|
|
|
|
 |
BusinessWeek: January 11, 1993 |
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |
|
Industry Outlook: Manufacturing
WILL WASHINGTON GREASE THE GEARS? Most seers expect Congress to pass a 10% tax credit speedily and probably make it retroactive to December. Laurence H. Meyer & Associates, a St. Louis economic forecasting firm, thinks such a credit might add 7.4% to equipment spending in 1993. "It would drive the beginning of a reinvestment binge for small shops and be very beneficial to large shops, too," declares Michael K. Campbell, senior vice-president of machine-tool maker Hurco Cos. MENTAL LIFT. Not everyone is so sure. Many industries are still so glutted with capacity that they don't need more equipment. And the lag time involved in making many machines could delay the sales upturn. Still, makers of machine tools, pumps, compressors, and materials-handling equipment think a tax credit will, at least, prompt Industrial America to consider new investment."It will be a psychological benefit," says Raymond E. Ross, president of Cincinnati Milacron Inc. Machinery makers will take any help they can get. U.S. capital spending was up about 5.4% in 1992, but nearly all of the increase went for telecommunications and information-processing gear, not industrial machinery. One reason is that sales at many durable-goods makers are still well below prerecession peaks. Auto makers, for example, aren't spending heavily on new equipment.Pulp and paper producers aren't either (page 90). That has put the hurt on such companies as pumpmakers. Last year, orders even fell for replacement parts, which usually provide plump profits. Executives at major producers such as Goulds Pumps Inc. and BWIP Holding Inc. say parts orders are down because customers are cutting inventories to save money-and they know suppliers can respond much more quickly today than they could in the past. That's just one of the structural shifts that have shaken the machinery business in the past decade. Few manufacturers are building new plants to add capacity these days. Instead, notes John F. Townsend, marketing vice-president at Giddings & Lewis Inc., they're investing "to improve competitiveness, to improve quality, and to gain faster response time to market conditions." That won't cause a boom, but it should help capital spending rise by perhaps 7.6% this year. Already, Cincinnati Milacron sees brisk demand for machines that mold plastic. That's an area closely linked to consumer spending and one that usually foreshadows stronger machine-tool sales. John M. Raab, marketing vice-president at Rapistan Demag Corp., notes that orders for small conveyor systems used widely in manufacturing increased 27% last year. "We're hopeful this signals that 1993 will be a good year, for both big and smaller systems," he says. There are reasons, apart from a tax credit, why this is a good bet. Corporate profits have been rising, and interest rates are low, making equipment affordable. "The fundamentals in the industry will be as favorable as they've been in quite a while," says Don Lane, vice-president of the marketing group at LeBlond Makino Machine Tool Co. DESPERATiON OVERSEAS. Moreover, the U.S. is now a low-cost place to manufacture. Where once they went abroad, lift-truck makers are beefing up U. S. production. Clark Material Handling Co., which was acquired by Terex Corp. last year, is adding 130 jobs in Kentucky. "They almost named me king of Lexington," jokes President Gary D. Bello. But few other machinery companies will be adding jobs this year. Many are still restructuring, and some changes in ownership are creating uncertainty. A new joint venture in pumpmaking between Ingersoll-Rand Co. and Dresser Industries Inc., for example, is preparing to consolidate its 18 major plants, which will cut both capacity and employment. Even in the strong lift-truck market, excess capacity is causing intense price competition. Larry Wuench, marketing director at Mitsubishi Caterpillar Forklift America Inc., says Cat lowered its prices 4% last year after a roughly equal drop in 1991. Nor will overcapacity disappear any time soon. Economic slowdowns in Japan and Europe will zap U. S. machinery exports. Weak business abroad also means producers there will try to boost U.S. sales. "You've got a desperate Europe and a desperate Japan," says Harnischfeger Corp. President Jeffery T. Grade. He wants Washington to limit an investment-tax credit to U.S. made machinery. Whether Congress takes his advice or not, machinery makers will take approval of the incentive as a good sign: A signal that, at last, the long-term climate for capital investment in the U. S. is starting to turn their favor. | |
|
|
|
|
|
Copyright 1991-2009 by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
