Fresh statistics from the Society of the Plastics Industry Inc. confirm what people in equipment sales know all too well - U.S. shipments for most types of plastics machinery tanked in the second half of 2000.
As inventories of unsold machines piled up, several machinery manufacturers have responded by laying off workers. The layoffs appear to be fairly widespread but shallow, with most companies trimming their work forces by about 5 percent. Other machinery firms have furloughed employees, letting them off for a week or two as they collect unemployment.
What does the future hold? Three machinery analysts are predicting a saucer-shaped recovery, with capital equipment sales slowly coming back to life into 2002.
``I wouldn't expect another big round of layoffs here,'' said Walter Liptak, an analyst at McDonald & Co. in Chicago. ``The economy's going to be getting better, not worse.''
According to the SPI Committee on Equipment Statistics, U.S. shipments of plastics equipment totaled $1.86 billion in 2000. Coming on the heels of several solid years, 2000 started out strong. But in the third quarter, overall machinery shipments plunged 14 percent, to $434.1 million, down from $505 million in the second quarter.
Machinery executives said the decline began, ironically, right after the June NPE 2000 show that drew record crowds to Chicago. Plastics processors, squeezed by still-high resin prices and slowing orders, have held off buying machinery. With capacity utilization at plastics processing factories down about 75 percent, processors have plenty of machines already sitting idle.
The weakness has continued into early 2001. Although SPI did not release first-quarter 2001 U.S. numbers in time for this story, the largest U.S. machinery maker, Milacron Inc., has been saying the North American market for plastics machinery plunged 50-60 percent in the quarter compared with the same period a year ago - a downturn not seen since the recession of 1991.
``It looked good for so long that it gives you a sense of hardship as soon as there's a twitch down,'' said Debbie Douglas, managing director of Douglas Group, a private investment banking firm in St. Louis that represents plastic company owners in the sale or purchase of businesses.
Douglas sees machinery sales in a holding pattern. ``It's been a rough six months, and people are cautious about capital spending,'' she said.
Chicago-based analyst Alexander Paris Sr. said manufacturers still are working down their inventories.
``I don't think there's going to be an official recession, but I've been saying you might not like the recovery. It's going to be a long, flat-line growth rate.'' But Paris, of Barrington Research, predicts a strong 2002 for capital equipment spending.
Meanwhile, machinery companies have adjusted their work forces to meet the slow market.
Early this year, Milacron cut 115 jobs from plastics machinery plants in Ohio and Michigan. Milacron laid off another 100 workers at its headquarters plastics equipment operation in Batavia, Ohio, in mid-May. The company also has used staggered furloughs to cut its output.
Early in the year, Van Dorn Demag Corp. had a layoff of about 30 people, said William G. Pryor, president and chief executive officer. The Strongsville, Ohio, firm shut down its plants for one week in April and again Memorial Day week.
Another Ohio-based company, HPM Corp. in Mount Gilead, has slashed its work force while it tries to keep afloat and find a new buyer.
Farrel Corp. in Ansonia, Conn., has laid off 40 people, or about 20 percent of its U.S. jobs, since Jan 1.
Davis-Standard Corp. has cut its work force by about 5 percent, according to sources familiar with the Pawcatuck, Conn., firm. Executives and union officials did not return telephone calls.
Josef Marek, president of extruder maker American Maplan Corp., said Maplan plans to cut 30 in McPherson, Kan., this summer, down from 130. The company will outsource some work to a new machining plant it is establishing in the southern United States.
``When I'm talking to my customers, they're running only 65-70 percent of capacity,'' he said.
SPI predicted that machinery sales will remain flat in 2001 but should pick up next year. By the end of 2002, shipments could top $550 million a quarter, according to SPI.