CLEVELAND — Plastics Fair Cleveland, held June 23-25, could have been subtitled: ``The Incredible Shrinking Yen Eats Cleveland.''
North American injection press builders say the weak yen virtually has eliminated any price hikes this year, even as U.S. demand stays strong. The reason? Asian competitors, especially from Japan, can push down prices as their currencies fall.
Troubles in Asia are making price hikes look doubtful for mold makers as well.
``It's absolutely ridiculous,'' said Joe Kavalauskas, vice president and general manager of Minco Tool & Mold of Dayton, Ohio. ``There's not enough work to go around. Anybody who's building molds right now is struggling.''
Kavalauskas said Minco's prices have fallen to cost or below, and that mold makers are ``just trying to get a job to keep people busy.''
``We're digging in, fighting and scratching to do business.''
Service has become key to Minco's survival.
``We're being effective,'' Kavalauskas said. ``It's just hard.''
Asian firms, including Taiwanese mold makers, have not all fared similarly during the economic slowdown.
According to Nelson Wen, director of Taipei-based Taiwan Mold Tool Co. Ltd., his company has reduced prices of its products by about 10 percent. Economic problems have hurt Taiwan Mold Tool's home markets, Wen said, but the company is not panicking.
``In Taiwan the market slowed down about five years ago,'' he said. ``We're used to it.''
Taiwan Mold Tool is relying on outside markets for business, Wen said, but the company is not feeling any added pressure to sell in the United States.
``We have enough business to survive right now,'' he said.
Taipei-based mold maker Horng Chang Steel Mold Co. Ltd., however, has suffered no ill effects of the economic slowdown, said David Tai, director of marketing. Tai said problems in Asia have affected Japan and Korea but not Taiwan and Singapore, and that his company is not reducing prices.
``It's a highly competitive business,'' said Kenneth Vaughan, marketing manager at Van Dorn Demag Corp. in Strongsville, Ohio. ``We did not raise prices this year. [The weak yen] has made it almost impossible to raise prices.''
Japan's economic turmoil is leading financial news reports. Major Japanese banks are in trouble. The week before Plastics Fair Cleveland, Japan's economy, the world's second largest, officially was declared to be in a recession. The yen hit an eight-year low — 143 yen to one dollar—and the U.S. intervened, trying to boost the yen's value and stop the slide. During the three-day trade show, the yen ranged from 139-142.
Japan's falling yen already has spurred other Asian countries to devalue their currencies, spreading the problem.
As their home markets dry up, Asian equipment makers hope to sell more in the huge, still-healthy U.S. market.
``The market's been really strong, but it's highly competitive,'' said Vaughan. ``It's a tough, tough business and it's always tough. We have to always do everything we can in terms of controlling our costs and keeping aggressive in the marketplace.''
In May, Van Dorn Demag and three other domestic injection press makers announced a coalition, the North American Machinery Manufacturers, to head off an expected flood of low-priced imported equipment. All four companies—Van Dorn Demag, Cincinnati Milacron Inc., Engel North America and HPM Corp.—exhibited in Cleveland. Van Dorn Demag, Milacron and HPM are based in Ohio.
Despite pricing pressure, Milacron's Plastics Technologies Group in Batavia, Ohio, has maintained its profitability, according to a news release issued June 22. Milacron's Ferromatik injection press factory in Germany, and its joint venture with Fanuc Ltd. of Japan to make small all-electric presses, ``helped to mitigate the margin pressure on domestically produced products.''
``By offering value in the form of technology, delivery and customer service, we've been able to avoid steep discounting and hold prices, even in the face of intensified Asian competition,'' said Daniel Meyer, Milacron chairman, president and chief executive officer. ``As a result, despite relatively flat sales, [plastics machinery] is expected to exceed its goal of a 10 percent operating margin both in the second quarter and for the year—a considerable improvement over 1997.''
Milacron officials at Cleveland Plastics Fair referred questions to company headquarters.
Although Japanese producers in Cleveland reported strong U.S. sales, they downplayed the currency turmoil.
Methods Plastics Machinery of Sudbury, Mass., which sells Shinwa Seiki machines from Japan, has purchased a second warehouse in Acton, Mass.
``Because the yen/dollar ratio's so favorable, we're giving pretty good prices now to keep inventory flowing,'' said Hunter R. Kissam Jr., director of sales and marketing at Methods Plastics. Kissam said official prices have stayed the same this year, but Methods is dealing. ``Instead of a price reduction, we have been able to discount a little bit more.''
Methods is hiring a national sales manager, he said.
Jerry Boggs, vice president of SHI Plastics Machinery Inc. of America in Norcross, Ga., said Sumitomo has reduced prices this year. But he pointed out that currency swings both ways. A few years ago the yen was in the 80-90 range, forcing Japanese players to raise U.S. prices.
To insulate against currency changes, Sumitomo is building a 40,000-square-foot press assembly factory in Jefferson, Ga., about 60 miles north of Atlanta. Boggs said crews will begin installing equipment in July. Production should begin in August.
Nissei America Inc. also doesn't like prices bouncing up and down. Back when the yen was soaring, Nissei enacted a single, 10 percent price increase in the United States, said Tony Iwashita, East Coast manager. In early 1997, as the yen plunged, Nissei reduced prices that same amount.
``One increase. One decrease. That's it.'' Iwashita said.
Nissei America, in Anaheim, Calif., is the U.S. unit of Japanese press builder Nissei Plastic Industrial Co. Ltd.
Austria-based Engel North America builds machines in York, Pa., and Guelph, Ontario. Kurt Fenske, vice president, acknowledged that ``it's very difficult to get price increases through.'' He said the yen is a factor—but hardly the only factor.
``Forget all this Far East stuff. I can't raise prices because all my North American competitors aren't raising prices,'' he said.
``Some markets close, some markets open up. That's just the way the world works. It's a global economy. We can't just concern ourselves with just our corner of the world,'' Fenske said.
With low interest rates, and the U.S. economy solid, machine builders agreed now is a good time to buy presses. For example, Van Dorn Demag has packed several thousand dollars' worth of improvements into its new Pathfinder 3000 and 5000 controllers, while keeping the machine price the same. The new controllers feature the Optimizer, which automatically calibrates proportional valves and determines the unit's digital feed forward, to adjust for changes in the machine.
Allen Tsai, manager of Miami-based Lung Meng Machinery (USA) Co., a maker of blown film extruders and injection molding presses, said the yen situation really has not changed sales for its Taiwanese parent company.
Normally, Lung Meng increases its North American prices 2-3 percent a year. The currency troubles now mean Lung Meng's prices will remain flat.
``Any changes we have won't be as dramatic as Japan's,'' Tsai said. ``Our Taiwanese machinery is already cheaper.''
``Business has pretty much ground to a halt in Southeast Asia,'' said B. Patrick Smith, vice president of marketing and sales for auxiliary machinery firm Maguire Products Inc. of Media, Pa.
Smith said Indonesia and Thailand have been hit the hardest, and that there is little demand in Malaysia. Still, the news is not all bad for Maguire in Asia. The company recently began doing business in China, Smith said, and he expects to continue to see substantial demand there.
Plastics News editorial intern Rachel Wenger contributed to this story.