AKRON, OHIO (Jan. 13, 10:30 a.m. EST) — Lingering economic uncertainty, made more so by a potential war with Iraq and divisive foreign trade issues, is a mirror to processors' outlook heading into the new year, as the guarded optimism of 2002 slipped slightly for 2003 predictions.
A recent Plastics News fax poll revealed 54.6 percent of respondents said they have very favorable or somewhat favorable attitudes toward the economy in 2003. That's a drop-off of 5.4 percentage points when compared with answers to those same questions last year.
The number of processors expecting a very favorable economy fell to 6.9 percent from last year's 9.7 percent, while the number expecting a somewhat favorable outcome dipped to 47.7 percent from 2002's 50.3 percent.
Taking a historical glance, this year's 6.9 percent very favorable rate marks the lowest in the poll's 10-year history. A 28.8 percent very favorable rate in 2000 is the highest. The PN fax poll was started in 1994.
Turning to issues most on the minds of processors for 2003, customer growth or cutbacks again topped the list of external factors expected to affect processors this year, with a persuasive 81.4 percent of respondents citing that topic. That figure, however, represents a 0.2 point drop from 2002. Raw materials pricing was the second most-pressing issue at 54.3 percent, up from 46.1 percent last year. Interest rates were third with 25.7 percent, down from 35.5 percent in 2002.
While just 24.8 percent of processors named trade/NAFTA/GATT issues among external factors, they contributed ardent responses on the issue of fair trade, particularly concerning China. Respondents used the poll to level all manner of opinions on the foreign trade matter:
“American business selling out U.S.A.”
“ 'Free trade' is hurting American jobs and security, we should endorse 'fair trade.' ”
“The apparent lack of wisdom in our government in everything being made in China, which continually puts businesses and Americans out of work.”
“As long as our government keeps letting China kill us, we will never do any better.”
Jim Vincent, chief executive officer of Henderson, Ky., injection molder Vincent Industrial Plastics Inc., wrote, “Ross Perot was right about the giant sucking sound, except he had the wrong country — it's coming from China.”
Possible war with Iraq presented a big question mark for many processors.
“War — short term, negative. Long term, unknown,” wrote Ken Wessler, president of Dunkirk, Ohio, rotomolder Diamond Plastics Inc.
Alan Johnson, president and chief executive officer of injection molder LDM Technologies Inc. of Auburn Hills, Mich., agreed, “The war with Iraq could have an impact if prolonged.”
However, Lance Hampel, president of Hampel Corp., a Germantown, Wis., thermoformer, suggested a war could be positive for the industry. He cited previous global conflicts in which “industry cranked up for the war effort.”
“Maybe times are really different, but one would think [a war] would be an artificial spur to the economy,” he said.
The X factors of the war on terrorism and a persistent recession haven't completely sapped processors of economic hopefulness. More than half of respondents — 51.6 percent — said they expect their firms to be more profitable in 2003. That number rises from 49 percent last year.
Jim Pugh, sales manager for Tom Smith Industries Inc., said a good customer base and a good work crew leave him with high hopes for 2003 profit.
“We are dedicated to influencing change, to increasing our efficiency,” he said. “2000 was probably our monster cost-reduction year, but we've been holding our own.”
The Clayton, Ohio, injection molder, which has in-house tooling, has seen strong tooling sales, Pugh added. “The key is, we've diversified,” he said. “Even if the automotive market drops, we're in good shape.”
At Vinylex Corp., President and Chief Executive Officer John Shaulis sees new products as the path to profit. Despite tremendous pressure on existing business at the Knoxville, Tenn., extruder, Shaulis said the new business is expected to start at a higher margin.
“We see quite a bit of activity in terms of new products,” he said. “That leaves us cautiously optimistic for the new year.”
Processors indicated, at 42.5 percent, that the primary reason they plan to buy machinery in 2003 is to improve quality or productivity. That figure fell from 44.1 percent in 2002. Thirty-one percent have no plans to purchase machinery this year, which is two percentage points higher than last year.
In terms of capital spending this year, 37.3 percent of respondents said they would spend about the same amount as last year; 33.2 percent said they would spend more on equipment this year.
A large number of companies polled have dealt with the current U.S. recession by staff and spending reductions. Lean manufacturing is the order of the day.
Still, 58.5 percent of processors expect staffing levels in 2003 to stay about the same, while 28.1 percent expect to increase staff.
Other noted attempts to assuage the pain of a stammering economy included “venturing into new markets,” “controlled spending” and “ no salaries for officers, no raises or bonuses for employees.”
Some firms, like thermoformer Formall Inc. of Knoxville, Tenn., are attempting to fight the recession through broadening their market base by expanding processing capabilities.
“We look at different types of equipment, going outside of what we have in the past,” said President Bryan Yarnell. “We face spots of optimism, and downturns in other areas leave us with a mixed bag.”
The tenor of the poll comments indicates many a processor intends to continue fighting the good fight.
Mark Vanderwoude, vice president of Fresno, Calif., extruder Allwire Inc., wrote, “We have weathered the storm while competitors with large general and administrative expenses have closed their doors.”
Plastics News faxed the unscientific poll to about 1,541 processors nationwide, and received responses from 217, or 14 percent. That number of responses is the highest since 2000's 337 respondents. Processors were chosen from Plastics News' rankings of injection and blow molders; film and sheet manufacturers; pipe, profile and tubing extruders; thermoformers; and rotational molders.