Foundry Management & Technology

Cast steel does something seemingly impossible

REB — Mon, 30 Jan 2012 20:12:00 GMT

The title is drawn from the observation of a structural engineer explaining the secret to a novel building design: essentially, it's one, mid-sized office building in Toronto that's being designed, in part, as an insert to an existing structure that has historic-preservation status (and thus, cannot be removed or visibly altered.)

A critical point to the design is the use of 35,000-lb, cast steel nodes to link together a structural steel frame.

There are a few more interesting illustrations here.

"Supporting the tower on conventional columns wasn’t an option because of the large size and number of columns that would have been required," according to the report. "What consulting engineer Stephenson Engineering Ltd. and Sweeny Sterling Finlayson & Co. Architects Inc. decided on instead was a series of 70-foot-tall 'delta frames,' each comprised of 1-meter-diameter, tubular steel columns shooting up through the new development’s atrium (within the four-story structure) to support the new tower."

The report quotes Carlos de Oliveira, president and principal structural engineer for Cast Connex Corporation, which designed and will supply the cast steel nodes for the project, which he observed "provide for a more rational means of meeting all the structural and architectural requirements.”

“With steel castings, you put the steel where it needs to be for the flow of forces on the structure," de Oliveira said. "You are not confined to having to build up elements from plate.” He also said the castings provide "architectural elegance."

The proliferation of steel castings in very large dimensions for applications like turbines has been well reported. Similar products undoubtedly have a place in infrastructure development and replacement, too (e.g., bridges.) Count this as another boon for steel foundries.

Short cited-ness

REB — Tue, 24 Jan 2012 13:49:00 GMT

"Reshoring" continues to be a hot topic among manufacturers. I wrote about the man many people recognize as the leading authority on the subject, but the trend has been observed for several years now. (NADCA is planning a panel discussion on the topic at its 2012 Die Casting Executive Conference, by the way.)

But if you take your business insights from the New York Times you'll probably conclude that there is no reshoring, and no possibility of it, because of the shortsightedness, greediness, and all-around inhumanity of manufacturing companies. This story from last weekend is being widely circulated and cited as evidence that the globalization game is over, and the U.S. manufacturing sector cannot catch up - ever.

In fact, it's a story about Apple Inc. and the particular manufacturing circumstances of its widely distributed and wildly popular consumer electronics devices. That's it. The article might have examined in more detail why Apple has made the decisions it has made to manufacture in China, rather than in California. It might have looked at other manufactured products - including, critically, some that are not consumer goods. It might also have considered that there probably is a middle ground between the high cost of excessive regulations and human rights violations.

In fact, this report is a sterling example of the tendency to see global economics as a contest for total control of the world's markets - which is probably how it appears in seminars and conferences - rather than a process of finding economic growth opportunities by developing products that customers will want and delivering them effectively, efficiently, and reliably — which is how it works for manufacturers now taking advantage of reshoring to improve their own businesses and the U.S. economy.

The riddle of recovery

REB — Tue, 17 Jan 2012 14:18:00 GMT

I've written several times that the ongoing economic recovery is so unsatisfying because we continue to see high levels of unemployment, but that unemployment is a feature of the economic recovery - not a defect. See this entry, for example. The point is that the Federal Reserve Bank's and federal government's economic policies are stoking economic stability and growth for businesses, but businesses will not hire more workers because their economic forecasts indicate they cannot afford to do so.

Why is that? Because there is no recovery for consumers, and thus a cloudy forecast on businesses' revenues. Here's more evidence of the conundrum.

Odds of recovery

REB — Tue, 03 Jan 2012 02:15:00 GMT

Economic predictions are still popular this week, but here’s an insightful analysis of recent economic trends that documents a simple and easy-to-miss point: “…most of the economy is (the results of) people doing normal stuff that they always just have to do.” More specifically, economic growth is the result of normal activity being done in greater volumes, and/or more efficiency. New products, technologies, and capabilities accelerate growth.

The analysis also points toward a conclusion that I find myself reaching over and over again: that a manufacturing-led recovery will not be much of a recovery at all if consumers don’t share in the prosperity. Manufacturers’ interests and goals are different than consumers’; in some critical ways (e.g., employment), they are frequently at odds with each other.

More practically, for all the financial benefits that a strong manufacturing base would provide, that sector of the economy simply will not expand fast enough to generate the volume of growth needed to drive an economic recovery.

The underlying fact of our financial dilemma is debt, and the way to achieve economic growth is to reduce debt and rebuild equity. Then, there will be cash available to things beyond the "normal stuff." Many manufacturers have made significant progress in this effort; consumers are still trying to accomplish it. Having one accomplish its goals at the expense of the other would be counterproductive.

Slow going

REB — Tue, 20 Dec 2011 15:03:00 GMT

“World growth will slow in 2012—the only question is by how much.” That is the abrupt and sober opening from IHS Global Insight’s chief economist Nariman Beravesh in his Top 10 Economic Predictions for 2012. We cannot blame bad news on him, but it’s still a pretty grim outlook even with its “moving in the right direction” theme:

The United States will probably avoid a recession.
The Eurozone is headed for a second dip.
Asia will continue to outpace the rest of the world.
Growth in other emerging markets will hold up, for the most part.
Commodity prices will (mostly) move sideways.
Inflation will diminish almost everywhere.
Monetary policy will either be on hold or ease further.
Fiscal policy is set to become even tighter in the United States and Europe.
With the exception of the Euro, the dollar will keep sliding.
Most of the risks to the outlook are on the downside.

Readers should follow the link to the full presentation, because Beravesh offers some brief and insightful narration to each point. If you’re like me, you’ll get the sense of someone trying to avoid acknowledging the full impact of all these trends.

If these are “trends,” then they are leading in the wrong direction. More accurately, they are not trends at all but lingering conditions, and they are generally the same conditions we have been trying to overcome since 2008.

Respondents to FM&T's annual Business Outlook Survey registered a more generally positive outlook for their own organizations – suggesting that the excruciating process of regaining financial soundness is largely completed for metalcasters.

What remains effectively unrecovered is the consumer economy (encompassing retail and housing, and much of the financial sectors), and these consumers are unlikely to regain their vitality as long as federal and state governments squeeze us harder as a consequence of their excessive spending.

So, let’s appreciate the manufacturing recovery now, because if Beravesh is correct then the scarcity of buyers for manufactured goods may make it hard to remember that it happened at all.

We're not machines

REB — Tue, 06 Dec 2011 14:01:00 GMT

The U.S. Labor Dept.'s monthly employment report has become a ritual of the ongoing recession — “jobs” rather than GDP are the measure of our economic progress. As such, the November report from late last week was good news, revealing as it did that nationwide unemployment is down to 8.6%, the first drop below 9% since March 2009.

To be clear about my view, 8.6% is still unacceptably high, and there is reason to be concerned that the 8-9% range has become a baseline of normal unemployment. But, let's take the good with the bad.

While I don’t agree with the reasoning that “jobs” should determine our economic standing, if it must be so then we have to acknowledge that there is a growing, general despondency as a consequence of this: among the unemployed, obviously, but especially among those who have given up hope of working. From October to November, the U.S. Labor Dept. report showed, 315,000 people lost their jobs. Moreover, the “labor participation rate” now shows that just 64% of the entire population is employed, and that the rate of underemployment (part-timers who want to be full-time workers, or who have been relegated to positions below their income potential) is 15.6% of the workforce.

All of that is a prelude to my own point, which is inspired by comments to our 2012 Business Outlook Survey,: the employed are also discontented. I don’t mean that the employed have problems as serious as those of the unemployed, but they are bearing the strain of a stagnant economy, too — and not merely because the effort of 64% is needed to support 100% of the population. The totality of work is carried out by a declining number of individuals, who must increase their production in order to be rewarded, even as the resources and support (and rewards) available to them do not increase

The joy, if it ever was there, is gone from work. Increasingly, our workmates are computers and machines. Not only do they offer no company, they are intolerant of slowdowns and mistakes.

This is a blow to individualism and idealism, which for centuries have inspired people to work hard and gain their reward. Our survey showed that metalcasting executives have a very positive outlook about their business for 2012, but their candid comments show them to be anxious, frustrated, and a bit defiant about the demands that work and business place on them as individuals.

So, is it worse to be overworked than to be unemployed? Certainly not … Not yet. One obvious difference between humans and machines is that the former can hold two contradictory ideas — outlook, positive; personal expectations, grim — for a while, at least. The strain of that contradiction is great, however.

Time warp

REB — Mon, 28 Nov 2011 02:32:00 GMT

The National Labor Relations board was established in 1935, by way of the Wagner Act, as an independent panel assigned to adjudicate differences between employers and labor interests. Lately, however, the NLRB seems to operate from the assumption that there is something inherently unethical about private businesses, or essentially unjust about the arrangement between private companies and their employees. The NLRB’s challenge to Boeing Corp. over its new, non-union plant in South Carolina made it clear that the board is not interested in mediation; it’s going to pursue its own agenda. This week, we may see how it will do that.

On November 30 the NLRB plans to vote on a new series of rule governing procedures for initiating unionization votes at workplaces. It explains that the changes will “simplify procedures, make them more uniform across regional offices, and reduce unnecessary litigation.” Effectively, it will establish the Employee Free Choice Act (“card check”) without the difficulty of legislative endorsement.

Employers, of course, see things differently. These new rules would put significant restrictions on employers to keep them from arguing against unionization, while expanding the union organizers’ access to workers and speeding up the process of establishing unions — unions that by that very process would be hostile or obstructive to the employer’s plans. The Wall Street Journal called the new approach “Big Labor’s version of speed dating.”

There is no reconciling these two points of view. Employers see unions as a drain on their competitiveness; they easily cite the ordeals of Boeing or the domestic automakers, and they take every opportunity to avoid hiring union workers, notably by locating their operations in places that do not stipulate union representation as a requirement for employment. Unions and their supporters see employers, like Boeing, as the reason that union membership is down from historic highs. They interpret any financial success by these companies as income generated at their own expense, and they want regulations to restore their former influence in the private sector.

Rather than stand between these two points of view, the NLRB is trying to regulate employers into a new reality, or rather an old one – one in which resources, information, finances, competition, and consumers, are not globally relevant. No, their outlook, just as in 1935, is that all these variables are within the power of the employer to optimize. By stipulating how employers may select and maintain their workforces, the NLRB assumes all the other market inequities will be stabilized. If everyone just played by the rules it will set, the board seems to assume, then workers would be treated fairly and employers can continue to operate, sharing their successes more equitably.

The world has changed since 1935 – and even since 1995. It will be different next year than it is now. The NLRB may succeed this week, but its new regulations won’t turn the clock back on global competition. Rather, the proposals seem likely to accelerate job relocations and raise the cost of doing business for those employers caught in NLRB’s time warp.

Stick to the message

REB — Tue, 08 Nov 2011 14:16:00 GMT

Speaking only for myself, I have never much like trade shows, conferences, seminars, etc. I realize they are important routines for conducting business - and that a lot of people appreciate the opportunity to socialize and recreate with colleagues they don't meet with regularly. I see a lot of waste in the cost structures, but that's generally someone else's problem, not mine. To me, the big objection involves my time: The routines of travel, meetings, and events are just too much extra crowding my schedule.

My objections don't matter much, except: A friend writes to tell me that AFS allowed Morgan Molten Metal Systems to record two presentations given last month at the Aluminum Conference & Workshop in Dayton, Ohio, by that company's regional account manager Ted Kostilnik. "To the best of my knowledge, these are the first complete videos of individual presentations shot at AFS conferences," he told me, and they are available now for viewing on YouTube. They are informative, not commercial in nature, and filled with practical advice for crucible operators.

Well done all around. This is the way to conduct a meeting. Give the audience what they need. Let them set the time. It may not be "marketing," but it is highly effective communication.

Video marketing has gone through waves of development and popularity in the past 10 years, and much of what has been offered has been ineffective, or worse. Generally, it's too static or it's too slick. In serious business like metalcasting, Morgan MMS has taken the only sensible approach: be informative. There's too little time for all the rest.

If you're interested in video marketing, you should check Creative Videographers' Eyes, a blog maintained by videographers and video producers who comment on best-practice commercial videos that they have found effective or "inspirational." Visitors are invited to submit their own videos for comment, evaluation, or advice. Amy Munice, creator of the Global B2B Communications web site that hosts “Creative Videographers’ Eyes,” said there were two reasons for launching the blog:

"One, we hope to create a shortcut to help global companies that go to some lengths to create quality videos gain a wider worldwide audience whose industry information might otherwise be too narrow in focus, or too technical, to easily become the type of global viral video that can be so important to driving traffic to web sites and assisting in search engine optimization," she said.

The second goal is to show the talent and ideas available for this type of communication among videographers, corporate video producers, and video production companies. If you have a message to deliver and you think video is the way to do it, you may find some insights among all that talent. Remember, there has to be more to the message than just the medium.

Is it working for you?

REB — Tue, 01 Nov 2011 03:14:00 GMT

It’s hard to study robotics — as I did recently — without examining the human aspect of it all, meaning how the availability of robots (and advanced technology more broadly understood) intersects with the humans that install them. Most of us realize now that robots can be programmed to do specific tasks more reliably and cost-effectively than humans, but is the availability of automation on the plant floor and on the desktop making humanity less insightful about the work they do (or, formerly did)? I don’t mean that the people programming or overseeing the robots are not informed and aware of the work at hand. I’m wondering if it’s a good thing that there are fewer and fewer human minds focused on these critical manufacturing processes.

The general theme of the short feature I wrote is that robots are getting much more effective at completing metalcasting work, and coordinating process flow in foundries and diecasting operations. Unquestionably, that is a good thing.

But, neither to I think there is any question but that one of the underemphasized factors behind the current unemployment problem is the availability of robots and other technological resources to execute tasks that are too physically demanding, too time consuming, or too expensive for humans to do. There is some concern about this sort of thing among those focused on skills development for young people. I share that concern - but I'm not thinking about the economic impact as much as I am wondering about the progress of human intelligence.

As machines get smarter, do we get less insightful, less informed, less creative, and less adaptive? The authors of this book seem to think it’s so, and they see it as part of the chronic unemployment plaguing the manufacturing sector. I admit I’m not informed well enough to make that conclusion, but I will offer the truism that it’s always better to have more minds focused on solving a problem – and exempting individuals from manufacturing process also does away with their insights. The increasing emphasis on productivity over recent decades (a good thing) may be depleting our creative resources.

Another gap in the system

REB — Tue, 18 Oct 2011 14:09:00 GMT

I attended an event in Canada about two years ago – a competition of vocational skills (machining, welding, carpentry, and much more) among young people (16 to 22 years old, I recall), from all over the developed world. Notably, there were very few Americans in the competition.

It was at the time an eye-opening event. I was surprised at the accomplishment and the industriousness of these craftsmen and women, competing mostly for the satisfaction of demonstrating their abilities. The award monies were attractive, but not overwhelming. I wondered why there were not more Americans in the competition, and though I never doubted that there are equally impressive skills among our own citizens, there is apparently not enough in our educational establishment to compare with the training and development programs other developed nations have for young craftsmen, tradesmen, and technicians.

Now, there is a study documenting – more or less — this situation. “The survey shows that 67% of manufacturers have a moderate to severe shortage of available, qualified workers,” said Craig Giffi, vice chairman and consumer & industrial products industry leader, Deloitte LLP, which conducted the study. “Moreover, 56% anticipate the shortage to increase in the next three to five years.”

My first reaction is probably not helpful: the findings of this study are not news, at least not to most manufacturers with whom I have discussed the matter. There is also a related problem, not fully explored: the cost of employing skilled workers. That is not a matter of training, but of regulation – and yet it must be addressed if the “skills gap” is going to be resolved.

We’ll present a column on this subject in the forthcoming issue of FM&T, from a leader of education establishment. In essence, her point is that manufacturers need to support efforts by schools, colleges, and universities to establish the importance of career and technical education to a thriving economy.

It’s a reasonable point, and I won’t undercut it before readers have a chance to consider it.

My own opinion on the “skills” gap is that it is an organizational problem – in which a rigid and unreformed educational infrastructure does not properly evaluate students according to the range of potential opportunities, leaving them undertrained, unappreciated, or unrewarded. The gap is made somewhat worse by a regulatory structure that limits the choices of manufacturers and other employers to find enough skilled workers.

Manufacturers are generally pretty effective at solving their problems, but they can only work with what is available to them. The solution to the skills gap involves more than “working together”: It may require a fundamental review of educational and regulatory programs.

You think you've got it bad?

REB — Tue, 11 Oct 2011 13:43:00 GMT

I screen all sorts of links related to metalcasting, but this is a novel one: first-hand accounts of the survival of foundries in an oppressed and depressed country. Most of us probably don't think much about the misery of life in Cuba since 1959, where the goods and resources — like coffee pots — can be scarce or impossible to find. Or, where engaging in an activity that is an extension of one's own skill or ingenuity — like metalcasting — can be restricted or regulated out of existence.

I've never thought about metalcasting in Cuba 'til now, but it's obvious on reflection that such a fundamental industry would survive, one way or another. As our own economy stumbles along, as our technologies grow more refined and more mechanized, it's still impressive to note the endurance of these people and these processes.

7,000 engineers

REB — Mon, 10 Oct 2011 02:57:00 GMT

Last week’s arrival of the U.S. Labor Dept.’s September employment report didn’t reveal much: there was some increase in hiring and economists feel the threat of a new recession has been averted. But, the unemployment rate is still 9.1% of the workforce, higher if you subscribe to the “underemployment” analysis, a number that is beginning to look like a new baseline.

If so, then it seems to me an even stronger case that federal government’s standard techniques for spurring employment (tax incentives, targeted loans) need to be replaced with something more innovative. The past week also brought news of Steve Jobs’ death, with appropriate paeans to his ability to convert technology into a marketable products; along with more frustrating details of the federal funding of a failed producer of unproven photovoltaic cells.

Innovation doesn’t have to be “next generation” in order to be an effective business strategy; it’s enough to be proficient and reliable at producing something already much in demand. That would be the lesson from last week’s news that Cummins Inc., which already employs 17,000 people in the U.S. and 40,000 worldwide, hopes to hire 7,000 engineers in the next five years.

Most readers probably know Cummins, which manufactures a range of high-value automotive engines, power-generation products, and component parts. Surely there is a lot of advanced technology in those products (that’s what engineers are for), but the more important point is that Cummins is manufacturing products that the global market wants and needs, and it is being rewarded for it. And it expects to invest to keep that process growing.

Cummins and its 7,000-engineer plan are encouraging reminders that we don’t to waste a lot more federal funds and we don’t have to settle for an unemployment rate fixed at 9%. Other companies have the means to produce valuable, useful products, too, and the global market has the demand. We need to identify what it is that’s keeping producers and consumers from coming together.

One of the greats

REB — Mon, 12 Sep 2011 03:20:00 GMT

Having written recently about the importance of recognizing the good works of people around us, I'm glad to be able to point readers to this article about one of the recent greats of the metalcasting industry. It happens that he's a member of the FM&T Hall of Honor, too. The article is a revelation to me, and another reminder of the hard work and determination that fill a person's life.

It causes me to realize, too, how in the present time we are too casual to ascribe a judgment to people - and very often it's one based on a particular merit or demerit that we find important. We don't pause for reflection; we don't wait for further developments. It takes so much more, and so much more time, to know the truth about someone.

Worth noting, too, is that be valuing hard work and sacrifice we not only credit worthy people, we encourage more of the actions and achievements that make all of our lives better.

Where the jobs are

REB — Tue, 06 Sep 2011 13:47:00 GMT

The anxiety over employment totals continues to drive most discussions about the state of the U.S. economy, and so last week’s report indicating that August ended with no net improvement in the jobless rate is bad news indeed. However, headlines suggesting there is “no change” in employment are just untrue. Jobs are being created, and some of these are in metalcasting operations.

In only the past week there have been reports of hiring from Decatur Foundry in Illinois, Gibbs Die Casting in Indiana, and Empire Die Casting in Ohio. None of these is a huge development, except at the locations where they are happening, because those companies obviously are growing. Hiring new workers is what growing companies do.

Employers hire new workers when they have the means to do so, and the confidence that their business activity will expand to cover the additional expense that workers add to cost of doing business.

Unfortunately, for the economic policy makers seeking to understand the “no new jobs” story, job creation happens incrementally, not in waves that would signal some sudden economic revival.

So, if the August employment report indicates there has been no change in employment totals, it means that every new job is being offset by a job being discontinued. Thus, if metalcasters are expanding their production activity, other sectors are cutting back.

What the August employment report means is nothing different than what many businesses and some economists have been describing for the past three years as “uncertainty.” Businesses cannot find the means to grow, so they are not making any plans to do what growing companies do.

Another conclusion from the August employment report is that the economic policy makers are failing at the responsibility they claim for themselves, because they are not fostering the circumstances that will allow employers to take confidence in future conditions. It’s likely that the reason they are failing is that they continue to treat job creation as their objective, when they ought to see economic expansion as their goal. Jobs are not a commodity that can be “created”; they are an indicator of growth.

Honorable mentions

REB — Tue, 30 Aug 2011 13:27:00 GMT

In a few days we'll announce who has been named to the FM&T Hall of Honor for the current year. I am always a little tense about this effort, because we want to be sure that the individuals we identify are worthy of the recognition, and of the company that is already installed in our roll of distinguished metalcasters.

As it happens though, for as long as I have been involved with this process, I have never failed to be relieved that our selection has been exceptionally worthy of the recognition — and impressed by the accomplishments each one can claim, and heartened to know that such estimable people are in our midst. The 2011 Honoree is no exception to this pattern.

But, it seems to me that there must be dozens more such persons at work in our midst. They deserve recognition, and the metalcasting industry at large deserves to know more about the brilliance, the determination, and decency around us.

There are a handful of folders on my desk documenting the individuals who we considered but did not add to the FM&T Hall of Honor this year. I have no doubt they are exceptional people, and might be worthy of this recognition. We will keep their records for future consideration.

But, to be frank, we need more information, and they need more support, more backing, more recognition from their friends and colleagues in order for us to understand better how valuable they have been to the industry.

And undoubtedly there are many more individuals who have escaped our attention because no one identified them for us.

The FM&T Hall of Honor has been in place for 19 years, and this year's addition brings the total enrollment to 48. A number of these are no longer living, and each time the news arrives that another of these Honorees has passed away I have to fight the impulse to wonder if the metalcasting industry can ever replace the ingenuity, the determination, and the spirit that has been lost, too.

The better, more optimistic side of me knows that there is as much talent and goodness at large in the industry now as ever there has been. But, all of us need to recognize it, and identify it. And honor it.

A little context

REB — Tue, 16 Aug 2011 13:44:00 GMT

I'm not sure that the political analysis in this column is as important as the underlying point that Midwestern states are overleveraged, giving them more incentive to be demanding of businesses and other taxpayers in order to meet their obligations — and that's bad for economic growth, especially in the course of a consumer recession, and in a global market that favors low-cost operations.

Some of this is turning around, and there are random examples of Midwestern metalcasters expanding operations and adding new equipment. But, it's wrong to assume that any of the past industrial model can be effective again, because all of the elements of that model — governments, consumers, and especially employers — have different objectives and obligations than they did in the boom years of American industry.

The first step now, it seems to me, is to determine the actual value of the resources available in the new economy. What is the real potential? Let employers pursue their strategies; let workers demonstrate their skill. There's no doubt the government will find a way to tax and regulate the results of those efforts, once they've had a chance to succeed.

Of course, I could be wrong

REB — Tue, 12 Jul 2011 13:13:00 GMT

In my last column for the magazine I took up the issue of CAFE standards again, because the word is out that the federal government wants domestic automakers to achieve a corporate average fuel economy (CAFE) of 56.2 miles per gallon by 2025. Now, I don’t design cars and I am open to the possibility that such a goal is feasible. But, what I want to know is if it is a sensible goal – in terms of the viability of the automakers.

The CAFE debate invites all sorts of opinions, many of them grounded in points of view that are guided by reason other than the issue of automotive industry viability — e.g., environmental concerns, or foreign trade. We’ll have those debates in any case, but the companies designing and building cars have a more fundamental concern: selling cars.

My position is that consumers’ tastes are not guiding this move toward higher fuel efficiency, despite the increasing selection. Sales of the Chevy Volt (a hybrid) are disappointing, as are those of the Nissan Leaf (an all-electric vehicle), and though the proponents of these technologies may be more encouraged by the sales they plainly are not the sorts of figures that are going to support an automotive manufacturing company.

Johnson Controls, a company that manufactures automotive fuel cells, released results of a survey it funded claiming that Americans are resisting fuel-efficient hybrid vehicles largely because of confusion over the differences between these types of cars.

"It's clear that consumers are confused about their options for more fuel-efficient vehicles, despite their desire to save on fuel costs," said Alex Molinaroli, president of Power Solutions for Johnson Controls. "These findings indicate U.S. drivers need to have a better understanding of the offerings available to them now as well as options that will become available in the U.S. market. This includes Start-Stop technology which has been marketed in Europe in recent years and will be offered to the U.S. market in 2012."

Johnson Controls is shifting its emphasis from lithium-ion vehicle batteries to Absorbent Glass Mat (AGM) batteries, which are a type of “valve-regulated lead-acid batteries” that do not require regular addition of water to the cells. It is converting a battery plant in Toledo, Ohio, to produce the new AGM units in a push to supply the batteries for “start-stop” vehicles — i.e., those that shut off during idling, and restart once the driver engages the clutch or releases the brakes. It claims the technology can reduce fuel use and emissions by 5-12% on standard gasoline engines.

I’m all for it. By all means, let consumers decide what they want to drive. I think Johnson Controls is spinning their interest in this debate, because I think consumers buy cars for several reasons that are in addition to fuel economy — and may even override their own preferences on fuel economy in favor of other factors.

But that’s the risk that Johnson Controls is taking with their investment. For automakers, a mandated investment into uncertain technology is something quite different.

Consider all options

REB — Tue, 28 Jun 2011 14:12:00 GMT

It used to be that polite people would avoid conversations about religion and politics. Now, add “energy” to the list. Last week I was an accidental bystander to a heated lunch-table discussion about energy: what is going to be the reliable energy source of the future? This can be a sort of enlightening discussion, but if one side of the debate is determined to rule out possibilities — e.g., fracking — it doesn’t take long for the tensions to rise.

On the subject of “energy,” I wonder if some people oppose the available options mainly because they are so viable. We know how to capture the energy potential of oil, coal, and natural gas, and to deliver the energy to consumers. Likewise with nuclear power. Of course, opponents will argue that all of these are too “risky,” too unreliable, too “wasteful.”

Of the alternative energy options — wind, solar, biofuels — there is a lot of work to be done to coordinate the capture of the energy units, and to convert it to electricity, and to deliver that to consumers. These are, in the strictest sense, “unproven” sources because so far they simply cannot substitute for the established sources in terms of volume or reliability.

That does not mean they should not be developed. It does mean that we should invest appropriate to our means and our needs. Entrepreneurs who want to develop wind and solar farms are welcome; spoiling those investors with public subsidies is not, generally, a good use of funds.

In the opposite direction, natural gas is a hot topic because there is so much of it available and accessible, and we know how to capture it and use it. Vast amounts of natural gas are locked underground in rock and shale deposits, and can be captured by “hydraulic fracturing,” or fracking. It’s not a new technique, but it’s being deployed more widely.

Thus, of course, there is a widespread opposition building to oppose natural-gas exploration. Here is a concise review of the fracking process, and the arguments raised to oppose it.

From the start of the recession in 2009 there has been general agreement that the U.S. economy needs to grow its capital base, to expand, in order to achieve a sustained recovery — and there is further agreement that the U.S. manufacturing sector needs to grow in order to sustain to any expansion.

A lot of time and money has been spent since that time to demonstrate that the focus of our economic recovery should be “infrastructure,” meaning roads, bridges, etc. That’s fine with me, but it’s obviously not enough. “Growth,” or “expansion” shouldn’t be confined to what we can agree on now: we have to be open-minded about developments that may come, and solutions that may emerge to problems we can identify now. Furthermore, to suppose we can grow economically without energy, without addressing the singular opportunities available to us now, is to miss the point of “growth” altogether.

U.S. energy companies create demand in manufacturing industries, drive employment, and support growth in other sectors. They support capital growth. Not to see the necessity of all this is a failure of imagination, or worse.

Enough growth?

REB — Tue, 21 Jun 2011 05:15:00 GMT

A few weeks ago a foundry executive expressed to me the opinion that the multiple-site business model remains unproven for the metalcasting industry, because the costs of operating a single plant (energy, labor, capital equipment, etc.) remain high and it takes skill and expertise to manage them effectively, while the opportunities for narrowing those costs across multiple sites are still limited, and still unproven over a long business cycle.

I tend to agree with this, based on the various examples of metalcasting chains that have dissolved into bankruptcy, though I am conscious that automation and networking technology can change operating practices radically. The current example of Grede Holdings LLC — which has 15 foundries and turned a profit in its first year of business — shows a lot of promise.

That’s why it is interesting to read the comments by Grede’s CEO Doug Grimm. He seems to think the business model is still unproven, too, and presumably wants to cool down the pressure to continue expanding — or to spook other investors from copying his accomplishments. Even so, it’s hard to argue with his priorities: profitability, cash management, product diversity, customer relations, and capital investment. It’s difficult to imagine how an organization could do all that and not grow.

Are they losing it?

REB — Mon, 23 May 2011 21:15:00 GMT

"Based on recent analyses and reports, a leading manufacturing sector economist asserts the Chinese will stand to lose significant market share in the years to come, and will not have a cost advantage over U.S. manufacturing by the year 2016." That's the seemingly hopeful opening paragraph of a release sent to me last week by the Fabricators & Manufacturers Assn.

It's a message that is not out of line with some other trends we have seen, including NADCA's discovery more than two years ago that its members are benefiting from buyers' efforts to source materials domestically, and an ad hoc program I reported last year to promote and stimulate the "reshoring" effort.

The latest information is premised on the notion that wage growth in China is eroding the profit margins of manufacturers there, giving manufacturers here another advantage in supplying the domestic manufacturing and retail sector with all sorts of raw materials, semi-finished and fabricated goods, and finished products.

It seems like a credible analysis of today's facts, but unfortunately it tends to glide past some rather obvious concerns. I think it would be a terrific thing if Chinese workers earned more and if U.S. manufacturers had a greater advantage in the global economy, but the likelihood of it all converging peacefully seems rather small. Dr. Chris Kuehl, the economic analyst for FMA who is cited in that study, says:

“If China shifts its attention to its own domestic market and away from exports, it will allow U.S. producers to recapture domestic market share, … As the U.S. manufacturing company looks to its own market, it will be generally better positioned than the Chinese competitor as the distribution infrastructure in the U.S.is better suited than China’s.”

But, as Kuehl points out, China's economy is almost entirely directed outward, at supplying the world. Restive consumers, frustrated consumers, and dissenting citizens have had little to no effect at persuading that country's economic planners to reverse that direction. It's hard to imagine how they might arrange it peacefully by 2016. And if they lose their competitive advantage as suddenly as that, I don't think we'll like the consequences either.

You know who "you" are

REB — Tue, 17 May 2011 13:01:00 GMT

If you merely scan the headlines, you’ll know that General Motors reported impressive earnings for the first quarter of 2011, about $3.2 billion, which was more than three times what it earned in 2010 Q1 and its fifth straight quarterly profit. In addition, the automaker outlined a $2-billion plan to expand and improve 17 plants.

For any ordinary company this would be good news, but this is General Motors so you have to get out your scorer’s book and figure out what it really means. Of course, it’s nearly impossible to tell because there are so many competing agendas at work in this “automaker.”

If you read the press release announcing that expansion program you’d barely note that GM manufactures cars and trucks, but you could have no doubt that “creating” or “maintaining” jobs is what keeps this company focused. The statement put jobs and not cars in the first paragraph, and chairman and CEO Dan Akerson underscored the point in his first comment by noting the “more than 9,000 jobs that GM has added or saved since mid-2009."

That is followed by congratulatory comments from a United Autoworkers vice president, Joe Ashton, who used the company’s announcement (obviously with its consent) to articulate the union’s policy: "The UAW's goal has been to return all laid-off workers to active status and see the company begin hiring again," said Ashton. "If the market continues to recover, we are confident that GM will hire new workers to meet the strong demand for the products our UAW members build. … I am proud of how our membership has worked hard to ensure the company's success."

Fine. The UAW owns 17.5% of GM, so it’s clear that the union has influence in the company’s decisions, too.

Perhaps the union should be even more involved, because just a few days later another UAW official told Bloomberg that he is confident the labor negotiations with GM that begin later this year will be successful. “You do better in negotiations when the economy and the company are doing better,” according to Norwood Jewell, a UAW director representing workers in Michigan.

Who is this “you” that Jewell is describing? Is it the UAW, whom he represents? Or is it GM, of which he is a major stakeholder? I’m sure it’s not me, even though I am a GM stakeholder, too, as is almost everyone who will read this.

You see, U.S. taxpayers fronted GM about $40 billion in 2009 to fund it through bankruptcy, along with about $14 billion in tax breaks that are ongoing. Those were just the financial benefits; there is no way to account for the value of the legal precedent of confiscating the rights of creditors. So even though GM is profitable now, it’s not the sort of “investment” that would be considered sensible or profitable under ordinary circumstances.

Note, too, the federal government may be at least $20 billion short of breaking even on this deal (without even computing the interest value of the original "investment") and it still holds 26.5% of GM — meaning that 299 million or so Americans gained nothing in this deal, but are making it possible for the rest to celebrate how far they have come since their bankruptcy ended.

That isn’t likely to change too soon, considering that last fall’s IPO brought only modest results, that shares of GM are performing well below the market average, and that those upcoming labor negotiations and political agendas will delay the prospects for better results in any potential future sale we can anticipate.

My guess is that by saying "you" the Michigan UAW director means "we" … that both labor and management will do well in their “negotiations.” How could it be otherwise with one segment of GM’s ownership negotiating with GM's management over how they will split the revenue made possible by the advantages they have gained over the past three years?

Labor and management will do well because they have been allowed to reestablish the invulnerability to suppliers and customers that GM enjoyed for so long. That would include invulnerability to the taxpayers who are underwriting this white-and-blue-collar cronyism.

Perhaps I’m jumping to conclusions, but is there better way to understand this odd caricature of a global manufacturer that celebrates profits built on the public’s investment, downplays its products, emphasizes its employment figures (normally a cost factor to be controlled), and functions as a mouthpiece for its nominal adversary? I don’t know how the taxpayers will be represented in the upcoming negotiation, but so much of this has been guesswork that it isn’t too difficult to imagine.

Can't have it both ways

REB — Tue, 03 May 2011 14:11:00 GMT

I have a copy of the latest manufacturing industry outlook from PriceWaterhouse Coopers, the consulting and accounting group, and it's somewhat encouraging.

PwC's Manufacturing Barometer is based on a quarterly survey of U.S.-based executives in multinational manufacturing firms. It aims to track the domestic and global economies as well as companies' performances and expectations. It measures factors like revenue growth, margins, inventory levels, and operating costs. It also seeks information on investments, M&A, and hiring. And it asks about anticipated problems or impediments to economic growth.

The headline on the announcement I received is "2011 Revenue Growth Projections for U.S. Industrial Manufacturers Improves," which is obviously good to know. It also matches some anecdotal information that I pick up in other ways, confirming that industrial and manufacturing demand is generally strong.

But, the subhead begins to give the game away: "Uncertainty about U.S. and Global Economies Continues; Higher Oil and Energy Prices and Costs of Goods and Services Raises Concerns."

I think anyone who pays even the slightest bit of attention to economic matters realizes that if your personal financial statement was comparable to General Electric's or Caterpillar's, or some other multinational manufacturer's, then you'd be pretty positive about your 2011 revenue growth projections, too. I'm not impugning those companies; I am pleased that they are doing well.

Unfortunately, there are other manufacturers that are not comparable in scale, scope, or activities to those multinationals. They have to work with the circumstances that prevail in their own country, states, counties, and cities. Your own finances are probably a bit more like that manufacturer: you have to pay the higher oil and energy prices, and costs for goods and services.

There is a problem for 2011 revenue growth if you are not a multinational manufacturing firms, and even if you are one of them you'll have to acknowledge the importance of consumers if you want to maintain your projections.

Another flight delay?

REB — Fri, 22 Apr 2011 20:01:00 GMT

If Boeing's new 787 commercial jet didn't already have a snake-bit reputation, now it's got the federal government trying to bring it down. The 787, also called the “Dreamliner,” will be a wide-body twin-engine aircraft with long range and carrying capacity for 210 to 330 passengers. Boeing has said it will be its most fuel-efficient commercial jet, but the development program is more than a three years behind its original schedule following six separate delays in the expected delivery date. Boeing reportedly has 850 orders from airliners for the jets, and deliveries are still set to take place this year. Among the reasons for delays have been design issues, parts shortages, and labor problems.

Along the way, Boeing announced it would build a new assembly line for the jets in North Charleston, SC — not really hiding the fact that they were aiming to avoid the labor troubles which have been so much a part of the company's history. South Carolina is a "right to work state," meaning that union membership or payment of union dues may not be used as a condition of employment.

Now, the National Labor Relations Board (NLRB), responding to a complaint by the International Association of Machinists and Aerospace Workers, says the 2009 decision to build a second 787 assembly line in South Carolina was "retaliation" for past labor actions. The NLRB intends to force Boeing to build the line in Washington State. There is a good summary in the New York Times.

Boeing is promising to contest the decision — which is good; if NLRB had done this to a smaller, less recognizable and resource-rich company (for example, a foundry group that chooses to build in Alabama or Texas than in Wisconsin), then the issues here might be overlooked.

Our contributor laid out most of what foundries need to know about the NLRB in a recent issue, but its transformation from a regulatory body into a politcal force is a threat to businesses seeking their own and their stakeholders' best interests, and a threat to states that seek to have autonomy over business in their jurisdiction. Watch how this develops.

A few bad apples

REB — Tue, 19 Apr 2011 13:47:00 GMT

Like many people, I suppose, I have seen and heard public service announcements from the Business Software Alliance that encourage listeners to report suspected cases of software piracy. I guess I supposed the bad guys were comparable to the designer-goods counterfeiters and video black-marketeers … meaning, that they were the sort of operations you had to slink pretty low to find, and only if you had some desire to do business with them in the first place.

Not so, apparently. The BSA's new Global Software Piracy Study contends that manufacturers and distributors were more frequently alleged to be using unlicensed software during 2010 than were other types of companies, and together those sectors accounted for 21% of the tips received by the Alliance last year. (Real estate and accounting firms represent the most "honest" sectors, generating the fewest reports and just 1% of the total.)

My sense is that metalcasters don't realize how pervasive software is in their operations, but from simulation through to enterprise planning, along with all the standard office and communications tasks, software represents a kind of central nervous system for a metalcaster — or any organization. It would be impossible to function very long without software to coordinate the activity.

So, the idea that some manufacturers might be using software illegally represents an unfair trade practice to their customers and competitors.

More than that, we're living through a time when the pressure for companies to compete against domestic and foreign competition is unrelenting; failure is a real possibility. And as a consequence of that, temptation lurks. Public and private morality are always at risk.

I'm happy to affirm that virtually everyone I have met in the metalcasting industry over the past several years has treated me with honesty and good will; I can't think of anyone who I'd suspect of bad character - publicly or privately. But that's all the more reason to take the issue of software piracy more seriously. It taints all of us.

The “skills shortage” gap

REB — Tue, 12 Apr 2011 13:24:00 GMT

I try to make good use of news feeds to deliver information about the industries and sectors I am supposed to know, so I didn’t have much reaction when I read today the following headline: “Foundry Industry Facing Acute Shortage of Skilled & Trained Manpower.” The surprise, however, is source of this report:

New Delhi: With the demand for castings steadily increasing, the foundry industry is facing acute shortage of skilled & trained manpower. There is need to have more training facilities especially near the foundry clusters. The Institute of Indian Foundrymen (IIF) has informed that the situation is likely to worsen as the demand of castings is likely to go up.

India, among other places, is supposed to be the low-cost alternative to the more sophisticated manufacturing centers in North America and Europe. It was only four years ago that a story in the New York Times outraged readers with the news that that city’s manhole covers were being produced in less than perfectly safe conditions in the Subcontinent.

On the other hand, fretting about workers’ skills and job training is one of the most frequent concerns of metalcasters and other manufacturers on our side of the global market. The broad idea is that precision manufacturing is the domestic economy’s advantage over low-cost labor in places like India, so manufacturers have to ensure they have well-skilled operators and technicians to manufacture their high-quality products. Only last month, an enlightening survey by Advanced Technology Services and The Nielsen Co. determined that “Manufacturing execs estimate retiring workers will cost their companies an average $43 million each over next five years,” and the “Training budgets (are) not sufficient for need”.

“Despite the perception that U.S. manufacturing jobs are scarce, the undeniable trend is that skilled workers will be in very short supply in coming years,” ATS president Jeffrey Owens said of those results. “What’s more, while much of the political debate centers around health care and basic or higher education, what matters to most manufacturing employers is vocational training.”

In my own conversations I’ve heard this message from many metalcasting and manufacturing executives. It is true, but the solution is not as simple as training more workers to do demanding jobs well — though that’s necessary, obviously. The news from abroad makes it clear that skilled labor is not going to be domestic manufacturers’ relative advantage forever, and they’re going to need a deeper, more comprehensive understanding of the purpose of their manufacturing enterprise, and what makes it valuable to the markets they serve.