Featured Product
This Week in Quality Digest Live
Metrology Features
NVision Inc.
Scanning plays a role in extending life span and improving design of A/C systems
Patrice Parent
Integral components of an electric vehicle’s structure are important to overall efficiency, performance
NIST scientists perfect miniaturized technique
Donald J. Wheeler
The more you know, the easier it becomes to use your data
Miron Shtiglitz
How production managers can increase yield by automating defect detection

More Features

Metrology News
Enables better imaging in small spaces
Helping mines transform measurement of blast movement
Handles materials as thick as 0.5 in., including steel
Presentation and publication opportunities for both portable and stationary measurement leaders
Accelerates service and drives manufacturing profitability
Improved readings despite harsh field conditions
Designed to meet standards, bolster detection, and mitigate work environment hazards
Machine vision market will return to single-digit growth in 2024 following declines in 2023
Enables manufacturers to integrate collaborative robots in operations

More News

Raissa Carey


Outlook for the Machine Tool Industry in the Current Economy

An interview with Pat McGibbon of the Association for Manufacturing Technology (AMT)

Published: Wednesday, December 16, 2009 - 07:37

Just as many industry sectors have been experiencing this year, the machine tools industry has seen a slow period in consumption and distribution of manufacturing technology.

Manufacturing technology consumption data is relevant because it provides a reliable economic indicator of how manufacturing companies are investing in equipment to increase capacity and improve productivity. In other words, the machine tool industry is the foundation for the entire manufacturing industry.

And as the heart of fabricated parts manufacturing, machine tools are the bedrock on which machined-parts quality stands.

Not surprisingly, given the current economy, it has also been one of the hardest hit sectors within manufacturing. Orders for manufacturing technology were down 66 percent for the first 10 months of 2009, according to a statement by the Association for Manufacturing Technology (AMT). 

Quality Digest Daily asked Pat McGibbon, AMT’s vice president of strategic information and research, about this reality and what manufacturers across the country should expect in 2010.

Quality Digest Daily: The machine tool industry had between 67 and 68 percent drop in consumption year to date. Is this 100 percent due to the current economic crisis, or are there other contributing factors?

Pat McGibbon:  No, the decline was not entirely due to the economic crisis. Early in 2008, we were talking about the beginning of 2009 being soft for two noneconomic crisis-related issues. First, Dec. 31, 2008 marked the end of a bonus depreciation program for capital equipment. When the same program was run in prior years, it tended to steal a portion of the the next year’s demand in the second half of the year. Also, with the number of mortgages that had to be turned over, we expected credit to be tight and expensive in the last part of 2008 and first quarter of 2009. In addition, the quarter after the International Manufacturing Technology Show (IMTS) always is a little slower and IMTS was in September 2008.

While the crisis certainly squeezed credit much more than the turn over in mortgages, I am sure that these two elements also contributed percentage points to the precipitous decline in orders during January 2009.

QDD: Under the current economic circumstances, what are some specific measures that machine tools/technology providers should take to overcome this challenge and start producing/selling more in the near future? 

PM: Manufacturing technology providers can’t change much in the current scenario.

Credit is tight and so many have self-financed their customers’ equipment purchases, but they can only extend this service to a limited portion of their customer base to protect their own cash position to be able to keep the production lines running. 

U.S. manufacturing technology providers have an advantage in that the dollar is weak compared to many currencies. U.S. builders can take advantage of this in their negotiations on foreign orders where they are likely to be the low-cost provider. In addition, many Asian and European Union companies are looking to buy U.S. components to produce their own manufacturing equipment due to the lower prices.

U.S. manufacturing technology providers are mining opportunities in Mexico as work from Asia floods back through Mexico into North America. Even if the work doesn’t land with U.S. manufacturers, domestic providers of production equipment have a 40-percent market share in Mexico, so work that stays there usually means increased opportunities for AMT members as well.

QDD: Do you see this current scenario in the machine tool sector having a domino effect on research and development (R&D) of new technology?

PM: The smart companies plan for downturns and even leverage the downturns to turn up their innovative juices to new levels. AMT members are opening new production facilities while moving equipment is less disruptive. Some members are stepping up R&D in the same fashion, taking advantage of having highly skilled engineers and machinists available for the additional duties.

Still, cash is king. A company can’t spend too much of their time or resources in development at the expense of meeting payroll or keeping components coming into the production process.

QDD: How can companies keep innovating and conceiving new products, even when there’s little financial resources and demand in the segment?

PM: Again—cash is the key. Many of our members are private companies who know the business well enough that they have prepared war chests to fund value added as well as intellectual property during these downturns. This is not the first or last downturn of this nature. Certainly, the financial swings of working within the industry are well understood and somewhat anticipated.

QDD: What’s your forecast for the industry in 2010?

PM: The manufacturing technology market most likely will see a double-digit upswing in orders during 2010. The question is will it be in the teens or just shy of 55-percent growth. At our recently concluded 38th Global Forecasting & Marketing Conference the mood was upbeat. However, economists speaking at the conference painted various economic scenarios, all of which seemed plausible. The general rule upon which they agreed is that even a large swing back would only put the market at slightly more than half of what it was in 2008. The next two years are likely to see a growth in orders placed, but from a very small base.


About The Author

Raissa Carey’s picture

Raissa Carey