Attention injection-press shoppers: 1998 could be the year of good deals, thanks to a weak yen.
On the business-news side, 1998 will be marked by additional U.S. manufacturing by foreign companies. In December, Sumitomo Heavy Industries Ltd. of Japan announced a $10 million factory to build small-tonnage injection molding machines in Jefferson, Ga. Six months earlier, during NPE 1997 in Chicago, Battenfeld GmbH officials revealed the German company is assembling large-tonnage machines in Bellefonte, Pa.
The yen has fallen against the U.S. dollar to its weakest level in more than five years. As of late 1997, one dollar would buy you about 130 yen. The yen fell especially hard in the last several months of 1997, reflecting weakness in the Japanese stock market and currency turmoil in several Asian countries.
That means products made in Japan, including injection presses, cost less.
Most Japanese press suppliers say they lowered prices in 1997. For competitors, raising prices already was difficult, even before the yen.
``I can't see them trying to raise prices in this market today, not in this currency environment,'' said Michael Paslawskyj, vice president of CIT Group in Livingston, N.J. ``If suddenly a foreign-made machine is 10 percent cheaper, you're not going to be able to raise prices. In fact, you may be forced to lower prices.''
In recent years, Paslawskyj has been reporting declining market share for Japanese-made machines, as the soaring yen forced Japanese suppliers to raise prices. Now, he said, watch out: ``The story for '98 is that imports might have a second wind here.''
The U.S. market for injection molding machines slipped back to normal in 1996 and 1997, after explosive years in 1994 and 1995 when sales were so hot some companies couldn't keep up with demand.
``The slowdown we had in '96 and '97 was to absorb all the new equipment, to take a breather. But now it's picking up again,'' Paslawskyj said.
He predicts machinery sales — all plastics machines, not just injection presses — will grow about 3.5 or 4 percent this year.
Most machinery company executives said business picked up in the second half of 1997, after NPE in June. Customers are adding new production capacity, not just replacing old machines, they said during interviews in December.
A year ago, William G. Pryor predicted 1997 would be flat. In December, Pryor, president and chief executive officer of Van Dorn Demag Corp. in Strongsville, Ohio, said he was wrong.
``I think we'll have a record year. We underestimated the market, unitwise, by about 20 percent,'' he said.
Pryor said key factors, as always, will be the overall economy and interest rates.
``Currency also will play a role,'' he said.
But he said pricing was difficult even before the yen's downward spiral.
``Net prices in the U.S. market, in dollars, have gone up very little in the last several years,'' he said. ``Plus, when the yen was high, the Japanese were higher [priced] than the domestic suppliers for a period of time.''
For Canada's Husky Injection Molding Systems Ltd., 1997 will go down as the year the company founded by Robert Schad changed forever. Husky is changing from a specialist in PET preforms and thin-wall molding machines to a broad-line machinery builder. Husky used to procure most parts and subassemblies from other companies. This year, Husky employees will assemble components in-house at a 200,000-square-foot expansion at its Bolton, Ontario, headquarters.
At NPE, Schad said he planned to have a highly automated line that robotically welds machine bases. Husky also is building a hot-runner complex in Milton, Vt., and greatly expanding its European base in Dudelange, Luxembourg.
Shortly after NPE, Schad revealed he wants to take Husky public.
Even though Husky is closely held, the company issues an annual report each year. Husky reported that sales rose 10.2 percent in fiscal 1997, which ended July 31, to $626.4 million, up from $568.2 million in 1996. Profit was $34.9 million, a 5.8 percent gain from $33 million the year before.
Husky credited the sales gain to its two-platen E-Series press and the G-Series machine, Husky's entry into general-purpose molding. Husky has sold more than 350 G machines since their introduction in 1996, said Michael Urquhart, vice president of sales and marketing for the Americas.
North American demand for PET preform molding machines has been flat, but business picked up last summer, Urquhart said.
``There's more growth in that market outside of North America. Both Latin America and Europe have been good markets,'' he said.
Husky plans to introduce a small-tonnage machine line this year.
Wolfgang Meyer, president of Battenfeld of America Inc., said he will not be surprised if 1998 is strong enough to cause some spot shortages and stretched-out delivery times. Meyer said quicker delivery to U.S. customers was a big reason Battenfeld started manufacturing its large HM presses in Pennsylvania.
Meyer, like several other executives, said consolidation among custom molders, especially in automotive, has created new, larger plastics companies that have to buy new technology.
``The significant players are getting more orders, so they are expanding,'' he said.
Kurt Fenske, vice president of Engel North America, said automotive ``is very, very busy, not only in large machines but for small to medium-sized machines as well.''
``The applications are becoming more demanding and requiring re tooling and new machinery,'' he said. ``A lot of this is done by the Tier 1 and Tier 2 suppliers.''
Engel North America builds machines in Guelph, Ontario, and York, Pa. Fenske said Engel North America sold about 600 presses in 1997, about the same number as 1996. But sales in dollars have increased, he said, because the company has sold more complete systems. He thinks 1998 will be about the same.
At Mitsubishi Heavy Industries Injection Molding Machinery Inc., sales of Mitsubishi presses from Japan increased 22 percent in 1997, said David May, national sales manager. Sales should rise at least 15 percent this year, he said.
The Wood Dale, Ill., firm reduced prices 5 percent last spring on its large-tonnage machines, with clamping forces of 390 tons and larger.
``That was pre-emptive, because we had a feeling where everything was headed,'' he said.
Another company selling Japanese presses, Methods Plastics Machinery in Sudbury, Mass., pays in yen to buy Shinwa Seiki machines from Japan and sells them here in dollars.
``We're getting a hell of a lot more for our money right now,'' said Hunter R. Kissam Jr., director of sales and marketing.
Methods also dropped prices in early 1997, to boost sales.
``We've actually lowered our prices anywhere from about 5 percent to close to 20 percent, depending on which model it is,'' he said.
The low prices, and new technology in an energy-efficient press introduced at NPE, have worked. By November, sales had surpassed the figure for all of 1996.
``We're stocking up like crazy. Our prices should be good for a long time,'' Kissam said.
But officials from two other Japanese suppliers cautioned not to expect constant price changes. Toshiba Machine Co. America in Elk Grove Village, Ill., enacted a modest price reduction at the beginning of 1997, but since has stabilized prices.
``It's difficult to keep raising and lowering the price of the machine,'' said Tim Glassburn, vice president.
Glassburn's outlook for 1998: ``I expect it to be about as good as . I don't see anything in the economy that would make it go down or dramatically up.''
Jerry Boggs, vice president of SHI Plastics Machinery Inc., which sells Sumitomo presses, agrees.
``The issue is yen-dollar fluctuations and it goes both ways. So we don't swing as rapidly or as wildly as the daily rates that are quoted in the newspaper,'' he said.
SHI booked orders for 350 machines in 1997.
One way to get around currency swings is to manufacture in both countries. SHI's Japanese parent, Sumitomo Heavy Industries Ltd., will be able to assemble 20 of its SH machines a month when it opens a Georgia factory this year. Clamping forces will range from 55-165 tons.
U.S. manufacturing has worked for Ube Machinery Inc., the U.S. arm of Ube Industries Ltd., which began building machines in Ann Arbor, Mich., in 1996. Ube was known for selling large machines to the auto industry. ``But the sale of the middle-sized machines, the 500-ton and 700-ton machines, have really taken off for us because of this plant,'' said Daniel O'Keefe, national sales manager.
Those machines are molding consumer electronics products, including television cabinet operations in Mexico, O'Keefe said.
Ube plans to introduce new high-speed machines this year, he said.
Electronics also is a robust segment for Krauss-Maffei Corp. in Florence, Ky.
``We're anticipating another strong year in '98, and we're following that up with an increase in our market presence in both the Southern states as well as the West Coast,'' said Michael Santa, executive vice president.
The company is adding direct-sales personnel in those regions.
Santa said Krauss-Maffei's business soared more than 70 percent in 1997, to about 170 units from 98 in 1996.
``Automotive has been a steady source of growth for us, but our biggest growth markets have been in packaging, the medical field and consumer electronics,'' Santa said.
Cincinnati Milacron Inc., the largest U.S.-owned plastics machinery maker, faced pricing pressures in 1997.
Through the first nine months of 1997, Milacron reported that operating profit for plastics machines declined by 7 percent, to $39.4 million, while sales increased 13 percent, to $537 million.
Milacron, in its third-quarter report, said pricing pressures on U.S.- and European-made injection molding machines affected profit margins.
Final-year 1997 results were not available for this story. Milacron's Plastics Machinery Group in Batavia, Ohio, generated 1996 sales of $662 million.
Milacron reported it sold $40 million worth of equipment, a company record, during NPE 1997.
When Los Angeles-based Stadco Inc. bought HPM Corp. two years ago, Stadco President and CEO Neil Kadisha said he wanted to triple HPM's sales within a few years. In 1997, Kadisha said, sales grew nearly 50 percent.
He would not give dollar amounts.
``That is substantial considering ... the market was fairly flat,'' he said.
Kadisha acknowledged that economic problems in Japan will make it hard to raise prices this year.
``Their market is going to shrink and excess capacity from Japan is going to make it to the U.S.,'' he said.
HPM notched a victory by selling two huge, 5,000-ton injection presses to Saturn Corp. in Spring Hill, Tenn.
Italy's Sandretto Group got new ownership in 1997: Cannon Group, best known for its polyurethane machinery. How was 1997 for the U.S. unit, Sandretto Plastics Machinery Inc. in Middleburg Heights, Ohio?
``It had a very good start and then everything slowed down right before NPE, but since then it was stronger again,'' President Bernard Choquel said.
After years of specializing in thermoset machines, Bucher Inc. of Buffalo Grove, Ill., kept pushing its thermoplastic injection press to packaging molders.
``Results in the customers' plants have been better than we anticipated, mainly on the speed side,'' said President Taras Konowal. ``We're seeing that the customers are pushing the machines faster than the machines could go.''
Netstal-Machinery Inc. is trying to crack the North American PET preform market, challenging Husky. According to Werner Christinger, Netstal's president, the Fort Devens, Mass., company took its first preform press order in 1977.
Christinger said that Netstal sold more than 50 compact disc presses in North America in 1997, including three for the new digital versatile disc.
``CDs have been strong and it continues to be strong going into '98,'' he said.
Plastic pallets keep bringing smiles to employees of Wilmington Machinery of Wilmington, N.C., because pallet molders are purchasing their low-pressure machines.
But Vice President W. Kemp Shepard likes walking through his local mega-retailer to check out new products for the car and home.
``We haven't seen this broad an array of new product introductions in a long time,'' he said.
The small machine sector will get more crowded next year, with new Husky machines and U.S.-built Sumitomo presses. The two leading companies, Boy Machines Inc. and Arburg Inc., both report solid sales to brand-new molders.
``We had a very strong growth in our first-time molders, both in start-ups and manufacturers bringing work back inside,'' said Andrew Lord, executive vice president of Newington, Conn.-based Arburg.
This year is the 75th anniversary of the company's German parent, Arburg GmbH + Co.
John Johnson, Boy's vice president of sales and marketing in Exton, Pa., said the firm experienced a dip in business in July.
``But overall the year was consistently strong and we're going into 1998 on a plateau,'' he said.
Business is good even at the smallest end of the spectrum, at Mini-Jector Machinery Corp. of Newbury, Ohio.
President Glenn Frohring showed a 10-ton press at NPE for molding cable ends and connectors.
``We've probably sold these to half-a-dozen companies that did no molding before,'' Frohring said.