Only days after the Purchasing Manager's Index (PMI)âa leading indicator of U.S. manufacturing activityâposted its first positive growth mark after 18 consecutive months of contraction, President Bush announced broad steel tariffs that some feel could extinguish the initial sparks of a manufacturing recovery.
February's PMI reading from the Institute for Supply Management was 54.7 after posting a 49.9 in January. Any reading above 50 is understood to indicate growth in the manufacturing sector. Bush's March 5 decision to impose a system of scaled tariffs over the next three years on widely used lines drew negative reaction from manufacturers and steel importers in the states as well as foreign trading partners abroad.
The good news for molders and moldmakers is that imports classified as tool steels are exempt from the action. The bad news is that the system used to classify the various forms of steel introduces ambiguities that could place 30 percent tariffs on many steels that are actually imported for tooling purposes.
In December (see "Steel Importers Face Federal Scrutiny," December 2001 IMM, pp. 12-13), IMM spoke with Tom Schade, vp and general manager of International Mold Steel, about what at the time were only proposed actions. On March 20, many of those proposals became the law for the next three years, and Schade struggles to see positives.
"The last couple of months we've seen business starting to come back," Schade says, "and it's a shame that Bush decided to tax the recovery out of it."
Bush describes the steel industry as a vital piece of the American economy, but Schade says this view ignores the larger steel-consuming portion of American industry, and it could have a negative impact on manufacturing.
"[Bush] turns around saying, 'OK, here's a 30 percent tax on manufacturing in this country,'" Schade says, "which is what this amounts to on the products that are taking a high tariff because immediately the domestics will go up to match those high prices." The direct impact on molders and moldmakers is difficult to discern, but one scenario could place a 30 percent tariff on a steel widely used in tooling. European P-20, if classified as an alloy, would be taxed 30 percent, allowing domestic producers to raise their prices and leave many U.S. moldmakers with few options. Schade reviews the possible consequences.
"Short term, if the alloy grade of a mold steel like P-20 takes a 30 percent hit on tariffs," Schade says, "you have an immediate cost increase to the domestic mold shop, which is going to put them in a less competitive position. Molders are still faced with their own competitive situation, so they are going to have to try to control tooling costs by going wherever they can get the molds the cheapest."
While it's difficult to say with any authority, Schade estimates that P-20 is the most commonly used grade of mold steel in the U.S., and its chances of getting under the tariff's radar are slim.
"The way I read this," Schade explains, "is that on March 20, the price of P-20 goes up, and [P-20] is, in percent tons, the highest utilized grade of mold steel in this country."
For Schade, and in his mind potentially many others, this action couldn't have come at a worse time.
"I don't see that we've accomplished anything other than throwing a wet blanket over the just-started economy," Schade says.
Thin to win: Molders awarded for lean operations
Every year for the last 14 years, Utah State University in Logan, UT has become the unlikely center of the lean manufacturing universe. Since 1988, the university's College of Business has awarded the Shingo Prize for Excellence in Manufacturing in honor of the late Dr. Shigeo Shingo.
Shingo trained workers for years and wrote and spoke extensively about the Toyota Production System and its lean tenets. Six of Shingo's books were published in the U.S. and gained wide acceptance in industrial engineering circles, helping to lay the groundwork for a new vision of manufacturing. It was during this time that Shingo had a speaking engagement at Utah State where he was awarded an honorary doctorate by the university. Then Shingo was honored again when an award recognizing the implementation of lean principles was named after him.
The general guidelines the Shingo prize addresses are customer satisfaction, profitability, quality, cost, delivery, lean core operations, leadership, and empowerment enablers. For 2001, Delphi Automotive Systems' molding operations in Adrian, MI and Warren, OH were chosen for the Shingo award.
The Adrian plant performs molding, painting, and assembly of instrument panel components and systems. Among the plant's achievements: a 90 percent improvement in rejected/returned parts per million since 1999; 99.9 percent on-time delivery; and a 67 percent reduction in total scrap to less than .5 percent as a percent of cost of sales.
Delphi's Cortland operation in Warren, OHâa 160,000-sq-ft facility running 120 pressesâproduces parts for electrical connection system applications. Its achievements included a system for automatic regrind blending; a 75 percent reduction in changeover times; zero returned/rejected parts per million; 68 percent reduction in scrap; and zero blocked cavities. For Delphi lean begins with knowledgeable employees, and this is exemplified by the 76 to 156 initial job-specific, lean training hours given to each worker. Ross Robson, the Shingo prize executive director, says the lean mantra has become ingrained in Delphi's psyche in a relatively short amount of time.
"Delphi is very focused on lean manufacturing," Robson says. "They have gone from being a mass or traditional manufacturing company to a lean one faster than any major corporation that I know of in the world for their size."
Robson says that, in the end, lean companies are better suited to cope with tough economic times. "I'm fully satisfied that the plants that are lean have weathered the recession of the past few months far better than others," Robson comments.
Amended mold lien law passed in Michigan
The Michigan chapters of the American Mold Builders Assn. joined forces to amend Michigan's mold lien law. The result: the March 4 passage of a mold lien law that better protects a mold shop's interests.
Michigan moldmakers examined the existing law and discovered that mold possession was the critical factor to enforcing a lien and receiving payment. The Society of the Plastics Industry (SPI) was instrumental in getting mold lien laws passed in most states, and 47 states are listed as having mold lien laws on SPI's website; however, these laws' language favor molders in possession of the mold, rather than moldmakers who are not in possession.
The new law allows moldmakers to retain their lien rights on a mold until they are fully paid, even if the moldmaker no longer has possession of the mold. To enforce the lien, the moldbuilder must give written notice of nonpayment and the amount owed. If payment is not received within 90 days, the moldmaker has the right to take possession of the mold, die, or form.
In response to the exodus of molding from the Pacific Northwest, Sealaska Corp. and the Arctic Slope Regional Corp. are closing TriQuest-Puget Plastics LLC (Vancouver, WA).
Citing thinning sales, LNP Engineering Plastics (Exton, PA) is shuttering its Santa Ana, CA custom compounding plant. National Molding Corp. (Farmingdale, NY) purchased the assets of Security Plastics (Miami Lakes, FL). Security produces a line of modular molds called the Hetero*Cavity system that National plans to add to its own line of modular molds.
Sony Disc Mfg. (Terra Haute, IN) announced it will add 32 DVD replication lines to boost its monthly U.S. production from 12.6 to 30 million units.
CoreTech System Co. Ltd. (Hsin-Chu, Taiwan) will represent Beaumont Runner Technologies (Erie, PA) and its runner balancing technology in Asia.