Naples, Fla. — The U.S. manufacturing sector is doing well overall, but it could be facing some challenges in the near future.
That was the outlook presented by Laurie Harbour at the 2016 Plastics News Executive Forum, March 28-29 in Naples. Harbour is president and CEO of the Harbour Results Inc. consulting firm in Southfield, Mich.
“Manufacturing has been doing well coming out of the recession, but it's now flattened out,” she said.
However, a lot can be going on even in a market with 1 to 2 percent growth.
“We've seen more launch activity than ever in automotive, and there are a lot of new products coming out in aerospace,” Harbour said. “But when you introduce new products into a flat market, they're fighting for market share.”
On the political front, the Trump administration's possible renegotiation of NAFTA may impact the flow of business, since the flow of material from the U.S. to Mexico and Canada totals billions of dollars.
“If the administration puts a barrier on U.S.-Mexico trade, there could be growth in the Canadian manufacturing space,” Harbour said.
Potential reductions in U.S. corporate tax rates also could impact regional manufacturing, as could the strength of the U.S. dollar, which affects manufacturers' ability to export out of the United States.
Although China's manufacturing sector has slowed a bit recently, a trade war with the U.S. “could change things dramatically,” Harbour said. “We have to be concerned about the fallout” of a trade war, she added.
Manufacturing gains have come from productivity, which has increased 250 percent since 1980. Companies now are focused on growing market share and reducing development and manufacturing costs.
Within manufacturing, plastics “is strong, but not without headwinds,” Harbour said. “Plastic manufacturing shipments are leveling out, but there's significant revenue growth. We're most optimistic [for plastics] in auto and medical.”
She added that resin prices have dropped since 2012, as oil prices have dropped dramatically. “Those are good stories for plastics processors,” Harbour said.
But workforce challenges in plastics have increased, because of aging employees and a shortage of skilled labor. This has led plastics manufacturers to move more into automation, which can create large capital expenses. Sales processes in the market also have room for improvement through better organization.
In the tooling sector, Harbour said that sentiment is at a two-year high, mainly because of record launch activity in the auto market, which makes up about 70 percent of tooling demand.
“Vehicle launches for 2018 and 2019 are driving tooling now,” she added. “We're seeing more than double the number of new launches than we saw before the recession.”
Increased truck sales in particular are pushing the need for more tooling, as the market continues to shift away from cars because of low fuel prices. SUVs are growing in North America and around the world, and could be more than 40 percent of the total vehicle market by 2020.
That's good news for toolmakers, Harbour said, since SUVs require 10 to 20 percent more tools per vehicle than cars do. New truck launches also help toolmakers, since those vehicles use 20 to 40 percent more tools than cars.
As a result of this abundance of vehicle launches, capacity is tight at North American tool shops, leading to some work being outsourced to offshore locations. But at the same time, Harbour said that auto tooling is expected “to come back to Earth” starting in 2019, leaving toolmakers hesitant to invest in new capacity.
Overall, Harbour concluded that markets for plastics and toolmaking are expected to be strong for the next 2 to 3 years. But she also added that planning for the future “is critical.”
“Companies need to develop robust sales processes to grow their business,” she said. “And they need to go after operational efficiencies.”