The average production worker in the plastics industry is 32 percent less productive than the average employee in the durable manufacturing sector, and 36 percent less productive than a worker in nondurable manufacturing. That is one of the conclusions of the ``Plastics Industry Outlook-1996-1998,'' prepared by CIT Group/Industrial Financing, a Livingston, N.J.-based machinery financing company.
Michael Paslawskyj, vice president of business development and economic research for CIT, said the productivity gap is symptomatic of the dramatic rate of growth of the processingindustry.
Despite the perception that the plastics processing industry is seeing more and more consolidation, Paslawskyj said CIT's study indicates the number of small processors with fewer than 20 employees increased between 1987 and 1992, and still represents about half the total number of processors.
He noted that, unlike the automotive and steel industries, for example, plastics processors pay low wages and benefits and generally are not unionized. Those factors contribute to relatively low wages, and levels of training and education, which in turn lead to lower productivity.
``With the exception of die and mold making, this is a low-skill labor job,'' he said. ``There are few barriers to entry. You can start processing plastic in your garage spending less than $100,000, and that is what has happened. The fast growth of the industry has led more people into it. In the auto and steel industries, labor and benefit costs are a major, big-ticket portion of the business.''
He said the productivity gap also is fueled when even large processors do not take advantage of technology. He noted he has visited several large plants where he saw processing lines manned by low-skilled workers instead of automated with robots, which decreases productivity.
``It's not like these companies couldn't afford the robotics to pull the product from the mold,'' he said. ``They just aren't focused on that, because lack of productivity is covered by the growth in the industry.''
He admitted that ``mom and pop'' processors are unable to afford the robots, and other technological productivity boosters, and thus must improve productivity in other ways, through better management techniques.
Among the other findings in the outlook are:
Noting that it expects theFederal Reserve Board to implement a ``soft landing'' for the U.S. economy, CIT predicts plastics shipments will continue to grow at a 4.3 percent rate in 1995, slower than last year's 8.9 percent rate. CIT anticipates growth will accelerate again in 1996 and 1997, by 5.3 percent and 6.9 percent respectively, and level off at 5 percent in 1998 at $119.5 billion. Those rates would represent an overall gain by 1998 of 23 percent over last year's level. New applications, such as brushless plastic motors, mooring piles, decking, transistors, intake manifolds and fuel tanks, should aid the growth.
The exploding electronics industry will help boost the use of plastics, coupled with increased consumption in health care, household products and the construction industry.
Although resin prices have risen 31 percent since March 1994, manufacturers of finished plastic products have absorbed most of the increase, causing the prices for finished products to rise only 6 percent. Prices for finished products are expected to rise about 1.5 percent during the next few years, and stabilizing resin prices will enable processors to recoup some of their margin losses.
By 1998, nominal exports of plastic products will rise to nearly $8.8 billion annually, 42 percent ahead of 1994. Imports also will grow, but at a slower rate, with imports' share of domestic plastic product consumption declining slightly from 5.7 percent last year to 5.6 percent in 1998.
Imports from Mexico will grow well beyond their 6.3 percent of total imports in 1994 because Mexican plastics products are now 35 percent cheaper due to the devaluation of the peso, and because an increased number of companies in the Far East, wishing to take advantage of the North American Free Trade Agreement, have opened facilities in Mexico.
Imports from China have increased more than 170 percent since 1991 to nearly $1 billion in 1994, and Canada, China, Japan and Taiwan account for nearly 63 percent of U.S. plastic product imports.
The U.S. plastics industry's trade surplus swelled from $336 million in 1993 to $660 million in 1994.
Domestic purchases of plastics machinery will exceed $2.9 billion by 1998, from the 1994 record level of $2.36 billion, and the 7.9 percent growth rate for machinery sales will slack off to about 2 percent by 1998.
Domestic machinery shipments soared an estimated 16.8 percent in 1994 over the previous year, while imported machinery sales plunged 16.2 percent.
Livingston, N.J.-based CIT Group/Industrial Financing is an operating unit of CIT Holdings Inc., also of Livingston. CIT Holdings is owned by Dai-Ichi Kangyo Bank Ltd., based in Tokyo, and Chemical Banking Corp. of New York.