These are unsettling times if your job is selling, or building, plastics machinery to customers in the United States.
It's ugly out there.
After a spate of equipment buying in the go-go period of the middle and late 1990s, demand began to crumble in late 2000. In some machinery segments, the U.S. market shrank to about half the size of the glory days. What happened? Machinery is being buffeted by an unusual number of factors: molding jobs are moving to China, machinery auctions continue to plague the new injection press market and customers are delaying machine purchases.
We can add some more macroeconomic issues that affect plastics machinery and the broad U.S. manufacturing economy. First, the painful bear market for stocks. Investors began wavering back when the tech bubble burst. Then corporate scandals erupted. Now worries about corporate profits are keeping stocks down.
While it has come down a bit this year, the U.S. dollar remains strong, and that hurts domestic manufacturers facing harder times with a flow of low-priced imported goods.
Throw in terrorism on U.S. soil, a new, scary wrinkle. It will be years before psychologists figure out the impact of Sept. 11, but the tragedy did prove that the future can change in an instant. The much-vaunted crystal ball of forecasting now comes with an asterisk.
Many machinery executives are predicting the same thing: a flat U.S. market that could remain unexciting next year. One recent interview illustrated these uncertain times. In early November, Jerry Johnson, vice president of sales, outlined how JSW Plastics Machinery Inc., facing a rough U.S. market, has reigned in exhibiting at trade shows and the once-common practice of putting a press in a customer's plant for a free trial. A few days later, Johnson himself was facing a layoff, as JSW announced it was closing its Elk Grove Village, Ill., technical center and cutting four jobs.
“It's basically the economy that's done it to us,” Johnson said.
The economy has “done it” to lots of plastics machinery employees the past two years. Manufacturers have laid off hundreds of plant workers, cut production and slashed inventories of unsold machines. Machinery makers, just like domestic plastics processors, have worked hard to get lean.
So now we move into 2003, an NPE year. U.S. manufacturing probably will get some investment tax relief, after the November elections handed majority status in both chambers of Congress to President Bush's Republicans. We support legislation that will encourage owners of U.S. factories to modernize, and we hope it happens early in the year.
The manufacturing recession exposed the sharp teeth of global competition. Now U.S. plastics factories are looking at more automation and higher technology, but too many are still trying to scrape together enough money to buy a new screw. They need some help.
Read the financial press. It's clear a major danger facing the economy is reluctance of U.S. businesses to invest in capital goods such as computer systems and equipment. That's also a major theme repeated in our machinery stories. Firms are waiting to see what happens.
Consumer spending has held up well. Now, as the economy stabilizes, it's time for business to make it happen.
