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November 1, 2001

13 Min Read
Industry Watch

Automotive OEM puts on the brakes 

FOR HUGE OEMS like Ford Motor Co. that run on lean inventories and demand speedy deliveries, JIT stands for "just in time," but following the Sept. 11 attacks "jammed in traffic" would have been more appropriate. 

With all air freight parked in hangars and truck freight languishing at border crossings, companies like Ford, which operate with very little inventory on hand, were forced to shut down assembly facilities three days after the attacks, and plants in Michigan, Ohio, Georgia, and elsewhere remained closed until Sept. 24. The shockwaves from this massive production interruption continue to reverberate throughout the automotive industry, extending to molders that supply parts. 

The immediate impact: On Sept. 14 Ford announced that its third quarter, North American production plans would be downsized to 810,000 to 820,000 vehicles. This marked a reduction of 110,000 to 120,000 vehicles, and Tier One suppliers like Visteon Corp. were already feeling the effects. 

Four days after Ford's announcement, Visteon released revised Q3 earnings that showed a projected loss of $60 million to $70 million after taxes. According to a company spokesperson, about 2000 temporary layoffs soon followed. 

"Basically at this point, we're constantly monitoring customer volumes, and we'll take further actions if necessary, but right now we're looking at temporary layoffs," spokesperson Liane Smyth says. 

In a press release, Ford cited "parts shortages stemming from freight transportation issues" as its rationale for the shutdowns, but Visteon countered these charges in its own release, saying, "despite difficulties in border crossings and air freight, it has been able to meet all of its production commitments to Ford." The levels of truth in those contradictory statements could be debated, but the fact that border security was heightened, and Ford's production fell precipitously, isn't open for argument. 

Operating at Alert Level One, which is defined as "sustained intensive anti-terrorism operations" by the U.S. Customs Service, traffic at American borders immediately after the attacks came to a screeching halt. 

According to a Customs spokesperson, busier ports like the Ambassador Bridge, which links Canada to the U.S. by way of Detroit and sees 6000 commercial vehicles a day, required the addition of National Guard troops to get wait times back to near normal. The waits have abated some, but not before the damage to production schedules was done. 

For the week ending Sept. 1, Ford reported that 73,438 vehicles were produced among facilities in the U.S., Mexico, and Canada. For the week ending Sept. 15, after its inventory problems, that number had fallen to 61,497. Canada produced no cars that week and only 4942 trucks, compared to total vehicle production of 8970 for the week ending Sept. 8. 

In a press release, Visteon President and CEO Michael Johnston could only admit the dramatic effect this manufacturing shortfall had. 

"We are taking every action to minimize the impact of this latest cut," Johnston said, "but [we] cannot accommodate this level of disruption in this time frame."

Ford Motor Co. September 2001 U.S. sales

 

Sept.
2001 

Sept.
2000 

Percent
change 

2001
YTD 

2000
YTD 

Percent
change 

Sales by brand, units

Ford

248,331

281,095

-11.7

2,459,105

2,745,442

-10.0

Mercury

24,689

29,380

-16.0

232,539

296,559

-21.2

Lincoln

9418

16,516

-43.0

121,428

150,998

-19.2

Jaguar

3020

3007

.4

29,844

32,838

-8.7

Volvo

7714

7932

-2.7

96,869

93,963

3.5

Land Rover

2043

2485

-17.8

18,272

19,941

-8.0

Total Sales

Cars

109,142

127,839

-14.6

1,141,518

1,359,714

-15.7

Trucks

186,073

212,576

-12.5

1,816,539

1,967,045

-7.2

Ford vehicles

295,215

340,415

-13.3

2,958,057

3,326,759

-10.7

Weakening sales numbers and a massive manufacturing disruption following Sept. 11 have impacted Ford and its entire supply chain. The nation's No. 2 automaker responded to the adverse conditions with a production cut of 110,000 to 120,000 vehicles.
Source: Ford Motor Co.



Aerospace molders feel the fallout 

WHEN THE FAA grounded all commercial flights after the events of Sept. 11, the subsequent fallout may have grounded many molders who supply the aviation and aerospace industry as well. 

One week after four jetliners became weapons of mass destruction instead of sources of mass transit, Boeing, the largest domestic producer of commercial aircraft, announced deep and prolonged cutbacks in its production schedule. 

The company's Commercial Airplanes unit called for layoffs of between 20,000 and 30,000 people to coincide with a 20 percent manufacturing reduction. For 2001, Boeing had initially projected delivery of 538 aircraft, but it has since pared that number to 500, pending airline companies' ability or desire to scrape together capital to purchase ordered planes. For Q3 2001, Boeing delivered 120 commercial jets, 19 less than it anticipated. 

The outlook for 2002 is bleaker with preattack predictions of 510 to 520 aircraft being reduced to the low 400s, and Boeing said 2003 might not provide a respite, either. That year's initial forecast indicates continued contraction although Boeing said that those numbers could be revised. 

Molders that supply Boeing or the aviation industry in general now wait for the dust to settle on a dramatically different market landscape. 

One such molder, Vaupell Industrial Plastics, operates a molding facility in Seattle, WA. While it does some medical and electronics molding, its proximity to Boeing's Renton and Everett, WA facilities led the company to do business with the Boeing and other aerospace companies in the area. Vaupell's President and CEO, Joseph Jahn, now waits with everyone else to see if or when the airline industry will emerge from the rubble. 

"Unfortunately, we know nothing more than what has been reported in the papers," Jahn said, "and we do not expect to hear anything from Boeing and our other aerospace customers in the immediate future. While the airlines have announced initial layoff numbers, the impact to the production lines and planned build rates has not been determined."

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License to weld 

WHEN LUCENT Technologies spun off Avaya Inc. one unexpected beneficiary was the UMass Lowell Plastics Engineering Dept. Per the terms of its split from Lucent, Avaya acquired the rights to a newly secured patent for kinetic welding, a technology that UMass had helped Lucent research and market. Avaya didn't want to handle the licensing of the technology, but UMass Director for Plastics Innovation Stephen McCarthy knew someone who did. 

"[Avaya] didn't have an interest in licensing the technology," McCarthy says, "so we suggested that they donate it to us, and we could license it." 

Avaya agreed and dropped the gift of a 17-year patent with an estimated lifetime value of $23 million in UMass' lap. The Plastics Engineering Dept. continues to do research on the process and in the meantime is beginning to turn a healthy profit. McCarthy says that approximately 50 companies have already taken a license on the technology, including firms like Mattel and 3M. 

The process uses friction at the interface of the pin and the boss to weld parts together (see May 1999 IMM, p. 97), and McCarthy says it creates stronger bonds and can weld larger parts than ultrasonic welding. 

"[Kinetic welding] can be suited . . . [for] medical devices and toys all the way up to automotive parts," McCarthy says. 

The school's work isn't done as it hones the process to add value to the technology. "We're looking to optimize the geometry for each specific plastic," McCarthy says. "We're basically looking to increase the number of plastics that it's applicable for and measuring the strength."

MPM, Apax deal axed 

IN A DECISION described as mutual by the participating parties, Apax Partners & Co. Ltd. and Siemens AG have terminated the proposed sales of Mannesmann Plastics Machinery AG (MPM). Months of declining sales and a downward turning market dulled the luster of the world's largest plastics machinery conglomerate, prompting Apax to reportedly ask Siemens to lower its asking price. Siemens claims it wasn't the price that killed the deal and points at Apax's inability to finance the purchase. 

In an interview with the French newspaper La Tribune, Siemens CEO Heinrich von Pierer said his company is in no hurry to find another buyer and that it will not lower the price to spur more offers. Back in July, Apax sold Netstal Machinery, one of MPM's brands, to Swiss businessman Christoph Blocher, but since that deal was contingent on Apax acquiring MPM from Siemens, it has also been cancelled. In addition to Netstal, MPM includes machinery makers Krauss-Maffei, Van Dorn Demag, Demag Ergotech, Berstorff, and Billion. 

Bob Spreat, marketing director for Van Dorn Demag, says the uncertainty at the top of Van Dorn's corporate structure isn't something the machinery manufacturer can worry about. 

"Life is uncertainty," Spreat says. "No matter who owns us, we've got a lot of things that we need to accomplish, and we've got a lot of products under development. Our focus is what's going on is going on, and we can't really affect that."

Machinery sales shrink 

RECENTLY RELEASED second quarter data from the Society of the Plastics Industry's Committee on Equipment Statistics (CES) reflect the declining market many machine manufacturers have been experiencing throughout 2001. 

Units shipped fell 41 percent from Q2 2000 to Q2 2001, according to the report, and shipment dollar values marked a similar decline, dropping 46 percent for Q2 2001 compared to Q2 2000. Q2 2000 statistics showed 1711 unit shipments with a value of $342 million. 


Nebraska molder cultivates new plant in spite of market downturn 

MANY BUSINESSES have been impacted by the uncertainty spawned from a contracting economy, but a Nebraska molder/moldmaker has spurned industry-wide moves toward downsizing and layoffs by finishing an expansion and hiring new employees. 

Garner Industries (Lincoln, NE) completed a new 78,000-sq-ft facility that now houses its once-separate molding and tooling operations under one roof. Operational in August, the new plant employs 120, including three new toolmakers hired since opening. The company operates 15 molding machines and a variety of machining equipment. 

Garner initially began in 1953 as a mold and die builder, but its purchase of custom molder Nebraska Mold in 1992 added molding to its resumé. A broad base of customers and a specialized molding niche have proven to be the key ingredients to the Midwest manufacturer's longevity. 

"Our specialty is small, tight-tolerance, high-cosmetic parts," Sales Manager John Kunkle explains. Garner produces these parts for a wide spectrum of end markets, which reduces overexposure to any one market, and insulates Garner from the industry-specific downturns that can paralyze more focused manufacturers. 

Although its heartland location in Nebraska does isolate the company from many of its customers, concurrent engineering allows clients to be no more than a mouse click away. 

"Most of our customers are out of state," Kunkle says, "but with the exchange of files being as convenient as it is now, it really isn't much of an issue." 

Having molding in-house also allows Garner to give parts a test run and send the prototypes to its far-flung customers for inspection. 

"Because of the fact that we have a molding facility, [customers] are able to see completed products prior to [tool] shipping, so they don't have to bring in a tool, find out a dimension is wrong, and send it back."

Omnexus launches multisupplier equipment site 

TO MARK ITS FIRST anniversary, Omnexus recently announced another first. In addition to its neutral resin purchasing site, it has added a multiple supplier site devoted to plastics processing equipment called Omnexus Equipment eMarketplace. It will allow customers to compare technical information and request quotes on products from Engel, Demag Ergotech, and Van Dorn Demag. 

What the site will not do is allow users to buy or sell machines. "The best role for Internet tools in this area is research," says Michael Thaler, vp, Omnexus, "similar to the car-buying process. Buyers can narrow down their choices in less time, while sellers will benefit by dealing with an educated and interested potential customer. Final sales can then be made in person with existing sales reps or manufacturer's reps." 

Van Dorn Demag is the most recent OEM to join the Omnexus website. Bill Carteaux, vp of sales and marketing for Van Dorn, believes the site will save customers time while offering research and quotation capabilities 24/7. "This supports our commitment to serving customers with sound Web-based technologies," he says. 

Powering the search, comparison, and quotation capabilities on the new site is software developed by BigMachines (Foster City, CA), a unique concern devoted to e-business for industrial machinery. According to Eugene Chiu, vp, BigMachines, searches on the site can include machine parameters such as clamp force and shot size, or they can be done using keywords or supplier names. Brochures can also be downloaded from the website, along with CAD/CAM drawings of the equipment. In addition, RFQs can be submitted to match specific search requirements.

Nylon parts study 

A NEW STUDY TO TEST the moisture equilibrium of nylon parts is being prepared by Omnimark Instrument. The goal of the study is to determine the temperature at which parts reach equilibrium and how drying affects the results. Molders willing to participate, or those with questions, should contact Gary Beebe at Omnimark: (480) 784-2200. 


Flextronics takes on Xerox's manufacturing

FOR $220 MILLION, Flextronics has secured a five-year manufacturing contract with Xerox Corp. The deal also includes the acquisition of four Xerox production plants, including the plants' inventory, property, and equipment. It's presumed that Flextronics will take on the approximately 3650 employees of these operations as well. 

The facilities, located in Toronto, Brazil, Mexico, and Malaysia, represent more than $1 billion in annual manufacturing costs, which comprises 50 percent of Xerox's overall manufacturing operations. Of those four, only the Mexican plant in Aguascalientes has injection molding capability. Flextronics is also negotiating a purchase agreement for Xerox's plant in the Netherlands, which also has molding capabilities. 

Xerox cited cost reductions, improved productivity, and increased competitiveness as reasons for relinquishing the bulk of its production, while Flextronics seized the opportunity to extend its $12 billion electronics manufacturing empire to include more than 70,000 employees in 27 countries.

Husky creates new sales, service headquarters 

HUSKY HAS SHIFTED all North American sales and service operations to its Detroit Technical Center (DTC). 

The DTC initially opened in 1999 as a support center for the large number of automotive molders in the Detroit area, but Husky has announced that the new center will offer a variety of services to North American molders in all markets. 

Hot runner design and development for large parts will be among the new services to be offered. Others services include hot runner and mold refurbishing, large-tonnage stack molding, MuCell systems, and, in the future, inline compounding. 

Husky says the 100,000-sq-ft facility's high bay machine hall, overhead crane capacity, and truck and rail access make it ideally suited for machine service.

DeRoyal signs molding deal with Murray 

A 15-YEAR RELATIONSHIP between DeRoyal Industrial Molding and Murray Inc. continues to grow after DeRoyal's plastics division announced a new multimillion-dollar manufacturing contract with the lawn and garden market OEM. 

Under terms of the agreement, DeRoyal will lease from Murray a 50,000-sq-ft manufacturing facility and 12 machines ranging from 66 to 700 tons. The facility is located at Murray's Lawrenceburg, TN campus and marks the first time DeRoyal has located a manufacturing facility on a customer's grounds. DeRoyal will hire and train 20 new employees to staff the plant that will produce components for lawnmowers and snowblowers. 

DeRoyal says the contract will save Murray money while generating $4 million in product for DeRoyal. 

Initially the facility will be captive to Murray, but eventually DeRoyal says it will serve other customers in a variety of end markets. 

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