A 'fab' future for fabricating

July 28, 2009

Gerald Shankel, president and CEO of the Fabricators & Manufacturers Association, International, has released the following statement regarding the future of metal fabricating:

Metal fabrication and forming represents a vital segment in the world of manufacturing. The companies in our industry are as diverse in size as the variety of industries they serve, and the impact from the efforts of those who bend, cut, extrude, fasten, finish, level, punch, shear, stamp, weld and assemble components made from sheet or structural metal is pervasive. And, it's exactly this diversity, as well as other factors, that will make our industry survive —and in some areas, even expand—in the face of these most difficult economic times.

Yes, the jobless rate in all sectors and the too-frequent images of shuttered plants can't be ignored. The automakers represent major customers to many in our industry and their plight is in the news nearly every day. But I want to focus on several key areas that bode so well for fabricators, beginning with our diverse markets, and then addressing other influential trends.

Diversity

The ability of fabricators to serve a broad customer base from different industries, particularly for those tied to one industry such as automotive, will bring stability and reap benefits. For example, Michigan-based W Industries has diversified outside automotive, adding aerospace, defense and many other industries to its customer mix. Another Michigan-based firm, Ultimate Hydroforming, excels at numerous processes ranging from hydroforming, stamping and deep drawing to cutting and welding. These skills enable the company to currently market to clients in commercial and military aerospace, medical equipment and alternative energy, and will help them target new industries as well.

This kind of flexibility helps fabricators take advantage of opportunities available in new industries, such as alternative energy. General MetalWorks of Wisconsin already is diversified with work split between transportation and industrial OEM work on one side, and point-of-sale work like store displays and shelving on the other. The company, though, has identified a new market—the construction of wind towers, fabricating parts such as ladder sections, walkways and other components for such structures. In fact, the Fabricators & Manufacturers Association, Intl. (FMA) just hosted in May a Webinar for the industry titled, "Anatomy of a Wind Turbine: Opportunities for Suppliers."

These examples from our publication Web site are just a small sampling from many that illustrate how fabricators are broadening their customer mix.

Growth Opportunities

Yes, there are opportunities even in this economic climate. As one would expect, a number of these are driven by the new government programs and stimulus plan. Energy efficiency and conservation efforts represent one area of focus with tax breaks offered to companies that install or retrofit energy systems to meet specific criteria.

FMA economic analyst Dr. Chris Kuehl wrote in a recent issue of the FMA e-newsletter Fabrinomics, "The most direct impact on the manufacturing sectors is the $3 to $4 billion in demand for materials involved in these modifications. That could mean a lot of sheet metal for the energy retrofits, and there are significant gains expected in the manufacture of the solar and wind systems that will be part of the development effort. There are efforts underway to ensure that these deals last well into the future, as it has been deemed a national priority."

Another area of government focus is infrastructure projects, which will affect fabricators in a positive way with increased business in construction and construction-related manufacturing.

One sector offering growth potential may surprise many—the rail business. Who can forget the cost of fuel in summer 2008? Even though costs dropped later in the year, they are unstable once again. The cost effectiveness of transportation by rail becomes quite an attraction for those shipping goods. In addition, fuel costs (as well as environmental issues) further reinforce the need for urban transportation alternatives for commuters, and this usually means some kind of light rail system. These trends point to expanded rail operations and the need for more rail cars, specialized yard equipment and even the rail itself.

Low Inventories

It may be counter-intuitive, but the slash in production and subsequent deep erosion in inventory levels in response to current economic conditions actually can translate to a swifter recovery for manufacturing and those in our industry in the months ahead.

According to FMA economist Kuehl, "Traditionally, the sector tends to carry substantial inventory to help maintain market share and maximize use of machines and labor. This creates a problem when trying to recover from a downturn. With too much inventory, it takes time for demand to eat away at the level and permit new production. However, the prolonged slump in demand and the collapse in global trade have generated significant drops in factory inventories in the U.S. and globally."

What this means is a barrier to rapid recovery has been removed. There will be no inventory to work through once demand rebounds, which will provoke immediate recovery of new production.

Global Markets

In terms of export business, a number of conditions exist globally that bode well for our industry and manufacturing as a whole. One of the most important: the drop in the dollar's value that allowed exporters to sell products more competitively in nearly all global markets. This will continue even as the dollar regains some of its luster.

There now is an increased sophistication in operations of U.S. manufacturers overseas. Companies that started with some tradeshow and Internet orders have often taken this to the next level. There are sales organizations in place, contacts have been made, and overseas consumers now have experience and familiarity with U.S. products. The weak dollar allowed a foothold, and companies have leveraged it from there.

Changes in countries that have evolved as manufacturing bases have impact as well. They are experiencing the challenges of development—higher inflation, shortage of qualified workers, shortage of management skill, and societal demands that could affect their competitiveness. The advantages that these countries once had in terms of production costs have started to erode.

The Future Looks Bright

Based on these perspectives, one can understand why we are bullish about the prospects of the fabricating industry as we progress through 2009 and beyond.

And, when one talks about the future, one must look at the future generations of workers. It's an issue we also address via Nuts, Bolts & Thingamajigs (NBT), The Foundation of the Fabricators & Manufacturers Association, Intl. NBT encourages America's youth to enter careers in manufacturing to avert a growing crisis in this country—the shortage of skilled workers in the trade arena.

NBT provides grants to educational institutions offering manufacturing camps for young people and awards scholarships to students pursuing trade careers. We utilize our resources to spread the message that manufacturing is a viable career option to spark interest among young people and help preserve the future of manufacturing in America.

NBT recently launched a text-to-give program that allows people to donate to the organization by simply texting "123" to the number "90999" from their cell phones.

Supporters will be prompted to confirm their gift by replying with the word YES. After replying with YES, they will receive a confirmation and the message generates a five dollar donation charged directly to the caller's cell phone bill.

It's one small, easy way to participate in strengthening U.S. manufacturing—and the future of the American economy.



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