A new study of the North American injection molding industry is suggesting that domestic manufacturers have been slow to adapt to the realities of the global market.
Companies have been too slow to establish overseas ventures and too reluctant to invest in automation and other technologies to make themselves more competitive, according to Globalization: The Implications for the North American Injection Molding Business, a report from Plastics Custom Research Services in Advance, N.C.
``We still have that residual fortress-America mentality and it's deadly as we get further into the global economy,'' said Peter Mooney, author of the report and president of consulting firm PCRS. ``For the last 15-20 years, when it was clear that the world was globalizing, the typical plastics processor was slow to get off the mark.''
Mooney said his interviews included more than 100 molding companies, and he came away surprised that more of them were not pursuing overseas ventures, either through alliances or setting up their own subsidiaries.
The report ranked the most common strategies in response to globalization, with sourcing molds offshore topping the list, followed by focusing on niche markets and diversifying markets. The report discusses approaches taken by each of the companies interviewed.
Building plants overseas or establishing alliances with foreign molders ranked fourth and fifth, respectively. Together, those two strategies were cited by about 25 percent of the firms interviewed.
Automation ranked sixth, getting much less attention than Mooney said he thought it would before he began the research. Nine of the officials he interviewed cited it as a strategy to address globalization.
``It is surprising in a way that automation doesn't figure more prominently in the responses of the injection molding officials,'' the report said.
The PCRS report presented figures from robot maker Wittmann Inc. of Torrington, Conn., which said that Asia and Europe are automating more quickly than North America, at least when measuring the number of robots sold against the number of injection molding machines that were sold in 2000.
Asia topped the list with 47 percent automation, followed by Europe with 38 percent and North America with 28 percent.
``This automation capability gap must close if regional injection molders are to compete successfully,'' the report said.
Other data in the report did point to what Mooney called positive trends in automation in North America: the number of employees per press dropped from 91/2 in 1995 to 8 in 2003.
The report touched on larger global economic issues, noting that the U.S. plastics industry has faced some disadvantages when measured against the rest of the world, such as high natural gas prices.
And Mooney said the North American industry faces problems with counterfeiting in China and other countries.
The report notes that China is a particular sore spot with the U.S. industry.
Many U.S. business lobbying groups, including the Washington-based Society of the Plastics Industry Inc., argue that China manipulates its currency in violation of World Trade Organization rules, in effect keeping its currency artificially low and making Chinese exports cheaper. SPI and others argue that China should go to a market-based currency.
Mooney - who earned his Ph.D. in economics from the University of North Carolina and worked as an economist for the Irish government in the 1970s - said every country tries to control the value of its currency to some degree: ``There is no currency in the world that doesn't have geopolitical strings to move it up and down.''
He said he was afraid that if China floated its currency more freely on world markets, the country's ``infant'' banking system would collapse under the weight of bad debt, which would fuel a larger economic crisis.
The report argued that every country has advantages and disadvantages in the global economy. Economic theory aside, the report contends that part of the reason the U.S. plastics industry has seen its trade picture worsen is because companies have not made enough moves offshore.
``U.S. suppliers of resins, plastic products, molds and machinery may have been guilty of complacency, taking their domestic markets for granted and not promoting their wares aggressively enough on foreign markets,'' the report said.
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Top 10 globalization strategies
Source molds offshore
Focus on nich markets
Establish plants overseas
Establish overseas alliances
Decrease labor component
Focus on large parts
Increase upstream/downstream value-adding capabilities
Source: Plastic Custom Research Services