Manufacturing getting back up to speed

Business is returning after difficulties caused by attacks of Sept. 11

July 28, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

The giant, mind-bogglingly precise teal, gray and red machines at Mac Machine Co. turn out everything from gun sights to clasps that help astronauts adjust their space suit pant lengths to casings for commercial airplanes' auxiliary power units.

Like many of its peers, the Woodlawn shop's business dropped sharply last year, and only now - as the manufacturing sector has begun to pull out of an 18-month slump - are things starting to turn around.

"Right after Sept. 11, we lost at least 50 percent of our orders within a two-week period," said George McNab, president and owner of the 52-person shop. "Since then, about 80 percent of that loss has come back."

McNab said his business' sales, which totaled about $10 million in 2001, are off about 4 percent this year but should pull even by the end of the year. Two new customers mean that by next year, he expects business will 20 percent ahead of where it was before the terrorist attacks.

"It's been a difficult couple of years" for the machining industry, said Matthew B. Coffey, president and chief operating officer of the trade group National Tooling and Machining Association.

"We're bouncing along the bottom now, but we are seeing more quoting [of prices to potential customers], and we've had some good months and some bad months," he said.

Overall, industry orders are expected to be 8 percent higher this year than last year.

But industry consultant and researcher Don Smith, recently retired from the University of Michigan, noted that the sector is still down about 20 percent from its 1997 peak.

About 14,000 people in Maryland are employed in industrial machinery, according to the state's labor department.

"Even though this is a plus number, it's still down substantially," Smith said.

Overall improvement

The picture for the manufacturing sector overall is improving. The Federal Reserve reported this month that industrial production grew 0.8 percent last month, its largest monthly increase since October 1999. It was the sixth consecutive gain.

Automobiles, home electronics and computers and office equipment saw production gains last month while appliances, furniture and carpeting manufacturing fell.

"I think we're seeing a turn at the bottom right now," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "It may take a little while for it to bounce back and to get a good head of steam, because that depends quite substantially on business conditions and business investment, and there has not been a big revival in business spending."

Although industrial production is up, Smith thinks surges in a few areas - such as autos - made the picture seem brighter than it is.

Smith noted that factories were producing at 74.5 percent of capacity. That figure needs to rise into the 90s for manufacturing as a whole to be called healthy, he said.

Moving overseas

A huge problem for machine shops and many other manufacturers, Coffey said, is that so much business has moved from the United States to China. Not only is labor cheap there, he said, but the Chinese government often offers generous subsidies for raw materials and electricity, and some companies can operate tax-free.

"Whenever we are quoting against Chinese competition, they are always below our cost of raw materials," Coffey said.

McNab is still trying to make a go of it in this part of the world.

In the 26 years he has owned the business - which he bought when it consisted of him and two employees - he has never had a sales representative, and for all but the first two of those years, he never had to go out and beat the bushes for business. He is hiring a sales representative now, however, and has returned to the medical-device business after leaving it several years ago.

Despite the recent downturn, Mac Machine is looking to hire several machinists, and some of his current employees work overtime. However, the business, which operates 24 hours a day, 365 days a year, has become so automated - with precision machines that can cost $700,000 - that for 100 hours a week, McNab shuts off the lights and lets the place run on its own.

On the upswing

At Bechdon Co. in Upper Marlboro, the president and owner, Bill Turley, saw the opposite business trend after Sept. 11. His $14 million company does a lot of work for the government - NASA's Goddard Space Flight Center is his biggest customer - and defense-related orders rose after the attacks.

"Our business is holding up quite well. It's up probably 20 percent for us in our company, but that's not indicative of normal growth for us. We've had a couple of years where it was flat," Turley said. "We do not expect this to be sustainable."

About 20 percent of his 80-person staff is working overtime, and Turley said that in the next few weeks the company might look into hiring a few more people.

J. Alexander Doyle, president of Micro Machining Inc. in Baltimore and past chairman of the Maryland Manufacturers Association, said his business - which makes precision machine parts for clients including AlliedSignal and the National Aeronautics and Space Administration - is seeing significant increases in orders.

"I'm quite optimistic that the overall economy is definitely on its way up," he said. "It's not as fast as we would have liked, but it's on its way up, and I think it will continue in that direction, and that's particularly encouraging for manufacturing."

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