Stamping Out a Living

Manufacturing Ranked No. 1 Industry for Economic Prosperity

2009-06-24T21:38:00.002-04:00

A study announced in early June by Deloitte LLP had some interesting insights into our perceptions of manufacturing.

Despite more than a year of bad news as the manufacturing sector continues to contract, a new annual index released today by Deloitte LLP and The Manufacturing Institute shows that Americans view manufacturing as the most important industry for a strong national economy. There is a wide perception gap, however, between the public's highly positive views of manufacturing's contributions to America's economic success and their negative views about pursuing a career in manufacturing.

The study goes on to observe

While Americans view manufacturing as the most important industry for a strong national economy, the index shows that they are not pursuing careers in manufacturing.

Even more alarming, These are jobs Americans want for their friends and neighbors - but not for themselves or their family members

So clearly there is some work to be done in improving the image of manufacturing.

US to loan $5.9 bln to Ford to aid fuel efficiency

2009-06-24T09:11:00.004-04:00

Well, this is interesting, especially when combined with a few other developments I'll speak about after the quote.

The US government will loan 5.9 billion dollars to Ford Motor Co. and 1.6 billion dollars to Japanese automaker Nissan to invest in improving the fuel economy of their US-built vehicles, officials said Tuesday.

The loans are the first awarded out of a 25-billion-dollar program to help automakers meet upcoming fuel efficiency standards, Energy Secretary Steven Chu said at a press conference.

"These loans will help the auto industry meet and even exceed the president's tough new fuel standards while creating jobs, reducing our dependency on foreign oil and ensuring America's competitiveness."

Another 465 million dollars will be loaned to electric sports car maker Telsa.

Additional loans will be awarded to "large and small automobile manufacturers and parts suppliers up and down the production chain" over the coming months, said Chu

Ford will use the 5.9 billion dollars retool plants in five states and boost the fuel efficiency of close to two million new vehicles annually.

Nissan will use the loans to modify its Tennessee plant to produce zero-emissions electric vehicles and the lithium-ion battery packs to power them.

As I mentioned above the quotes, there is an interesting tie-in for this blog. A lot of metal stamping dies, and the original production of them, have gone off-shore.

There are a determined bunch of people in Detroit (and no doubt in other places too, but I only know about the Detroit bunch) who want to play catchup and bring their toolmaking lead time and costs down, in line with off-shore toolers, in order to keep that work onshore. I've kept in loose touch with a few of them, belong to some of their groups on LinkedIn and other places, and in general applaud what they're doing. I did, however, question their belief that they could bring 50% of the diemaking that went offshore back. I don't think those dies are coming back unless and until they need to be retooled.

This may be the retooling opportunity they're looking for/need. Retooling for greater efficiency means making better use of steel components, smarter brackets with stiffening ribs instead of using thickness to get the strength needed, use of aluminum where possible, etc. These things mean new dies, and therefore, a chance to start over again on-continent.

So this may well be a very good thing.

Auto parts makers to shed 37,000 jobs this year, Conference Board forecasts

2009-06-18T13:55:00.001-04:00

More bad news for Canadian stampers. One can expect roughly the same results south of the border, at least in proportion.

From Yahoo! Canada Finance

The Conference Board of Canada says auto parts makers will cut 37,000 jobs, or about one third of their workforce in Canada, as the North American industry undergoes massive restructuring.

The sector has been shedding jobs for years, but this year's losses are expected to top the total of the last four years combined.

Ontario will be hard hit by the job losses since the province has most of the parts companies.

Chrysler dealers left without vehicles

2009-06-18T12:03:00.001-04:00

Here's another amusing (well, probably not to the dealers) side of the Chrysler saga. From the (Toronto) Globe and Mail:

Chrysler Group LLC will start cranking out vehicles at seven of its North American assembly plants on June 29, but some Canadian dealers say they will be unable to restock their dealerships with new vehicles because they can't get the financing they need.

Inventories have fallen to minimal levels [...but many ...] can't order new cars and trucks because they are still waiting for financing approval from GMAC LLC

This is another example of cascade failure I spoke about earlier. Seemingly unrelated things combine to topple systems that should continue to work. If it were easy to get credit another way, these dealerships would not be having a problem. They might pay a little more for credit from someone else, but at the moment, all other sources are choked off, and this one is slow.

This is another bottleneck on the road to a recovery for stampers.

Chrysler plants will open in weeks: Fiat

2009-06-18T11:52:00.001-04:00

From Canadian Manufacturing News, a Rogers publication. Some tentatively good news for stampers:

Fiat [which now controls Chrysler] announced plans to resume production at its Brampton and Windsor plants and five other North American factories at the end of June.

In addition, parts stamping, engine and transmission factories that feed those plants also will restart June 29, Chrysler said in a statement.

US Steel FAQ

2009-06-11T13:19:00.001-04:00

The Hamilton Spectator has this handy article Questions and answers on the shutdown of the former Stelco plants

Canada lobbies Congress over Buy America

2009-06-11T13:17:00.001-04:00

From the Hamilton Spectator (as a steel town newspaper, hardly a bystander in this arena), dated June 9th, 2009

Canada is launching a full court press in the U.S. Congress today against the Buy American provisions in the federal stimulus spending law.

[...]

The action is part of the ongoing campaign by our federal government to get the U.S. government to drop Buy America provisions that force U.S. municipalities and states to use American steel and manufacturing exclusively for projects paid by U.S. taxpayers.

The provisions are believed not to contravene international trade agreements because states and municipalities are sub-national jurisdictions and not subject to trade deals.

Sounds pretty weasily, doesn't it? Sure we have these NAFTA provisions, and they apply to you, but they don't apply to our states and municipalities. One wonders how Free Trade can have so many different meanings to different people.

USWA leader hurting Canadians

2009-06-11T13:00:00.001-04:00

Keeping the issue of U.S. Steel alive, the Hamilton Spectator published this letter to the editor today. An interesting aspect of the problem I hadn't considered before.

U.S. Steel bought Stelco and made record profits last year. Then the Americans ruined the world economy and U.S. Steel shut down the Hamilton and Lake Erie works, moved all our orders -- including Canadian orders -- to Pittsburgh, Alabama and Indiana

[...] what follows is some discussion of how US Steel got around NAFTA rules. But the sting is in the tail

What really hurts is our Canadian-born USWA president Leo Gerard not only backs this "Buy American" approach, but used union dues to lobby Congress to get the protectionist plan passed at the expense of Canadian workers.

If it were not for Gerard, we might be actually working, making steel at Stelco, rather than hoping our EI won't run out before we start up again.

I don't know about all of it, but at least part of it is true. Leo Gerard was born and raised in a mining family in Sudbury.

U.S. Steel, feds still at odds

2009-06-06T21:21:00.001-04:00

I'd let this issue slip to the back of my mind, but re-reading a fellow steel bloggers recent postings brought it back to mind. It seems the national media have forgotten about this story, but in Hamilton it's still in people's minds.

From The Hamilton Spectator TheSpec.com

A single guideline in the Investment Canada Act is �probably the crux� of the dispute between U.S. Steel and the Canadian government, says Industry Minister Tony Clement.

The guideline excuses foreign buyers who are unable to fulfil their commitments under the act due to �factors beyond the control of the investor.�

The question is whether the current economic meltdown qualifies as such a factor in U.S. Steel�s shutdown of the former Stelco.

[...]

Clement sent a demand letter to U.S. Steel earlier this month after determining that the temporary closure of its plants in Hamilton and Nanticoke violates promises made under the act. He is now reviewing a response from the Pittsburgh steelmaker that is �about 87 pages in total.�

But he was tight-lipped about the contents of that document today.

�You�ll be hearing from us very shortly,� he said.

And then, again, the sounds of silence.

Auto suppliers brace for uncertain summer

2009-06-02T09:38:00.000-04:00

More coverage of suppliers, now from Detroit, where a lot of parts suppliers are, and where the press has clearly been thinking about this.

From the Detroit Free Press

A fragile automotive supply base will be tested even more as suppliers wait to see if they will be part of General Motors Corp.'s future after the company's historic bankruptcy filing.

Last week, local suppliers Visteon Corp. and Metaldyne Corp. filed for Chapter 11 protection. More are expected to follow [...]

[...] analysts say GM seemed as prepared as possible to deal with strains in the supplier industry as it headed into bankruptcy.

That includes paying suppliers last Thursday instead of today, when payments for parts shipped in April could have been caught up in the court process.

The Detroit News has also been writing about the economic impact. Under the headline
Michigan feels brunt of GM's bankruptcy, they write

Michigan's share of the total job loss: 42 percent. And that doesn't count the trickle-down impact on suppliers, stores, real estate and other segments of the state's economy.

GM aftershocks

2009-06-02T09:23:00.001-04:00

From the Globe and Mail, today. Someone is starting to think about parts suppliers now.

The impact of GM's Chapter 11 filing has already started rippling through the supply network. Several companies, including Lear Corp., Johnson Controls Inc., TRW Automotive Holdings Corp. and Magna International Inc., are among GM's largest creditors. Lear, which makes seats, is owed $45-million and Monday said it won't make a semi-annual interest payment of $38-million that was due June 1.

From further down in the article:

The parts industry has been reeling for months. Canadian parts suppliers have seen their production fall an average of 40 per cent in the past year or so and roughly 10,000 jobs have vanished.

Last week alone two major U.S. parts makers, Visteon Corp. and Metaldyne Corp., filed for bankruptcy protection, joining five others this year.

Yesterday I reproduced a list of suppliers owed money by GM. The conclusion is that these people will lose much, if not all, of that money. There are roughly $400 million (US) owed to parts suppliers. I thought that number was low, but today's Globe article claims that, in advance of the court proceedings, many parts suppliers were paid up until the end of April (very rare for automotive, it would be more usual to have 75 to 90 days outstanding).

So we are left to ponder cascade effects. Another quote from the article

JPMorgan Chase & Co. analyst Peter Acciavatti said in a recent note that based on debt-trading levels, Lear, American Axle & Manufacturing Holdings Inc., Cooper-Standard Automotive Inc., and at least one other company �appear to be on the verge of bankruptcy.

GM Declares Bankruptcy

2009-06-01T11:02:00.005-04:00

Well, given the events of the last few weeks, this is hardly a surprise. None-the-less, now it is really happening.

From Yahoo Finance, originally from AP

General Motors Corp. filed for Chapter 11 bankruptcy protection Monday as part of the Obama administration's plan to shrink the automaker to a sustainable size and give a majority ownership stake to the U.S. government.

GM's bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has US$172.81 billion in debt and $82.29 billion in assets.

They owed more than twice what their assets were. The big question now is, how much of that debt was tooling owed to metal stampers and other outsources? How many upstream businesses will fail now because of the defaults? How many jobs will be lost? Is there protection for the supplier chain as part of this deal? I know it was a slow, negotiated slide into bankruptcy, but was saving the supply chain a part of the negotiations? I've heard lip service paid to this idea in the press in the last month, but see nothing in todays headlines that is on point.

From the same article:

the automaker will permanently close nine more plants and idle three others

and the article contains unconfirmed speculation on where those dozen plants likely are.

The downsized GM's brands will be limited to Chevrolet, Cadillac, GMC and Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either sold or closed.

I never got the point of Hummer. Not as a car, not as a part of GM.

It's a shame about Pontiac. We had one when I was a kid. Everyone did.

Saturns are good cars. Everyone I know with one loves it. I don't understand why they'd sell it.

It's a shame what they did to Saab. It was a good brand. My boss in Germany had one 20 years ago, and it was a wonderful car. But it became the Commodore Amiga of the auto world. They bought it and had no idea what to do with it.

The Globe had an interesting list of who the creditors are (or should we already speak of them in the past tense?)

THE CREDITORS

Name of GM creditor and amount of claim.

Starcom Mediavest Group $121.54-million (U.S.). Not a parts supplier, as far as I can see.
Delphi Corp. $110.88-million. parts supplier
Robert Bosch $66.25-million. parts supplier
Lear Corp. $44.81-million. parts supplier
Renco Group $37.33-million. not sure
Enterprise Rent A Car $33.10-million. not a parts supplier
Johnson Controls Inc. $32.83-million. parts supplier
Denso Corp. $29.23-million. I believe these are the rust proofers
TRW Automotive Holdings Corp. $27.52-million. parts supplier
Magna International Inc. $26.75-million. parts supplier
American Axle & Manufacturing Holdings Inc. $26.74-million. parts supplier
Maritz Inc. $25.65-million. ? there are several companies named Maritz
Publicis Groupe SA $25.28-million. Advertiser, I think
Hewlett Packard Co. $17.01-million. computer maker
Interpublic Group of Cos Inc. $16-million. marketer

Not to diminish the damage to non-parts manufacturers, but this is a metal stamping blog. There's a lot of part suppliers out there with their unmentionables flapping in the breeze this morning.

Tax Funded Head-Start for Low Cost Country Tool & Die Makers

2009-05-11T12:02:00.001-04:00

Joe Brown, in his blog, wrote an excellent, fictionalized (I presume) account of what it's like to be laid off, followed by an excellent analysis of why we're losing tooling money offshore and how the car companies are encouraging this.

What if we added that not only were taxpayer funds being funneled to China, the very recipients of these taxpayer funds, (GM, Chrysler and hundred�s of Tier 1 parts manufacturers) gave the Chinese competitors to North American manufacturers a 5-9% cost advantage by paying these Chinese suppliers on far better terms than they would pay say a company in Grand rapids, Detroit or Windsor.

Ford Has No Plans to Match Rivals' Scaled-Back Production

2009-05-07T08:36:00.001-04:00

I'm glad to hear someone is worrying about the supplier base (stampers amongst them)!

From the Wall Street Journal:

Bill Ford, Jr., the Dearborn, Mich. auto maker's executive chairman, said that the precarious state of auto parts suppliers remains the company's greatest concern after Chrysler filed for bankruptcy protection

Canada warns U.S. Steel about temporary shutdown

2009-05-06T14:48:00.001-04:00

When US Steel announced that the former Stelco plant in Hamilton would be shut down "temporarily", a lot of people were upset and called for action. This seems to be the first step in the action.

From the Canadian Press, via Yahoo Finance News
The Canadian government is warning U.S. Steel it must live up to production commitments at the former Stelco Inc. plants in Ontario.

Industry Minister Tony Clement said he has sent a 'demand letter' to the U.S. giant that it's temporary shutdown at plants in Hamilton and Nanticoke, Ont., may be in violation of commitments it made when it bought the Canadian steel producer in 2007.

[...]

In Clement's announcement, the minister said the demand letter is the first step in the enforcement process under the Investment Canada Act.

Lowered demand

2009-05-04T22:22:00.008-04:00

This is the second in a series of discussions of developments over the last 6 months.

How is demand for manufactured goods holding up?

Here's the picture in Canada.

Real gross domestic product (GDP) declined 0.8% in the fourth quarter, weakening progressively each month. This was the sharpest quarterly decline since 1991.
[...]
Declines in the production of goods (-2.4%) were widespread as domestic and foreign demand weakened. Except for agriculture, all other goods-producing sectors receded. Manufacturing (-4.3%) led the downturn, experiencing a sixth consecutive quarterly decline.
[...]
Business investment in machinery and equipment contracted 7.5% in the fourth quarter. All categories recorded declines, notably automobiles, trucks, and industrial machinery.

From: The StatsCan web site.

OK. So how are things doing in Britain?

Picture's not much different there.

Manufacturing output decreased by 6.5 per cent in the three months to February 2009 compared with the three months to November 2008 and was 12.2 per cent lower against the same three month period a year ago.

From: http://www.statistics.gov.uk/CCI/nugget.asp?ID=198

And how about the US?

The Canadian economy contracted at an annualized rate of 3.4% in the fourth quarter, compared with a 6.2% decline in the US economy.

So, all other things being equal (lots of other things aren't), it's tough for a low-margin business like metal stamping to stay healthy in such a volume downturn.

Let carmakers go bankrupt, say Americans

2009-04-29T13:48:00.001-04:00

We seem to be seeing a lot of this recently.

CNN's Political Ticker web site wrote, a few weeks back The public used to think that the automakers were too big to fail, but not any longer. In December, two-thirds say auto bankruptcies would create major problems or a crisis for the U.S. economy. Now most say that would only cause minor problems or no problems at all.

And Americans don't see any effect on their own lives if the automakers fail: 55 percent say they would face no problems at all if the auto companies went bankrupt. Only 37 percent say they would buy a car from a bankrupt company. But that number rises to 57 percent if the federal government stands behind the warranty on those cars.

It's all very well for the average american to "think" there will be only minor problems. But what does the average american know about the automotive industry and its related subindustries?

Here are some numbers. The big 3 directly employ 240,000 people. The supplier network for the big 3 employs another 975,000 people, for a total of 1.2 million. There's an estimated 1.7 million additional jobs created by those 1.2 million workers, for a total of 3 million jobs.

People assume that, if one of the Detroit 3 went out of business, about 80,000 (1/3 of the direct jobs) would be lost. But that's not how bankruptcy works.

When a company declares bankruptcy, if a judge grants the bankruptcy, the company is relieved (at least temporarily) from paying its suppliers. Since automotive have long been the poorest payers of any manufacturing customers, most automotive Tier 1 suppliers are owed huge amounts of money by the Detroit 3. Not paying those debts, even if only temporarily during a restructuring, could force many Tier 1 suppliers into bankruptcy. That, in turn, would force Tier 2 suppliers into bankruptcy. What you then have is the beginnings of a cascade failure of significant parts of the automotive supply structure.

But wait! It gets worse. Once you get down below assembly, to the level where actual manufacturing is done, where tools and dies are hefted, when the receiver steps in, he isn't letting go of the tools and dies so easily. You have red tape to go through to get the dies out of the shop in receivership, and into a shop that also has the equipment to run the die.

Once you've got the dies out of the bankrupt shop and into a shop that's still alive and gasping, does the new shop have the expertise to run the job? Eventually, yes, they're all smart people. But even smart people need time to work out the kinks in a new job they've never seen before. And if 50 new dies landed on your doorstep one day, no matter how diligent and how smart, it would still take a week or so per die to get it set up, run, PPAPed and submitted to the PPAP inspection process. That's 50 weeks. Holding up an entire supply chain. Replicated over and over again all through the industry. It will be total meyhem.

And it will create a second cascade failure, running backwards up the supply chain this time, as entire car lines are shut down for the lack of a particular valve stem that can't be made, a particular plating process where the local processor has been closed down and all the parts have to go to the overloaded facility in Kalamazoo, and so on.

I think this has the potential to be very, very disruptive.

GM to cut 21,000 US factory jobs, shed Pontiac

2009-04-27T13:52:00.001-04:00

Goodbye, Pontiac: Nostalgic for MTOs, Firebirds and the long-lived Pontiac Bonneville
In 1955, Lucy, Ricky, Fred and Ethel drove a Pontiac Star Chief convertible cross-country to California in a series of episodes on television's I Love Lucy.

Sad news today, Pontiac being discontinued.

The first family car I drove was a Pontiac. It was a white station wagon, long enough that you could sleep in the back if you folded down the back seats. I did sometimes on long trips, caught a few winks on the side of the road. I even bought, built and painted a model of it in my early teens. It had a truck clutch and no power steering. It was a bitch to park when I proudly drove it to York University to my first summer job, still in high school. Somewhere in a family album somewhere, we still have a picture of the 4 of us, posing in front of that Pontiac. I'm sure I don't have the plastic model any more.

The Globe is asking for your memories of the brand here.

Raw Material Pricing - Party like it's 1999

2009-04-17T14:06:00.006-04:00

Remember that old Prince hit?
I was dreamin' when I wrote this
Forgive me if it goes astray
But when I woke up this mornin'
Coulda sworn it was judgment day

As I was doing the research for this article, that tune kept going through my head. The events of the last 6 months do feel more like a dream than reality. Judgment day? We'll talk more about that later in the update series.

Raw materials are a large component of costs for metal stampers. So what has happened to the prices of the most commonly used raw materials?

Metal stampers care most about these input costs:
Steel
Copper
Aluminum
something to make the steel not rust (usually zinc or nickel)

For Copper, Aluminum, Zinc & Nickel, prices are back down to 2004 levels. In a few cases, even below 2004 levels. See these charts, courtesy of Kitcometals.com

Steel prices are down below 2007 levels.

So it's not 1999, but in a lot of ways, it's 2004 all over again.

What does this mean for stampers? Well, a major input cost has reverted to 5 years ago levels. Is that enough to ensure a return to profitability? Not usually. Stay tuned for the next part of the puzzle.

All Dressed Up, and No Place to Blog

2009-04-17T14:02:00.003-04:00

This was originally posted Tuesday, April 14, 2009 and is being reposted today with the proper blogger tools. All's well, I suppose, that ends well.

Well, I don't know if this blog is going to go out. It's certainly not going to go out well. Google has decided, in their wisdom, to force my blogger account to be upgraded to a Google account. I acquiesced, since I didn't seem to have any choice.

The net result was, I now can not access my Blog. Neither by the old account nor the new one. Thankfully, I have access to my own web server, where this blog lives, and so I can get around Bloggers road block, at least for the nonce.

I am posting this by the simple expedient of hacking the blogger-generated output using a 9 year old tool (HoTMetaL, by the way - great tool, which is why they discontinued it, I'm sure).

I had a post researched and ready to go. Alas, doing it this way is like driving on a superhighway with a golf cart. The ride is not pleasant.

I'll wait a while longer then, if they haven't figured out how to fix my accounts, I'll actually post using these stone-age tools.

A taste of things to come

2009-04-10T14:54:00.003-04:00

It could hardly have been a worse 6 months to miss. So much to summarize.
Here's what I plan to talk about over the next while.

Direct influences on the Metalstamping industry

Raw material pricing

Raw material availability

Lowered demand

The changing face of labor

Larger economic indirect influences

The bailout: If you�re in the automotive supply chain, what�s it all mean?

The bailout: If you�re not, what does that mean?

Recession/depression/inflation?

Sometimes it takes a while to get back in the saddle

2009-04-09T15:38:00.002-04:00

In December I wrote that I'd be restarting the blog soon. I guess I spoke too soon. It's now April, and the fallout from the death in the family has taken longer to resolve than I expected.

I plan to start blogging again soon. I've already started my research.

My goodness, it's hard to imagine a more eventful time in the history of metal stamping than the last 6 months. I'm going to try to summarize what has happened and make some educated guesses about what at least the near future might look like, over the next few weeks.

Unexpected absence

2008-12-14T22:02:00.001-05:00

Hi all. I've been away from the blogging world for the last 2 months, due to a death in the family. I hope to be back to it in a week or two, at which time I'll try to summarize what has happened in the world of metal stamping (short version: a lot) in the last 2 months.

Copper Leads Decline in Metals in London on Outlook for Demand

2008-09-30T19:34:00.000-04:00

And yet, Copper is still multiples of it's price a mere 5 years ago.

Bloomberg.com
Copper fell in London, heading for the biggest quarterly decline in more than two decades, on concern that worsening financial turmoil will slow global growth and crimp demand for industrial metals.
Copper has lost 25 percent this quarter, the worst performance since at least 1986

Copper Drops to One-Week Low in New York as Bailout Plan Stalls

2008-09-27T12:16:00.001-04:00

Of course, a one week low when it's already too high is of more interest to speculators than manufacturers, but it is interesting to see how these things are all intertwingled.

Bloomberg.com
Copper fell to a one-week low after the U.S. government's $700 billion plan to bail out the finance industry faltered and regulators seized lender Washington Mutual Inc., raising concerns that economic growth will stall.