(Feb. 18, 2008) — Financial publications, including Plastics News, have documented the steady slide of the U.S. dollar against the euro. For European plastics machinery manufacturers, it's been bad news. As the euro climbs, plastics machinery made in euro-zone countries like Germany and Austria becomes more expensive in the United States.
On the other hand, the weak dollar makes American-made goods cheaper around the world, fueling stronger U.S. exports. And now another positive sign is emerging: The weak greenback will lure manufacturing investment from overseas companies.
Plastics News has reported on two recent developments. German blow molder KVK Koetke GmbH is spending $3 million to build a factory in New Castle, Ind., to make parts for the automotive and medical markets. Dutch composite panel maker Plastisol BV will build its first U.S. factory, in Groton, N.Y., a $1.9 million investment to make panels for emergency vehicles such as fire trucks and police vans. Officials of both companies specifically cited the currency exchange rate as playing a role in their decision.
I learned about this coming trend at the K 2007 show in Dusseldorf, Germany, back in October. Jim Moran, vice president of sales for Engel North America, talked about some of his discussions with multinational European companies.
“They have commented on the strength of the United States, not just as a market, but as a production site where they want to build and grow and expand their business, because of the euro,” Moran said. “They can't export anymore from Europe to the Western hemisphere. And in this case, a strengthening of their position in manufacturing in the United States is good, not only for the U.S. market, but for the U.S. economy.”
The dollar finished 2007 nearly 10 percent weaker vs. the euro. One day in late November, 1 euro equaled $1.49. That is causing some pain for German and other European machinery makers.
During the K show, most European players basked in strong domestic economies. Some even reported shortages of key parts like castings and motors. Their news releases crowed about developments in red-hot markets like China, India and Russia. They weren't even fazed when oil hit $95 a barrel during the show.
Currency and the U.S. market were the only angst-producing topics. European suppliers said the unrelenting fall of the dollar has forced them to raise prices in the United States, or accept a lower profit — and many said they have done both.
Of course, the U.S. market is pretty lousy these days, especially for injection molding machines. Injection press shipments were around 3,000 in 2007, about half the level of the late 1990s. But the U.S. market is still very important — according to the VDMA engineering trade association, it's the largest export country for German plastics and rubber equipment.
China may be thrilling. But the Europeans view the U.S. as a solid, stable market in which to sell their capital machinery and, increasingly, to set up production.
Bill Bregar is a Plastics News senior reporter in Akron, Ohio.