000 to 2.9 million for the week ended April 24. Continuing claims are those older than two weeks.

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Factory orders jump in March
New orders for manufactured goods increased 4.3 percent to $360.7 billion in March, according to the Commerce Department. This followed a 1.1 percent February increase and is the third increase in the last four months.

New orders for manufactured durable goods increased $9.4 billion, or 5 percent, to $195.8 billion in March, revised upward from the previously published increase of $6.3 billion.

Transportation equipment, up three of the last four months, had the largest increase, $2.3 billion or 4.1 percent to $57.3 billion. Fabricated metal products increased $1.9 billion, or 8.6 percent to $23.8 billion. This was the largest percent increase in fabricated metal products since December 1993.

Durable goods are costly manufactured items expected to last three or more years.

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Planned job cuts increase in April
Planned job cuts announced by employers increased in April to 72,184, up 6.1 percent from the 10-month low of 68,034 recorded in March, according to global outplacement firm Challenger, Gray & Christmas Inc.

Last month's figure was 51 percent lower than the 146,399 job cuts announced a year ago in April, which was the second largest job-cut month of 2003.

Through April, employers have announced 335,024 job cuts, 33 percent lower than the four-month total in 2003.

The 12-month moving average, which smoothes volatility in month-to-month tabulations, fell 6.5 percent to 89,105 in April from 95,289 in March.

Despite the general decline in corporate downsizing, employers still managed to announce nearly 1.1 million job cuts over the last 12 months. Since the economic slump began in January 2001, almost 5 million job cuts have been announced.

"The good news for workers is that job cuts during the summer months typically decline from the beginning of the year. If that occurs this year, we could see job-cut figures fall to their lowest level in several years," said John A. Challenger, CEO of Challenger, Gray & Christmas.

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Coke appoints chairman, CEO
Coca-Cola's board of directors named E. Neville Isdell chairman and CEO-elect to succeed Doug Daft, the company reported. The transition is expected to take place by early summer. Until that time, Daft will work to ensure an effective and seamless transition.

"Upon becoming chief executive in 2000, I had four key objectives: to re-establish critical relationships with our bottling partners, customers and communities everywhere; to expand the company's portfolio of beverages; to invest in our brands; and to implement a strategy for building share-owner value," said Daft. "We have made significant progress in all of these areas, and Neville inherits a strong and thriving company with rock solid fundamental strengths."

Isdell led the company's business operations on five continents and in some of its largest and most important markets. An Irish citizen, Isdell joined the Coca-Cola system in Zambia in 1966. After holding positions of increasing responsibility in South Africa, Australia and the Philippines, he was named president of the company's central European division, based in Germany, in 1985. There, he restructured the German bottling system to 30 franchises from 106 in just over three years.

Isdell was responsible for opening or re-opening new markets in India, the Middle East, Eastern Europe and the former Soviet Union. In 1995, he was named president of the Greater Europe Group, comprised of territories accounting for nearly one-third of the company's worldwide profits.

Isdell left the company in 1998 to serve as chairman of Coca-Cola Beverages, a company that went public the same year. In 2000, he negotiated a merger with Hellenic Bottling Company to form Coca-Cola HBC, at the time the world's second-largest Coca-Cola bottler, and became its CEO. He left the company at the end of 2001.

Isdell holds a bachelor's degree in Sociology from the University of Cape Town and studied at the Harvard Business School. He served on the boards of directors of Coca-Cola Enterprises, Coca-Cola Amatil, Coca-Cola Femsa, and British Telecom, and remains a director of Scottish and Newcastle Breweries.

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Timken raises steel bar prices
The Timken Corp. announced price increases on steel bar products. Non-contract prices will increase by $30 per ton for all sizes and grades of carbon and alloy steel bars effective with shipments beginning May 10, 2004.

"Increases in costs continue to challenge our steel business financials, despite surcharges addressing major cost items. The increase is necessary in our efforts to regain acceptable levels of profitability," said Robert N. Keeler, Timken director of steel sales in North America and South America.

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PMI slips in April
Economic activity in the manufacturing sector grew in April for the 11th consecutive month, while the overall economy grew for the 30th consecutive month, according to the Institute for Supply Management's (ISM) Manufacturing Report On Business.

"The manufacturing sector continued to improve in April," said ISM Manufacturing Business Survey Committee chair Norbert J. Ore. "While new orders contracted slightly compared to last month, production moved upward, and employment grew at a faster rate. The PMI has now been above 60 percent for six consecutive months."

ISM's PMI registered 62.4 percent in April, a decrease of 0.1 percentage point when compared to 62.5 percent in March. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 42.8 percent, over a period of time, generally indicates an expansion of the overall economy.

"The second quarter is off to a very strong start. Many respondents indicate that order backlogs are growing for the first time in several years. The list of metals up in price is quite extensive, almost every category of product has seen price movement," said Ore.

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MEP selected as finalist for prestigious Harvard award
Harvard University selected the Manufacturing Extension Partnership (MEP) program as one of 15 finalists for its prestigious Innovations in American Government Award given by its John F. Kennedy School of Government.

As a finalist, MEP was described as one of the nation’s best “when it comes to vision, creativity and usefulness.”

The Ash Institute for Democratic Governance and Innovation, part of the John F. Kennedy School of Government, selected the federal MEP program from a group of nearly 1,000 programs for the award. Finalists will make formal presentations to the National Selection Committee in May and five winners will be announced July 28 at the Excellence in Government 2004 Conference.

The Manufacturing Extension Partnership (MEP) program is a national network of more than 1,400 professionals in more than 300 locations around the country and Puerto Rico providing technical assistance, support services, engineering services and business advice to small manufacturers.

Manufacturers who completed MEP projects in 2002 – the most recent year for which data is available – reported sales of $2.8 billion, savings of $681 million, plant investments of $940 million, and 35,000 jobs as a result of just their MEP projects in the following year.

Still, MEP is slated for a 63 percent funding cut that all but eliminates the program.

“Ironically, the administration wants to eliminate the program just when the nation’s small manufacturers need it the most,” said Mike Wojcicki, president of the Modernization Forum, a trade association for MEP centers around the country.

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Kennametal becomes preferred supplier to Tyco
Kennametal Inc. entered into an agreement with Tyco International Ltd. that will leverage Tyco's consumable tooling needs with Kennametal's global solution capabilities.

As Tyco's preferred perishable tooling supplier and tooling integrator, Kennametal will work with Tyco manufacturing personnel to identify the most cost-effective tooling solutions for the myriad production applications within Tyco.

Results will include increased competitive advantage for Tyco through reduction in the total cost of tooling and manufacturing process improvement resulting in increased material removal efficiencies on the shop floor.

Under terms of the agreement, three Kennametal business units will provide Tyco with access to Kennametal's products, services, tooling expertise and manufacturing process knowledge in a coordinated global rollout of the agreement.

These units are Metalworking Solutions and Services Group, Full Service Supply and Kemmer Prazision, a part of the Advanced Materials Solutions Group. In addition, J&L Industrial Supply may also participate in the relationship.

"For Tyco, our 'Engineering Your Competitive Edge' strategy means we translate manufacturing productivity into financial terms that they can see, measure and compete with. We are organized to support our customers globally, and this was very attractive to Tyco since they are a global company. We look forward to a strong relationship as we work side-by-side with Tyco to achieve productivity gains," said Kennametal Metalworking Solutions and Services Group president Carlos M. Cardoso.

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Feds deny AFL-CIO 301 petition on China
The Bush administration rejected the AFL-CIO's workers' rights 301 petition filed with the U.S. trade representative (USTR) March 16 against China, alleging worker's rights abuses in the country that violate U.S. trade law.

The labor union filed the petition with the U.S. trade representative, marking the first time an entity other than a business filed a petition under Section 301 of Trade Act of 1974. The act is normally used to settle disputes between companies and foreign governments over unusual tax breaks and subsidies.

According to the AFL-CIO's petition, the "scale and degree of government-engineered labor exploitation in China is such that it clearly distorts global labor markets. If not for China's repression of workers' rights, the extraordinary losses in U.S. manufacturing jobs and wages would be significantly curtailed."

U.S. Trade Representative Robert Zoellick said the AFL-CIO petition seeks remedies that worsen the problems it is trying to solve. He said the measures recommended in the petition would hurt American workers and American families by raising the costs of everyday products.

According to Zoellick, the AFL-CIO petition seeks to impose a 77 percent tariff on products imported from China.

"To take such measures would worsen the very Chinese working conditions we are concerned about, because these measures would cut China off from trade that will help overcome poverty and improve working conditions," said Zoellick. "Accepting these petitions would take us down the path of economic isolationism. That is a path we will not take."

After the Bush administration rejected the AFL-CIO's petition to the USTR, the labor group called the decision an outrage and an insult to American and Chinese workers.

"President Bush is sending a clear message that he will not stand up for American workers," said AFL-CIO president John J. Sweeney. "His administration has used Section 301 to protect corporate intellectual property rights in the Ukraine, but he took a pass where American jobs and the rights of Chinese workers are at stake. By turning down the AFL-CIO petition, he has effectively ruled out any meaningful trade action, saying instead he will launch his own non-binding investigation. The Chinese government is unlikely to take this seriously, and neither will America’s workers."

Business Roundtable president John J. Castellani stated his support for the Bush administration’s decision not to initiate a Section 301 investigation on Chinese labor practices.

"The AFL-CIO petition, in effect, called for an isolationist, unilateralist U.S. trade policy that would have damaged the economic future of American workers, farmers, consumers and companies," said Castellani. "Six U.S. administrations, Democrat and Republican alike, recognized that U.S.-China policy rested on deepening economic relations and a commitment to the rule of law as the most constructive ways to encourage China to move toward a more humane and just social order."

The Business Roundtable is an association of CEOs of leading corporations with a combined workforce of more than 10 million employees in the U.S. and $3.7 trillion in revenues.

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