Metalworking equipment – Industry Overview
Patrick W. McGibbon
The industries covered in this chapter are machine tools; metal cutting tools; robotics; numerical controls; tools, dies, jigs, fixtures, molds, and contract machining (usually referred to as the tool and die industry); power driven hand tools; and welding apparatus. The tool and die industry is the most important in terms of the value of domestic shipments.
In 1991, metalworking equipment shipments (machine tools, tools and dies, power driven hand tools, and welding apparatus a SIC 354) were down 7 percent to an estimated $21.3 billion. They are expected to increase 9 percent (in current dollars) in 1992. The machine tool industry exports the most products, but there is a substantial trade deficit in machine tools, primarily because of imports from Japan.
Before reading this chapter, please see “How to Get the Most Out of This Book” on page 1. It will clarify questions you may have concerning data collection procedures, factors affecting trade data, forecasting methodology, the use of constant dollars, the difference between industry and product data, sources and references, and the Standard Industrial Classification (SIC) system. For other topics related to this chapter, see chapters 17 (Advanced Materials), 19 (Industrial Machinery), 21 (Aerospace), and 36 (Motor Vehicles and Parts).
Exports of metalworking equipment were up 1 percent in 1991, to $3.6 billion. Exports are projected to grow about 2 percent in 1992, to $3.7 billion. After a significant fall in 1990, imports increased 11 percent in 1991, to $5.6 billion, but they will grow less than 1 percent in 1992. However, these trade trends are general; individual industries have different patterns, which are discussed later in this chapter.
The various metalworking equipment industries have differing views about the current free trade negotiations with Mexico. Most of them would benefit from lower tariffs and a free trade area. However, the tool and die industry already competes extensively with the maquiladoras (Mexican assembly plants located near the U.S. border and having foreign equity participation). Lower trade barriers between Mexico and the United States would intensify this competition.
[TABULAR DATA OMITTED]
Each of the industries has different regional trade concerns. Canada is a primary market for all the industries. Most of them also rely on Mexico, which remains the second or third largest market for each of the industries, with the exception of robotics. Recent inroads by U.S. welding and machine tool finus in Germany have made it their second largest export market.
Major foreign markets of U.S. metalworking goods, particularly Japan and Europe, are expected to continue to grow, but at a slower pace. Therefore, the search for new markets will intensify. U.S. metalworking firms continue to look for the next economy to develop rapidly, much as South Korea did in the 1980’s. Export opportunities are likely in Thailand, Indonesia, Brazil, and Czechoslovakia. A strong, but small, base of manufacturing has already taken hold in Thailand, and U.S. exports of machine tools there nearly doubled in 1991. Thai imports of other U.S. metalworking products were also up significantly. Indonesian imports of U.S. metalworking products rose rapidly in 1991, although the dollar volume remained very small. Thailand and Indonesia are heavily dependent on Japanese trade and have large trade deficits with Japan each year. Consequently, they are likely to turn to U.S. (and European) manufacturers to reduce their dependency on Japanese products.
Both Brazil and Czechoslovakia have relatively developed economies with vibrant machine tool markets. However, the flow of exports there is affected by financing constraints for machine tool purchases. Loan guarantees (loan repayment insurance for exporters) are nearly as difficult to obtain as hard (convertible) currency. Nevertheless, these two countries should be viable markets for U.S. firms in the near term.
U.S. banking institutions have become more conservative in the past 3 years as a result of foreign loan defaults and the U.S. financial crisis. Financial packages offered by U.S. metalworking firms on export orders to “safe” markets are usually higher than foreign offers by several percentage points of the total contract cost. Given the current financial climate, U.S. firms cannot hope to offer reasonable financial arrangements in developing countries that are considered risky.
The machine tool industry is composed of 16 primary product groups arranged in two distinct SIC codes. The metal cutting machine tool industry (SIC 3541) and the metal forming machine tool industry (SIC 3542) represent about 65 and 35 percent, respectively, of industry shipments. About 650 plants produce machine tools and are owned by an estimated 570 companies. They have been concentrated in the Great Lakes states, but changes in the industry’s investment patterns are moving its center toward the South and Southeast. New plants and capital expansions in the South have become more significant because of bankruptcies and consolidations in the “rust belt”.
The machine tool industry is small, but it is an integral part of the manufacturing production cycle. Nearly every product bought by U.S. consumers owes its existence to machine tools. They make the machines and equipment that, in turn, produce appliances, cars, trucks, plastics, cloth, and agricultural products. However, the machine tool industry employs only 40,500 persons, of whom 23,600 are production workers. In 1991, shipments by the industry were $4.2 billion, less than what most of the top Fortune 100 companies shipped individually.
U.S. machine tool shipments, orders, and imports peaked in 1989. However, exports are expected to continue to grow into the latter half of 1992. According to the Bureau of Census’ Current Industrial Report (CIR), machine tool producers shipped $3.3 billion in 1990 and $2.7 billion in 1991. (CIR data represent about 80 percent of machine tools produced in the United States.) The NMTBA, The Association for Manufacturing Technology, reported that orders declined about 15 percent in 1991. Shipments were down 22 percent from 1990, to $2.6 billion. (NMTBA reports monthly order and shipment estimates for new complete machine tools valued at more than $2,500.)
The largest customer of the U.S. machine tool industry remains the automobile industry, which places 33 percent of domestic machine tool orders. However, this reliance on auto makers increases to more than 40 percent when machine tool orders placed by part suppliers and job shops to the automobile industry are included. This is a much greater dependence than that of foreign machine tool counterparts. (The Japanese machine tool industry obtains 26 percent of domestic orders from the auto industry, while export markets account for more than 60 percent of the German industry’s orders.) The second largest domestic source of machine tool orders is aerospace, followed by the general industrial machinery sector. These two industries each account for 10-to-15 percent of domestic machine tool orders. After the auto industry, the largest source (23 percent) of orders was exports.
[TABULAR DATA OMITTED]
In 1991, export shipments were up about 4 percent from the 1990 level, to $1.7 billion. The leading export markets were Canada, Germany, Mexico, and Japan, which accounted for 44 percent of total shipments. Germany was the surprise export market, climbing to second place with shipments up 78 percent to more than $124 million. The two largest export categories for new complete machine tools were grinding machines and gear-cutting machines. Exports of the two groups grew 58 percent and 32 percent, respectively, and were 18 percent of total shipments.
The slide in imports during the past several years stopped in 1991 at about the same level as in 1990. Growth in metal forming machine tool imports more than offset a decline of 3 percent in metal cutting machine tools. The largest sources of U.S. machine tool imports were Japan (down 1 percent in 1991) and Germany (up 78 percent). Imports from them amounted to 68 percent of the total imports of complete machine tools.
Outlook for 1992
Orders for the industry were beginning to pick up by the end of 1991. Shipments were also forming as builders moved workin-progress to completion to forego property tax and increase annual revenue figures. Industry shipments will move up 16 percent in real terms in 1992; there will be nearly equal growth in both the metal cutting and metal forming machine tool sectors.
An adage in the machine tool industry states that machine tool orders are a leading indicator of a downturn in the economy and a lagging indicator of a recovery. The current recovery has been slow, and normally machine tool builders could not expect an increase in their orders for several quarters to 1 year. However, manufacturers have little idle capacity because durables manufacturers have retired unproductive machinery during the past 2 years. As a result, an upturn in business activity should be reflected in machine tool orders much earlier in the recovery cycle than in similar past upswings.
Yet, the recovery will not affect customers of machine tools equally. For example, the aerospace industry can expect orders from the military to continue to decline, while business activity from commercial orders will rise. This will result in increased orders from the aerospace industry but at a slower pace than the economy is growing. The same situation applies to appliance producers, which will continue to invest in capital equipment that will mean lower costs per unit. However, activity in the appliance industry is closely linked with new housing starts, which are expected to be soft through at least 1992.
Exports to Brazil, Thailand, Indonesia, Singapore, and Japan are expected to grow at more than 20 percent each during 1992. Exports to Germany, South Korea, Mexico, the United Kingdom, and Italy are forecast to increase more than 10 percent each. Machine tool exports to Germany may exceed $150 million in 1992. Buyer delegations from most of these markets will participate in the Department of Commerce’s Foreign Buyers Program at IMTS-92 in Chicago during September 1992.
However, export growth will be slower to many other European and Asian countries. There will be greater export potential in South American markets during the next 2 years. The shift in demand from customary markets in Europe and Asia to developing nations reflects the characteristics and development of their individual economies.
The machine tool voluntary restraint agreements signed with Taiwan and Japan are scheduled to expire at the end of 1991. The market impact of an expiration is uncertain. A surge in Japanese imports is not expected because of substantial Japanese investment in U.S. production facilities. However, Taiwanese machining center manufacturers with restricted access to the United States may make a bid for market share, which could result in heavy discounting in smaller, light-duty machining centers. The same situation may occur to a lesser extent in the market for numerical control turning centers.
U.S. machine tool shipments are expected to grow at an annual average rate of 3 percent in real terms through the next 5 years. A labor shortage is expected to have a major impact on the industry during this period. Projections are disturbing for the supply of skilled workers and engineers in the U.S. labor market. The number of training programs for machinists and craftsmen has increased markedly in the past 5 years partly because of these projections. Unfortunately, these programs are not likely to make available significant numbers of trained personnel until the turn of the century. Machine tool customers will need to automate their product processes to offset an increase in labor costs and a shortage of labor. According to the capital spending surveys of Production magazine during the past 3 years, productivity improvement, rather than the enlargement of plant capacity, is increasingly important as the determining factor in decisions to buy machine tools. Although a shortage of labor will have a negative impact on costs, it also will increase demand for automated machinery products.
The Japanese and European economies have already experienced significant skilled labor shortages in the past decade and expect the situation to worsen during the next 10 years. German and Japanese initiatives to automate and invest in the latest technologies are aimed at alleviating labor shortages and the accompanying pressure on costs. In addition, U.S. foreign competitors have found that benefits from automation investments have included improved quality, reduced scrap, and energy conservation. Automation will certainly be one of the long-term growth areas for the industry, both in the United States and abroad.
Trends in the U.S. metalworking industry could lead it back to a balanced manufacturing mix of special and volume products. U.S. producers are focusing on fewer product lines, resulting in increased concentration in various product groups. Failing companies are making complementary technologies available to the remaining U.S. firms. Mergers are allowing U.S. producers with captured component markets to spread high overhead costs over larger volumes. This trend toward consolidation is likely to continue. Old-line firms will leave the industry through mergers, buyouts, or failures. Continued consolidation will result in further cost rationalization and reductions in per unit overhead costs. As a result, by the mid- 1990’s, a smaller but healthier U.S. industry will be able to produce standard products in significant volumes.
(Call the Bureau of the Census at (301)763-4100 for information about how to order Census documents.) Metalworking Equipment, Current Industrial Report, Series MQ-35W, Bureau of the Census, Industry Division, U.S. Department of Commerce, Washington, DC 20233. Economic Handbook of the Machine Tool Industry, NMTBA, The Association for Manufacturing Technology, 7901 Westpark Dr., McLean, VA 22102. Telephone: (703) 893-2900. American Machinist, Penton Publishing, 826 Broadway, Fourth Floor, New York, NY 10003. Telephone: (212) 477-6420. Automation, Penton Publishing, 1100 Superior Ave., Cleveland, OH 44114. Telephone: (216) 696-7000. Production, Gardner Publishing, 6600 Clough Pike, Cincinnati, OH 45244. Telephone: (513) 231-8020.
METAL CUTTING TOOLS
Metal cutting tools (SIC 35451) perform the actual cutting on the machine and require frequent replacement or resharpening. They include mills, drills, reamers, taps, and various forms of indexable inserts.
After sluggish growth in 1990, shipments of metal cutting tools declined in 1991 by more than 8 percent (in constant dollars). Recessions in the United States and in leading export markets, including Canada, the United Kingdom, and Australia, held back demand for machine tools and other capital goods. The decline brought product shipments to an estimated $2.15 billion, a decrease of about 8.5 percent from $2.35 billion in 1990. (Shipments in 1989 were $2.27 billion.)
A fall in new orders for metal cutting tools, first registered in 1989, continued into 1991. The decline was cushioned somewhat by a further increase in exports, partly due to the entry of U.S.-made cutting tools into more international markets.
After rising sharply in 1990 to $263 million, U.S. exports of metal cutting tools dropped by about 5 percent in 1991, to an estimated $251 million. The decline interrupted a surge of U.S. cutting tool exports, which had brought U.S. trade in metal cutting tools into balance. The 1991 export decline was caused by recessions in several key foreign markets, including Canada and the United Kingdom. Canada has long been the leading export destination for U.S.-made cutting tools, accounting for $108 million, or 41 percent of total exports, in 1990. Canada far outstripped Germany ($28 million-11 percent) and the United Kingdom ($16 million – 4 percent.)
U.S. metal cutting tool imports rose sharply in 1991. Imports were an estimated $328 million, up 29 percent from $255 million in 1990. Japan, which in 1990 accounted for $83 million, or 33 percent of U.S. cutting tool imports, has long been the leading import source. Germany ($39 million – 15 percent), Canada ($26 million – 10 percent), and the United Kingdom ($17 million – 6 percent) were the other principal sources of imports. The Japanese share of U.S. cutting tool imports had been 56 percent in 1989. According to partial data for 1991, Japan was unlikely to recover much of its lost import share as more cutting tools enter the United States from other Asian countries.
Outlook for 1992
Product shipments of metal cutting tools (in constant dollars) are expected to remain at about the same level as in 1991. New orders are expected to be stable and then grow as 1992 progresses.
The industry continues to find its fortunes linked to the performance of the machine tool industry and advances in machine technology. In the past, changes in tool technology have preceded changes in machine tools. However, recent developments in casting technology and the faster reaction and processing times of computer numerical controls have reversed this sequence. Cutting tool technology is now changing in response to the increased cutting ability of machine tools. Coating technology will continue to advance with new “thin coated” diamond and titanium nitride coatings for steel tooling, improvements in ceramic carbide tooling, and greater use of cermets (hard ceramic metal composites).
The industry should experience 2.5 percent compound annual growth during the 1992-96 period. Some of the growth will be generated through the sale of cutting tools that use new and exotic materials to enhance productivity. However, a threat to the industry is the possible erosion of the customer base of small job shops, which are expected to shrink as the decade progresses. Many small machine shops must extensively retool and find product niches to remain competitive. The ability of many of these firms to do so may hinge on available financing for new machine tools.
(Call the Bureau of the Census at (301) 763-4100 for information on how to order Census documents.) 1987 Census of manufactures, Metalworking Equipment, MC-87-1-35D, U.S. Department of Commerce, Bureau of the Census, Washington, DC 20233. Telephone: (301) 763-7304. American Machinist, Penton Publishing, 826 Broadway, Fourth Floor, Next York, NY 10003. Telephone: (212) 477-6420. Cutting Tool Engineering, CTE Publications, Inc., 464 Central Ave.. Northfield, IL, 60093. Telephone: (708) 441-7520. Job Shop Technology, Edwards Publishing Co., 16 Waterbury Rd., Prospect. CT 06712. Telephone: (203) 758-6663.
The robotics industry is composed of about 60 to 70 producers and robotic systems integrators. U.S. robotics firms add value to end products through heavy engineering and accessories. U.S. builders excel in such accessories as vision systems, sensing and proximity devices, end-of-arm tooling, and motion controllers.
The robotics industry is not well-defined, so statistical information on it is difficult to find. Rather than having a specific SIC code, robotics shipments appear with industry data classified by the robots’ application. Welding robots appear with data for welding equipment in SIC 3548, for example. There are no data for employment or value added in the industry.
One source of information is the Robotics Industries Association (RIA), which publishes quarterly shipment and order data for its membership. RIA data show that the industry’s orders in 1991 slipped for the first time in 3 years. Orders of $490 million were down 5 percent from the previous record of $517 million in 1990. Shipments in 1991 were $430 million, up 7 percent. Orders continued to outpace shipments for the third consecutive year, resulting in an increase in the industry’s backlog so nearly $310 million, 12 percent higher than at the end of 1990. Cancellations remain at a low level. The situation cannot continue, however, without either an increase in cancellations or shipments.
Substantial orders and increased shipments have done little to improve the industry’s profitability. The Department of Commerce’s Office of Industrial Resource Administration has completed a survey of the nine largest robotics firms in the United States. The survey reveals that the group as a whole had only one profitable year (1986) during the 1980’s. Past and projected investment figures provide little hope for an increase in U.S. production capacity.
Those firms still producing robots have taken positions in niche markets, specializing in painting, welding, or one of the other popular applications. Little improvement has been made during the past 2 years in diversifying the industry’s customer base. Orders in 1991 were predominantly from the auto industry, primarily placed by European builders rather than U.S. auto producers. Applications continued to focus on welding and painting operations. Advances in new applications have increased slowly and have helped the industry somewhat.
Continued foreign investment in existing U.S. companies has continued to erode U.S. robotic capacity as acquired technology is moved overseas. In 1990, ABB of Switzerland bought the robotics division of Cincinnati Milacron, the last of the large volume robot producers in the United States. ABB moved the production of this technology to Europe. It also bought Graco, a small but profitable U.S. robot producer, in 1991. Foreign control of the U.S. robotics market is increasing.
The majority of the U.S. robotics market continues to be serviced by imports. The estimated U.S. market size is about $350 million. Imports were slightly more than $300 million in 1991-$180 million in complete robots and $128 million in parts. Japan has a 65 percent share of U.S. robotics imports. Japanese imports were more than 80 percent of total complete robot imports and 35 percent of U.S. robotic parts imports. Germany and Canada are the second and third largest sources of U.S. robotic imports at 10 percent and 8 percent, respectively.
Estimated exports of robots and parts totaled $210 million in 1991, a 27 percent increase over 1990. Exports were about $70 million in complete robots and $140 million in parts. The major markets for U.S. robotic exports were Canada and the European Community (EC), which each accounted for about 20 percent of total exports. The United Kingdom, Germany, and France were the largest EC consumers of U.S. robotics with about $12 million each during 1991. Mexico and Thailand each received 10 percent of U.S. exports, while Singapore accounted for about 7 percent. Germany and Singapore represent strong growth markets for future U.S. exports. Estimated growth rates in 1992 for U.S. products in these two markets are 10 percent and 8 percent, respectively. In 1991, Thailand and Venezuela recorded abnormally large shares of U.S. robotic exports. The two countries received 5 percent of exports through the first 9 months of the year.
Outlook for 1992
Industry shipments are expected to grow 7 percent in real terms. This expectation is based primarily on the strength of orders, which continued to outpace shipments during 1991, in spite of declines in order rates and increases in shipments; and the industry’s large backlog, which was even higher than at the close of 1990.
The long-term outlook for the U.S. robotics market in the United States is promising. Shipments are expected to grow at a 5 percent real rate of growth annually during the next 5 years. The market for factory automation and robotics is estimated at $33 billion by the Automation Forum and is projected to grow significantly during the next 6 years. Robotics already accounts for 6 percent of the materials handling market and will take a growing share as system integrators strive for greater flexibility.
The industry is pressing to expand both new applications and shares of older applications. R&D activities have focused on software engineering and manipulators, each accounting for about 30 percent of R&D spending. Systems control (13 percent) and vision applications (8 percent) are the next two largest areas.
Automation is the key to offsetting declining labor supplies. This is one reason why robotics and factory automation were cited in both the critical technologies lists developed by the Departments of Commerce and Defense. Although the industry and Government are investing in new applications, there has been little investment in increasing U.S. production capacity. As foreign firms have bought firms in the U.S. robotics industry, production capacity and technologies have usually been moved abroad. When the U.S. market reaches a critical mass able to support a domestic industry, there may be no U.S. industry to revitalize. – Patrick W. McGibbon, Office of Capital Goods and International Construction, (202) 377-0314, September 1991.
Office of Industrial Resource Administration, Bureau of Export Administration, U.S. Department of Commerce, Washington, DC 20230. Telephone: (202) 377-3795. American Machinist. Penton Publishing, 826 Broadway, Fourth Floor, New York, NY 10003. Telephone: (212) 477-6420. Automation, Penton Publishing, 1100 Superior Ave., Cleveland, OH 44114. Telephone: (216) 696-7000. Production, Gardner Publishing, 6600 Clough Pike, Cincinnati, OH 45244. Telephone: (513) 231-8020. Robotics Industries Association, 900 Victors Way, P.O. Box 3724, Ann Arbor, MI 48106. Telephone: (313) 994-6088.
The numerical controls industry is composed of 50 to 60 producers, which shipped about $235 million worth of controls in 1991. The major numerical control builders for motion control applications are large firms with diversified industrial control products. However, a majority of the builders are small firms that either build for a particular application or for use on the firm’s own machinery line. Numerical control (NC) devices include positioning type controls, digital readout devices (DROs), continuous path controls, and nonpositioning machine tool controls.
The largest component of the industry (on a dollar basis) makes computer numerical controls (CNCs), which were 59 percent of the total value shipped and 21 percent of the 93,000 units produced in 1991. The growth rate in CNC units has averaged 33 percent annually during the past 3 years. Output of positioning type devices continued to fall, down 6 percent from 1990, to 39,000 units. Digital readout devices production also has continued to slide (12 percent) to 20,000 units in 1991.
The U.S. market for CNC units is dominated by GE/Fanuc and Fanuc, which account for between 40 percent and 50 percent of U.S. installations. Other producers with significant shares of the U.S. market are Allen-Bradley, Mitsubishi, and Siemens. Companies that use substantial amounts of their product on their own machinery (i.e., captured producers) include Cincinnati Milacron, Fadal, Giddings & Lewis, and Hurco/Dynapath.
Domestic producers have maintained 35-to-40 percent of the domestic market, but they have continued to lose market share internationally. During the recent EMO machine tool exhibition in Paris, American Machinist editors and others noted that nearly 1,400 NC machine tools were on display. Only 13 percent of these machines had controls produced in the United States, including 114 units produced by GE/Fanuc. Exports have provided an underlying strength for the machine tool industry. Unfortunately, exports of NC machines continue to have little effect on U.S. control builders. With the exception of the captured NC producers, few NC exports incorporate domestically produced controls.
Competition in NC devices varies from region to region. The Japanese dominate Asian markets, the Germans are predominant in Europe, and all producing countries are involved in North and Central America. Estimates of worldwide demand for NC devices range from $2 billion to $5 billion. According to one industry consultant, the market will grow to more than $12 billion by 1996. Motion and computer control of processing equipment and machinery will continue to increase in both dollar terms and as a share of all processing machinery purchased. In the United States and Europe, computer controlled machines remain a minority of all equipment produced. At current rates of growth, NC equipment could become one of every two machines produced in these markets by 1995. By comparison, data released by the Japan Machine Tool Builders’ Association indicate that 83 percent of total machine tool orders, by value, placed in 1991 were for NC-equipped machines.
The U.S. balance of trade in both NC devices and NC machine tools is in substantial imbalance, with imports predominating. U.S. imports of NC devices fell significantly in 1991, down 37 percent on a unit basis. Japanese imports were 96 percent of the 9,450 units imported and 97 percent of the total import value of $34 million.
U.S. exports of NC devices were also down in 1991, off 17 percent on a value basis and 14 percent on a unit basis. Most U.S.-built controls exit the country attached to numerically controlled machine tools. In this respect, NC machine tool exports climbed 2 percent in 1991, after a 40 percent increase in 1990. Export markets that seem particularly bright for U.S. NC products include France, Germany, Switzerland, and the United Kingdom. Such traditional U.S. markets as Mexico and Canada also continue to provide significant trade opportunities. In addition, several Asian markets, such as India and South Korea, are very promising.
Outlook for 1992
The value of NC shipments should grow by about 12 percent in real terms, reflecting an upturn in machine tool shipments and the rebuilt/retrofit business. Continuous path and DRO shipments will outpace machine tool shipments as applications for these products continue to expand beyond machine tools.
Increased production rates for NC devices will result from more shipments of NC machine tools, robots, and woodworking equipment. Also, there will be development of new NC applications, including controlled motion of lasers for both measuring and machining.
During the next 5 years, NC shipments will continue to gro’a by an average annual rate of 5 percent in real terms. Numerous legislative and structural issues coming up will result in continued expansion of investment in automation equipment. NC equipment will continue to take larger shares of annual machinery production as controls become easier to use and less expensive relative to other costs. Projected employment and skills levels in the mid-1990’s will force U.S. manufacturers into automation investments. NC devices are essential at every level of automation.
Lists of critical technologies developed by the Departments of Defense and Commerce both noted the importance of motion and process control equipment. Congress is considering legislation to increase R&D, investment, and dissemination of automation technologies. The NC industry will be substantially affected by such technologies as the development of digital drives, advancements in open-architecture (compatability across machines), and advancements in control compensation. – Patrick W. McGibbon, Office of Capital Goods and international Construction, (202) 377-0314, September 1991.
(Call the Bureau of the Census at (301) 763-4100 for information about how to order Census documents.) Switchgear, Switchboard Apparatus, Relays, and Industrial Controls, Currer Industrial Report, MA36A, Bureau of the Census, U.S. Department of Commerce, Washington, DC 20233. American Machinist, Penton Publishing, 826 Broadway, Fourth Floor, New York, NY 10003. Telephone: (212) 477-6420. Automation, Penton Publishing, 1100 Superior Ave., Cleveland, OH 44114. Telephone: (216) 696-7000. Economic Handbook of the Machine Tool Industry, NMTBA, The Association for Manufacturing Technology, 7901 Westpark Dr., McLean, VA 22102. Telephone: (703) 893-2900. Production, Gardner Publishing, 6600 Clough Pike, Cincinnati, OH 45244. Telephone; (513) 231-8020.
TOOLS, DIES, JIGS, FIXTURES, MOLDS,
AND CONTRACT MACHINING
The tools, dies, jigs, fixtures, molds, and contract machining industry is often referred to as the tool and die industry. Tool and die shops primarily engage in manufacturing on a job or order basis. The industry makes a variety of products beyond the scope of tools, dies, and fixtures as a service to other manufacturers. Tool and die firms often serve as stopgap capacity for major manufacturing firms in the automotive, aerospace, and electronics industries. Business activity in the tool and die industry is a leading indicator for orders of materials processing machinery.
Product shipments declined 12 percent in real terms between 990 and 1991. Industry revenues include data for the tools, dies, jigs, fixtures, molds, and contract machining industry (SIC 3544) and receipts for machine shop job work (SIC 35995). The latter is a component of industrial machinery, not elsewhere classified (SIC 3599). According to the Bureau of Census’ 1987 Census of Manufactures, 7,207 establishments were in SIC 3544, including only 1,517 having more than 20 employees. However, the actual number of firms in the tool and die industry may be more than 14,000.
Orders for the tool and die industry, like the machine tool industry, typically lag other sectors by two to three quarters during an economic recovery. However, the 1990-91 recession was different than previous downturns. In spite of a significant slackening in business activity, inventories were well-managed, capacity utilization rates remained relatively high for a recessionary period, and order patterns were less volatile than in the past.
Industry exports increased slightly more than 10 percent in 1991, reflecting the economic slowdown overseas. Tool and die exports were up 3 percent in 1991, to $556 million. Canada was the only large declining market in 1991 for U.S. tool and die products, down about I percent. The next four largest markets (Mexico, Taiwan, China, and the United Kingdom) each averaged about a 25 percent increase over 1990. Exports to Brazil recorded a substantial rise to $12 million, nearly doubling the 1990 level.
Exports of jigs and fixtures fell 9 percent in 1991, after a 67 percent increase the previous year. Exports were off 50 percent to Canada, while those to the United Kingdom and Germany were more than three times the 1990 levels. Total exports of jigs and fixtures were an estimated $64 million in 1991.
Imports jumped significantly, climbing 58 percent in 1991. Imports of dies nearly doubled from 1990, led by Japan (up 124 percent), Canada (up 94 percent), and Spain (up nearly 700 percent). Imports of dies totaled an estimated $430 million. The value of imported molds grew 45 percent in 1991, to roughly $670 million. The largest suppliers to the U.S. market were Canada ($321 million), Japan ($172 million), Italy ($32 million), and Portugal ($29 million). Surprising increases were registered by Belgium and Austria, which more than doubled their molds exports to the United States.
Outlook for 1992
Product shipments for the tool and die industry have already begun to turn upwards and should expand by about 6 percent in real terms. The unique combination of well-managed inventories, relatively high capacity use, and less volatile order patterns will result in a faster than usual turnaround in business activity for the industry.
However, the slow pace of the economic recovery will keep orders growth at relatively low levels. Export markets are growing soft in contrast to the strengthening U.S. market. This will affect U.S. firms’ prospects in two ways. Not only will export orders decline, but domestic markets will become more competitive as foreign companies search for new business.
Long-term trends for industry shipments are difficult to determine. A number of pending changes in trade policy and structural components in the economy are likely to have significant effects on the industry. During the next 5 years, tool and die shipments should grow at a 3 percent annual rate in real terms.
The major issue is the current negotiation with Mexico for a free trade agreement. Many of the U.S. tool and die shops compete directly with Mexico’s maquiladoras. An agreement would lower the costs of intermediate goods for both Mexican and U.S. manufacturers. Although assembly and rough machining operations within the United States may suffer, the molds. special machines, and precision machining operations should benefit from free access to the growing Mexican economy.
The supply of skilled labor continues to plague the industry and to cloud its future role in the U.S. economy. Smaller, labor-intensive industries, such as tool and die companies, will be the most affected as this supply continues to dwindle. Automated manufacturers also have become concerned about the scarce supply of trainable labor. The limited basic education of some men and women entering the work force is hindering efforts by automated manufacturers to train employees to perform relatively simple functions. High-technology consortia such as the National Center for Manufacturing Sciences (NCMS) are now becoming involved in the issue. NCMS and other high-technology-related groups are spending greater amounts of their resources educating corporate and political decisionmakers about the problem.
In addition, groups such as the National Tooling and Machining Association and the Tooling and Machining Association are expanding vocational training programs and revitalizing apprenticeship programs in the workplace. However, the task is difficult and may require emphasis on retraining rather than education. As NCMS has noted in a recent report, 75 percent of the U.S. workforce in the year 2000 will consist of people working today; only 25 percent will be new employees.
[TABULAR DATA OMITTED]
American Machinist, Penton Publishing, 826 Broadway, Fourth Floor, New York, NY 10003. Telephone: (212) 477-6420. Automation, Penton Publishing, 1100 Superior Ave., Cleveland, OH 44114. Telephone: (216) 696-7000. Economic Handbook of the Machine Tool Industry, NMTBA, The Association for Manufacturing Technology, 7901 Westpark Dr., McLean, VA 22102. Telephone: (703) 893-2900. Production, Gardner Publishing, 6600 Clough Pike, Cincinnati, OH 45244. Telephone: (513) 231-8020. National Tooling and Machining Association, 9300 Livingston Rd., Fort Washington, MD 20744. Telephone: (301) 248-6200. Tooling and Machining Association, 1177 S. Dee Rd., Park Ridge, IL 60068-4396. Telephone; (708) 825-1120. National Center for Manufacturing Sciences, 900 Victors Way, Ann Arbor, MI 48108. Telephone: (313) 995-0300.
POWER DRIVEN HAND TOOLS
In 1991, the U.S. power driven hand tool industry experienced a most difficult year. New residential construction dumped, and major tool markets such as the automotive and acrospace industries also reduced purchases of new tooling. Product shipments of power tools are estimated to have fallen to $2.26 billion in 1991, 7 percent in constant dollars, the first such decline since 1982.
The recent recession hit hard at industry employment. Several of the industry’s leading firms laid off employees and temporarily suspended production at one or more plants during the year. Total industry employment was estimated at 16,300 in 1991, down 1,000 employees, or 5.8 percent, from 1990. Production worker employment totaled 11,000, or 7.6 percent below the 1990 level.
The decline in new residential and nonresidential construction especially affected demand for electric power tools, although the decline was partially offset by a 4 percent increase in in expenditures for home improvement. The power tool industry is highly sensitive to changes in new residential construction and the rate of spending for rehabilitating existing units. The near-term performance of the power tool industry hinges on demand new and existing residential units.
Several home center and catalog retailers went bankrupt in 1991. Other power tool retailers closed or consolidated stores, specially in New England and the Mid-Atlantic states, contributing to sagging electric power tool sales. The subsequent discounting and excessive inventories reduced manufacturers’ margins and may have slowed the introduction of some new consumer tools.
Since 1982, the chain-saw segment of the industry has experienced flat sales. Industry sources estimated that domestic shipments and imports of gasoline-powered chain saws totaled 1.38 million units in 1990. Domestic consumption in 1991 was expected to fall again to less than 1.35 million units. The industry also is likely to be regulated by the Environmental Protection Agency (EPA) under the 1990 Clean Air Act amendments. The regulations will primarily affect manufacturers of two-cycle engines commonly used in smaller models of portable gasoline-powered chain saws. California also is implementing similar regulations through its Air Resources Board. When implemented, the small engine regulations are likely to increase the cost of chain saws and remove some producers and dealers from the market.
U.S. exports of electric power tools continued to rise steadily during the early 1990’s. This development and falling imports have markedly improved the U.S. balance of trade in power driven hand tools. In 1991, U.S. exports of power tools should reach $579 million, up 5 percent from the previous record of $550 million in 1990. Increased demand for cordless tools and greater attention to international markets have spurred U.S. power tool exports. On the other hand, recessions in the United Kingdom, Canada, and Australia acted as a brake on U.S. exports and slowed growth from 1990 levels in these key do-it-yourself markets.
Power tool imports surged in the 1980’s, but are now in decline. The U.S. recession, combined with increased production by Japanese and German-owned transplant facilities, halted import growth and narrowed the trade balance deficit in power tools. As a consequence, U.S. imports of power driven hand tools in 1991 were expected to fall for the second consecutive year, dropping by 9.5 percent to $694 million.
U.S. power tool manufacturers face several immediate challenges to their competitive position. The Single European Act has encouraged several U.S. producers to buy or establish European subsidiaries and to reduce direct shipments to the European Community (EC) from the United States. U.S. producers also remain concerned that EC standards-setting authorities may limit U.S. access to the EC by imposing changed product standards.
Effective August 1, 1991, upon conclusion of a semiconductor agreement with Japan, President Bush suspended the 100 percent ad valorem tariff that had been levied against Japanese-made electropneumatic rotary hammers. The tariff had temporarily forced Japanese suppliers to produce their rotary hammer drills in the United States.
Outlook for 1992
The power driven hand tool industry should experience a relatively flat performance in 1992 as it emerges from the recession. Product shipments should total $2.3 billion, an increase of less than 1 percent (in constant dollars) over 1991. Increased growth is likely in the second half of the year. However, the industry’s performance will remain contingent on the availability of capital for investment in nonresidential construction and the level of expenditures for home improvement, maintenance, and repairs.
The movement toward trade equilibrium in power tools is expected to continue in 1992, although this may be due more to reduced domestic demand than to an improvement in U.S. producers’ competitiveness. Imports are expected to fall by about 7 percent to $644 million in 1992, while exports will rise by about 4 percent to $604 million. This increase reflects the growing acceptance of U.S. cordless tools and power tool accessories in do-it-yourself markets, the spurt in exporting generated by the U.S.-Canada Free Trade Agreement, and parallel growth in the Mexican market.
Power tool imports have fallen in the wake of the recession and are unlikely to resume an upward climb in the immediate future. However, imports will remain high enough to act as a brake on U.S. industry growth. Foreign-owned power tool firms, primarily German and Japanese, should continue to expand their U.S. production, limit imports, and increase exports, primarily to Canada and Mexico. Bilateral trade with Mexico will rise as maquiladora-based production increases and the Mexican market absorbs more U.S.-made tools.
Moreover, rising demand and increased exports of cordless tools will benefit the industry. Cordless tools, both consumer and professional, are expected to account for about 30 percent of electric tool shipments in 1992-93. Export markets are likely to supplant domestic demand as the major source of growth in cordless tool shipments. Manufacturers will continue to offer cordless tools at higher voltages and with shorter charging times.
Further changes are likely in the distribution and retailing of power tools. Home center chains and discount stores expect a continuing increase in their share of power tool retail sales at the expense of hardware stores. Home centers will seek to market more intensively to shopping mall contractors. Because of store closures by some retailers, the larger home center chains have been expanding their areas of operation, especially in the Midwest, and may be losing their reluctance to challenge each other in their home markets. As the decade progresses consumers should find a greater variety of tools available at retail from larger outlets controlled by fewer retailers.
Both U.S. and Japanese firms seek to commercialize nickel hydride battery technology. This will ultimately assist power tool manufacturers in complying with state regulations on the disposal of nickel cadmium batteries.
The marketability of power tools in foreign countries is significantly influenced by national standards, which may be used to deny entry of tools to a given market. Conversely, the development of common national standards applicable over a range of countries may significantly reduce the costs of market entry. Increasing market integration in the EC has focused industry attention on the activities of European standards organizations. The decisions of these bodies and similar national organizations, such as the Canadian Standards Association, will substantially influence the export potential of U.S. power tools in the 1990’s.
During the next 5 years, the U.S. power tool industry is expected to grow at a compound annual rate of 1.5 percent in constant dollars. Achieving this rather modest growth will depend substantially on renewed expansion of residential and nonresidential building construction and continued increases in expenditures for residential remodeling and repairs. The number of power tool users also will continue to expand, attracting more women, apartment dwellers, and new homeowners, as well as residents of newly democratic countries in Eastern Europe and other areas.
[TABULAR DATA OMITTED]
(Call the Bureau of the Census at (301)763-4100 for information about how to order Census documents.) 1987 Census of Manufactures, Metalworking Machinery, MC-87-I-35D, U.S. Department of Commerce, Bureau of the Census, Washington, DC 20233. Building Supply Home Center, Cahners Publishing Co., 275 Washington St.. Newton, MA 02158. Telephone: (617) 964-3030. Chain Sawage & Power Equipment Trade, Hatton-Brown Publishers, Inc., 225 Hanrick St., Montgomery, AL 36104-3317. Telephone: (205) 834-1170, Do-It-Yourself Retailing, National Retail Hardware Association, 5822 W. 74th St., Indianapolis, IN 46278. Telephone: (317) 297-1190. Hardware Age, Chilton Publishing Company, Chilton Way, Radnor, PA 19089. Telephone: (215) 964-4282. Home Improvement Center, P.O. Box 1400, Lincolnshire, IL 60069. Telephone: (708) 634-2600. National Home Center New,s, Lebhar-Friedman Publishing Co., 444 N. Michigan Ave., Chicago, IL 60611. Telephone: (312) 371-9400.
The welding apparatus industry (SIC 3548) covers electric and gas welding equipment, soldering equipment, and welding consumables. It faced difficult times in 1991 due to the recession in the U.S. economy and the depressed state of its major end-user industries. Cutbacks in defense, coupled with a downturn in construction, machinery, shipbuilding and repair, energy-related construction, and other fabrication industries, slowed growth in this industry. Shipments were an estimated $2.6 billion in 1991 – no growth in real terms.
Exports declined in 1991 after increasing the previous 2 years. Export shipments were about $463 million, a decrease of 18 percent from 1990. Export shipments to Canada, Latin America, and Europe were down from 1990. Canada, the traditional leader in purchases of U.S. welding equipment, was again the chief customer, providing a market for 17 percent of the U.S. industry’s exports. The other major purchasers were South Korea (8 percent), the United Kingdom (7 percent), Japan (7 percent), and Mexico (6 percent).
The welding apparatus industry was still able to maintain a positive trade balance in 1991, despite a rise of 18 percent in imports of welding equipment and consumables, to an estimated $431 million. Shipments from Japan accounted for about 60 percent of the import total and 85 percent of all imports of resistance welders. The other major suppliers to the U.S. market were Germany (9 percent of imports), Switzerland (9 percent), Canada (8 percent), and the United Kingdom (4 percent).
Outlook for 1992
Welding equipment manufacturers should be cautiously optimistic about prospects for 1992. Product shipments are forecast to increase about 1 percent in constant dollars. The industry should benefit from a recovery in the overall economy, but growth in the welding equipment and consumables industry will be hampered by the effects of defense cutbacks, and the flat to negligible growth in the end-user industries that stimulate demand for welding apparatus.
During the next 5 years, the welding apparatus industry is expected to grow at a compound annual rate of 6 percent. Demand for new technology by the automotive, construction, machinery, and energy-related industries will provide the stimulus to support this growth.
The U.S. welding industry will continue to be among the world’s technological innovators of welding equipment, offering the latest developments in such processes as electron, laser, and plasma welding. The emphasis on quality, productivity, and efficiency will continue to spur the industry toward automation, computerization, and increased use of robotics. Many of the latest developments and practical applications will be on display at the annual International Welding Exposition of the American Welding Society in Chicago, Illinois, on March 24-26, 1992.
[TABULAR DATA OMITTED]
The Welding Distributor, Penton Publishing, Inc., 1100 Superior Ave., Cleveland, OH 44114. Telephone: (216) 696-7000. American Welding Society, 550 NW LeJeune Rd., Miami, FL 33126. Telephone: (305) 443-9353.
COPYRIGHT 1992 U.S. Department of Commerce
COPYRIGHT 2004 Gale Group