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back to index backAMERItalk October,  2005

Retooling the U.S. Machine Tool Industry

Advanced technologies are making the American machine-tool industry more competitive in the global market, and sales are steadily rebounding.

Once a global powerhouse, the U.S. machine-tool industry fell on hard times in the late 1990s. But today it's experiencing renewed growth in major markets, even in the face of tough international competition from China, Japan, and Europe.

Also called "manufacturing technology," the machine-tool industry creates the specialized tools necessary for the production of manufactured goods, especially in the automotive, power-generation, aviation and aerospace, shipbuilding, communications, and IT industries.

Machine tools are heavy, power-driven machinery and equipment that perform specific actions on materials like metal and plastic. The most common jobs these machines tackle are material removal (turning, milling, drilling, grinding, water-jet or laser cutting); material forming (stamping, bending, joining); and "workholding" (chucks, fixtures, clamps, blocks). Almost all of this equipment is fairly sophisticated, with computer numerical control (CNC) or programmable logic control (PLC) built in.

"U.S. machine-tool sales peaked in 1998 at about $8 billion," says Bob Gardner, vice president of public relations for the Association for Manufacturing Technology (AMT), the largest U.S. machine-tool trade association in the country. "Then from 1998 to 2002 sales dropped 68 percent to about $3 billion. The industry started recovering in late 2003, and that uptrend is continuing. Right now sales have come back up by about one third," Gardner says.

Still on the Rise

According to AMT data, orders for the U.S. machine-tool market in 2004 were 40 percent higher than 2003 levels, and shipments were up 25 percent. For the first four months of 2005, machine-tool consumption was up 18.6 percent, with sales totaling more than $950 million — evidence that the recovery is indeed continuing.

Growth is being driven by increased sales in several key machine-tool categories, especially workholding equipment and industrial lasers. In the last quarter of 2004, shipments of workholding equipment in the United States totaled $52.2 million, about 13 percent higher than the same period in 2003. Nearly half of that production went to manufacturing companies in the Midwest.

"This upward trend has been fueled by a strong recovery in U.S. manufacturing, combined with the dollar returning to more equitable levels," says Richard Spooner, president and CEO of equipment manufacturer Powerhold Inc. "And there's no sign that the current trend will reverse itself in the short term."

The AMT reports that shipments of industrial laser equipment in 2004 for the United States and North America were up 52 percent — most of those sold as cutting tools to manufacturers. Although encouraging, this increase was also partly due to the capital expensing allowance. "Allowing the 50 percent expensing allowance to expire, which it has, will damage the American laser manufacturer's ability to remain competitive in 2005," warns David Plourde, vice president of sales at Preco Laser Systems LLC in Somerset, Wisc.

Even though overall machine-tool sales are up, there is less big production equipment going to U.S. manufacturers. "There is definitely a trend away from big production machinery in the American market," says John Roth, director of sales for Haas Automation in Oxnard, Calif., one of the largest machine-tool producers in the country. "We're making lots of lower-priced, small-batch machines for U.S. job shops that are easier to use. Of the 800 machines we sold last month, only 5 percent were designed for high production." What does this mean? "Big production work is leaving the United States," Roth says flatly.

Regional Picture

Although some merger and acquisition activity occurred during the downturn, there are still many smaller, privately held machine-tool companies that have significant market share.

Machine-tool companies tend to cluster where the manufacturing action is; places like Detroit, Chicago, Cincinnati/northern Kentucky, the Southern states, and California. More than half of all domestic tool consumption is in the Midwest and the South. The traditional heart of the machine-tool industry is New England, home to Bridgeport Machine Tools (recently purchased by Hardinge Group). Toolmakers Hardinge and Gleason are headquartered in New York, while Haas Automation, the largest machine-tool company in the United States, operates out of Oxnard, Calif.

"Right now the U.S. machine-tool industry is in a holding pattern and not expanding," Gardner says. "Foreign competition is very strong. In fact, more than half of U.S. consumption of machine tools is imported, but half of our domestic production is exported to other countries."

Gleason Corp., based in Rochester, N.Y., is a global leader in machine tools for gearing for the automotive, aerospace, and power-equipment industries. Gleason recently established a joint venture with Harbin No. 1 Tool Corp. of China, a leading supplier of gear-cutting tools for that country's market. "China has emerged as by far the leading consumer of machine-tool products, including gear-making machines and the cutting tools and services that support those machines," says John J. Perrotti, president and COO for Gleason. "We're excited about bringing precision gear-cutting tools to this market."

Still a Leader

"A steady flow of technological improvements over last five to seven years has greatly improved cutting speeds, efficiency, quality, and production time, making the U.S. machine-tool industry more competitive," says Gardner. The adoption of robotic handling of equipment and materials has resulted in rapid assembly times.

The U.S. continues to be an international leader in metrology, composite tape-laying machines, transfer lines and systems, CNC machining centers, spar and skin mills for aircraft components, punch presses, and spiral bevel and parallel axis gear-making machinery. "The U.S. also holds a leadership position in water-jet cutting and laser processing, as well as the technology for developing small assembly robots," Gardner says.

Water-jet cutting is one of the fastest-growing machine-tool processes in the world. A high-powered jet of water (driven at pressures of 90,000 psi or higher) can cut virtually any material without heat, leaving a clean edge that doesn't require secondary finishing. The world leader in water-jet technology is Flow International Corp., based in Kent, Wash. Nearly two thirds of all water-jet systems sold in the world are made by Flow.

PRC Laser in New Jersey is the largest U.S. manufacturer of high-powered CO2 lasers. Its subsidiary, Lee Laser, is one of the world's largest OEM suppliers of Nd:YAG lasers. "Short-pulse lasers are fairly new to the market," says Paul Warndorf, vice president of technology for the AMT. "The very quick pulse actually vaporizes the material to be removed. With a standard laser, the beam only melts the material to be removed, which then needs to be washed out. The short pulse eliminates that step."

There's also magnetorheological finishing (MRF), a new technology that polishes optical surfaces in a computer-controlled magnetorheological (MR) finishing slurry. The shape and stiffness of the slurry can be magnetically manipulated and controlled in real time. The world leader in this technology is QED, headquartered in Rochester, N.Y. (one of its biggest clients is the Department of Defense).

Looking Ahead

Short-term prospects for the U.S. machine-tool industry are encouraging. "Most analysts predict double-digit growth in 2005," Gardner says. "They also feel that the best opportunities are in the present, with some sectors in the manufacturing-technology markets possibly slowing in 2006."

Some customer markets, such as automotive and heavy construction equipment, are already beginning to slow. "The continuance of the capital-spending boom will depend upon the fortunes of the export markets for U.S.-built capital goods and nontraditional, but expanding, domestic markets such as the medical-equipment industry," Gardner notes.

A weaker dollar and the elimination of tariffs on U.S. shipments to Europe have boosted sales to European markets. "In other areas, tax issues are hurting U.S. exporters," Roth says. As an example he points to the higher taxes in Brazil and India, which are making it hard for U.S. companies to compete in these growth markets.

On the legislative front, the AMT is lobbying Congress for a permanent law that allows for the depreciation of new equipment immediately after it is purchased. The AMT is also working to improve product liability laws. "Something also has to be done about the high worker's-compensation and healthcare costs in this country, which create such a burden on the domestic producer that it's hard to compete internationally," Gardner says.

The AMT launched its Smart Machine Platform Initiative in 2003. One of its immediate goals is to secure about $4.5 million in funding from the federal government to build the core, enabling technologies that will allow manufacturing equipment to automatically make the right decisions, based upon acquired knowledge, to produce a part correctly the first time, without unscheduled delays.

Source: Area Development - GAI

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