In my 30 years of active involvement in the plastics industry, I have seen many changes, but none so severe as the rapid transfer of existing work from U.S. shores to Asia.
With utilization rates at 60-65 percent and an installed base of close to 96,000 machines, it means we have 35,000 injection molding machines installed, plumbed, wired, wired and ready for work. With an average machine capable of doing $250,000-$500,000 annually, this means we would need billions of dollars in new work just to fill up this existing capacity, let alone create demand for new equipment.
It's not going to happen.
The only way to get utilization up is to get the installed base down. The only way to accomplish this is through attrition. When the field population gets down to 65,000-70,000 units we should have proper utilization rates, which once again will create demand for new machines.
As the pre-1990 machines go to auction and go unsold, they sit in dealers' warehouses or go to the scrap heap. This will continue to be the case. There are simply too many front doors in America with molding machines behind them.
Injection molding is no longer a stand-alone process, but simply a component in the supply chain. Actually, when a part can be molded and it is complete, as a stand-alone part, we are as competitive as anyone anywhere in the world. Optimum cycles have been reached worldwide, current technology is available everywhere, building rents and utilities in China are similar to U.S. rates, so what is the attraction? You guessed it, labor. If labor is involved on a large-scale project it is going to Asia or India.
The assembly location determines the component manufacturing location.
This is the reality of net shape manufacturing in 2003.
Understanding what is going on will help us all better deal with how to survive in the coming period of transition in our industry. Plant closings are occurring weekly and my experience tells me it will be five years before the plastics processing industry settles into a plateau where once again we can enjoy slow, steady progress by working with what's available at the time. There is no answer to this dilemma, nor is there a magic bullet to bring work back to the United States.
For those of us still standing, a clear understanding of why this is happening can help us proceed in the positive direction needed to improve the bottom line, not the top line.
Robert S. Risbridger
Plastics One Inc.