Statistics terrible for U.S. manufacturing technology

August 3, 2009
| By Pete Daly |
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A joint report issued by two major machine tool trade organizations shows U.S. manufacturing to be dramatically weaker than one year ago, but a local executive who heads one of the associations sees hope in the growing industrial diversification — and in American technological expertise, especially in writing software.

From January through May, investment in U.S. manufacturing technology was running about 70 percent below the same period a year ago, according to the U.S. Manufacturing Technology Consumption report generated jointly by the American Machine Tool Distributors’ Association and the Association for Manufacturing Technology.

In the Midwest region, which includes Michigan, Wisconsin, Illinois, Indiana and Ohio, the decline in manufacturing technology investment was slightly more than 75 percent.

The reports on machinery orders, done regularly by the two trade associations, are an indication of the vitality of America's industrial base, according to a spokesperson for the AMT. Changes in orders can indicate an upturn or downturn long before other indicators identify a recovery or decline.

"There's no way to describe this as anything but terrible," said Peter Borden, president of the AMTDA, which has its headquarters near Washington, D.C. He noted, however, that the first few months of 2008 were "surprisingly strong" before U.S. manufacturing plunged in the last half of 2008.

Borden said the report reflects data supplied by about 75 percent of the manufacturing technology industry.

At the national level, the report shows that the month of May, with almost $110 million in orders, was a slight improvement over April, which marked almost $104 million. The slight gain, while encouraging, is overshadowed by the stark difference between U.S. manufacturing now and one year ago.

Unlike the national average of manufacturing technology investment, the Midwest Region did not see an improvement in May numbers over April. In May, slightly more than $27 million was spent; in April, it was slightly more than $31 million. The Northeastern Region and the West showed the most improvement from April through May.

It so happens that the 2009 national chairman of the AMTDA is Joe Braun, general manager of Braun Machinery Co. Inc., 4130 44th St. SE, Kentwood. The company was formed by Braun's grandfather in 1946, and is a distributor of metal-cutting equipment and metal fabrication equipment to manufacturers throughout the state.

Because the auto industry was based here, "Michigan was the No. 1 consumer of machine tools in the country for many, many years," said Braun. About 10 years ago, Michigan alone accounted for 12 to 15 percent of machine tool technology sold in the U.S. Now the leading state is California, followed by Texas, with Michigan in third place, according to Braun.

"This is just my opinion: Probably in the next couple of years, Michigan is going to slide another couple of spots," said Braun.

"Now, all that sounds kind of dismal," said Braun. "But the positive part of it is, I spend a lot of time on customers’ shop floors out in their factories, and there are a lot of smart people in Michigan. There are a lot of people who know how to make things. They know how to make difficult parts."

Over the last few years there has been a movement by Braun's "smarter customers," he said, to diversify into "something other than automotive. Or, if they're committed to automotive, they're trying to get in with Toyota or Honda and not be so dependent on the Big Three."

"I guess the high-water mark (for the Michigan auto industry) was '97 or '98," he said. "It's been declining since then. I do think it will come back. I don’t think it's ever going to come back to what it was in '97 or '98, but again, I think there's a lot of smart people in Michigan, there's a lot of entrepreneurial spirit. We've seen a lot of our customers successful in getting involved in defense or medical or whatever it happens to be. They've been working hard to diversify for a long time."

While Michigan doesn't have what Braun described as "a ton" of medical device manufacturing, with the exception of Stryker and a few companies in Southeast Michigan, the number is increasing. Braun added there are a couple of companies manufacturing titanium hip and knee replacement devices in northern Indiana.

"We have a fair number of customers who've crossed the state line and have been knocking on their doors, trying to get some of their work," he said.

Some of Braun Machinery's previous customers are gone forever, although he couldn't give a precise number. "We've seen quite a few companies go out of business in the last year," but those have tended to be companies that waited too late to diversify, he said.

"If 50 percent of your business comes from the Big Three, for example, and their production gets cut in half — that's probably going to be fatal."

Braun said that in the last year or two, there has been a lot happening in defense contracting. Parts for various military vehicles are now being made by companies such as Spartan Motors and Demmer Corp., both located in or near Lansing.

Braun said many companies, including some trying to survive in automotive, are working to become more efficient.

"They’ve invested a lot in new technology. There have been tremendous advances in machine tools in the last 10 years," he said. "A lot of it is in software and automation, and improving efficiency."

"Everybody looks at the headlines and sees the number of manufacturing jobs lost in Michigan. It's very sad, but not all of those are because companies went out of business. A lot of those jobs are gone because these companies are automating, or they're trying to do things differently and take the manpower out of it."

"Obviously, we're in a global economy and we're competing against cheap labor," said Braun. He maintains, however, that "there will always be a cheaper place to manufacture. You think China's cheap? We haven’t even gotten to Africa."

Braun said technology is the key to the future, not cheap labor.

High-tech machinery means fewer workers are needed — but those that are there have to be better educated.

"It used to be, 20 or 30 years ago, you could hire unskilled labor. A guy that was flipping burgers the day before could be in your plant running a machine. That's not true anymore. The equipment is so much more sophisticated, it really requires a higher level of operator. In fact, I think a lot of people who run machinery now would be insulted if you called them an operator. They like to think of themselves as a technician or some kind of specialist," said Braun.

Braun said resources such as the university system in Michigan, which has many "world class" manufacturing programs, is another strength.

He noted that "everyone is talking" about manufacturing wind turbines in Michigan. He believes there is opportunity there, mainly because of the variety of sizes of wind turbines and the opportunities in both metal and plastics manufacturing.

One of Braun Machinery's customers is K&M Machine Fabricating in Cassopolis, which makes large, metal, wind turbine components, among other things, using "enormous machines," he said.

Utility-grade wind turbines, like those sold by General Electric, are comprised of "very large components … a lot of manufactured parts. It's not something a mom-and-pop job shop can say, 'Hey, I want to bid on those parts.' Because of the size of the parts, it requires a lot of capital investment to be able to buy the equipment to manufacture parts like that. The machines that make those (wind) machines are enormous."

But wind turbine production will be different from automotive in one respect, said Braun. Over the years, automotive suppliers were "used to making parts in the hundreds of thousands or millions. As much as we'd love to see millions of windmills, I don't think that's going to happen any time soon."

Some European and Asian nations produce manufacturing technology that is "phenomenal," said Braun, but he believes the U.S. has one strength, in particular: The software to run the high-tech machinery isn't as complicated.

"I think what Americans do best is software. We write the best software in the world" for manufacturing technology, he said. "Americans tend to think more intuitively; the software is much more intuitive from the United States. At least that's been my experience.

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