2012 State of the Industry: Metal Cutting Machine Tools

Today, it’s as simple as this. Manufacturers either move ahead technologically or perish. A “let’s wait and hope” attitude in the manufacturing world is extremely counterproductive, while making brave decisions and exerting influence over one’s own destiny ensures certain survival. Our strategy as machine tool builders must be a total commitment to convincing manufacturers that it is imperative to their future success that they truly embrace advanced technology.

However, once manufacturers are convinced, the successful implementation of advanced technology is a complex process. Product performance is only one level, and by itself will not deliver fully realized customer value. Two other levels – support and process/performance enhancement – must be considered. Success is not created and delivered by any one function within an organization.

Leveraging the value inherent in advanced precision machining solutions, for instance, requires an orchestrated effort on the part of suppliers. Suppliers should have the resources in place for proactively, not reactively, working with customers for extended periods beyond the initial machine installation to ensure that value expectations are met. Additionally, suppliers must adapt the support and training they provide to match the customer’s specific needs. Every customer is unique, yet most training is standard. Situations must be addressed – not solely by the customer – such as when less capable operators struggle to get the most from a new machine.

PERSONAL INSIGHTS
Everyday we ask ourselves these three questions: (1) Are our customers fully realizing the value that they expected when they committed their investment decision in our favor? (2) Did we deliver optimal results, capable of leveraging value to the highest level of the customer’s business? (3) Did we deliver support and services and other value enhancements that enabled the customer to achieve the ROI they anticipated?

In summary, the point is this. We continually strive to be our customers’ sole source, differentiate ourselves competitively and live up to our claim of “the global reference for precision machining.” And we achieve these goals by not only supplying high performance machine tools, but also by providing the support resources necessary to ensure that our customers do indeed realize the entire value that they anticipated when they selected us as their manufacturing partner.

GF AgieCharmilles, 560 Bond Street, Lincolnshire, IL 60069-4224, 847-913-5300, Fax: 847-913-5340, info@us.gfac.com, www.us.gfac.com.

Rajas Sukthankar
Director of Sales, Motion Control Business – Machine Tools, Siemens Industry, Inc.
Provides advanced CNC controllers, software and support services for milling, turning, grinding, drilling, metalforming, laser, and other precision metalworking applications.

CURRENT STATE OF BUSINESS
Impetus from inventory rebuilding, an asset market rebound, exports and government spending – on manufacturing and the U.S. economy broadly – started to lessen in 2010 and have faded rapidly as 2011 has progressed. Capital formation and deleveraging since the recession began have lessened the risk of a second deep contraction, but serious impediments to robust economic growth remain with high unemployment, an excess supply of housing and nonresidential structures, stagnant or declining wages and an increasing regulatory compliance burden.

With virtually no upside heading into 2012, the overall economy has little cushion to absorb additional economic shocks. We saw a strong rebound in manufacturing sector in 2011, with a great recovery in the auto sector. Nonetheless, the manufacturing rebound is slowing sharply and we expect sharp decelerations in sales growth in 2012 and 2013, with the ever-growing concerns about the economic future of the Eurozone, diversification of the supply chain resulting from the after-effects of the tsunami in Japan, and concerns about the supply of rare earth minerals from China – which controls about 90+ percent of the worldwide supply of rare earth minerals and is continuously cutting production to keep prices high.

For the machine tool sector, we see the overall market as being stable and increasing in 2012, but at a much slower pace. The main drivers of growth for the machine tool sector are continued investment in the automotive sector, especially on the powertrain side due to new CAFÉ standards, increased activity in aerospace due to ramping up of 787 production, and continued demand in farm equipment and a strong agricultural sector resulting from grain exports to China.

MAJOR TRENDS
The manufacturing sector shed a large number of jobs in the 2008-2010 timeframe. The sector is not willing to give back the productivity gains achieved during the subsequent lean period. We see the following trends developing in the manufacturing sector:

1) The overall employment in the manufacturing sector will grow with the economy but will not be at the 2007 pre-crisis level.

2) Increased automation and lean manufacturing practices will drive further productivity gains in the industry.

3) ‘Lights out machining’ will gain more traction as manufacturers try to squeeze labor cost out of their products to compete with Asian and Latin manufacturers.

4) The blue collared jobs with low skill sets on the factory floor will be under threat as increased automation in the industry gradually replaces manual tasks in the next decade.

5) ‘Energy efficiency’ will gain more traction as manufacturers try to curtail the cost impact of growing energy bills.

New technology being introduced is network centric and has built-in functionality to provide ‘lights out machining’ capabilities to the users of machine tools. There are 4 quadrant line regenerative drive systems that feed energy back into the active lines during regenerative braking of spindles and large machine axes saving power. Controls now use new software features such as reducing reflective power of the servos during machine standstill that reduces the carbon foot print of the machine

CRITICAL ISSUES
There are several critical issues facing the industry:

• The Euro zone debt crisis and its impact on the U.S. economy
• The impact of rare earth minerals on the price of magnets used in motors
• Political gridlock in Washington resulting in uncertainty about future manufacturing policies
• Shortage of skilled labor to handle

Along with a number of other U.S. companies, we are active in meeting representatives from Congress and the White House to demand action on rare earths and industrial manufacturing policies. We are also introducing newer controls that help machine owners be instantly productive without much training through an innovative HMI that promotes ease of use.

PERSONAL INSIGHTS
On the domestic front, gains in business equipment investment have slowed sharply from the rates of growth seen in the period immediately following the recession. Overall spending growth on equipment and software slipped below 10 percent from year-to-year in 2011Q2, a marked deceleration from the double-digit gains posted in each of the four previous quarters.

Investment in industrial equipment, meanwhile, saw increases moderate to their lowest in a year at less than 7 percent year-to-year – down sharply from 17 percent in 2011Q1. This slowdown in capital formation is expected to persist through the end of the forecast horizon in 2013 as rates of return remain low in the face of a prolonged stagnation in broader economic activity. At the same time, business investment in structures is expected to continue to languish.

Though expected to outpace public sector construction, it is hardly on the precipice of a renewed boom – indeed, it is barely on the precipice of consistent growth of any degree, with gains expected to average less than 1 percent over the next two years, before accelerating modestly to 6 to 7 percent in 2013. Construction of industrial facilities is seen faring better than the overall total, but is unlikely to see sustained robust growth before 2013.

Siemens Industry, Inc., 390 Kent Avenue, Elk Grove Village, IL 60007, 847-640-1595, Fax: 847-437-0784, www.usa.siemens.com.

Don Lane
President and CEO, Makino, Inc.
Manufacturer of horizontal and vertical machining centers, electrical discharge machines and production systems for the die/mold, aerospace and automotive parts industries in North and South America.

CURRENT STATE OF BUSINESS
The current recovery we are experiencing in the manufacturing industry has been quicker, stronger and more robust than that of any previous downturn in history. Sales are the highest they have been in nearly 15 years and show no sign of slowing down. Many are caught off guard by this outlook, but if you dig a little deeper, there is ample evidence to support the growth that we are experiencing.

The weakened dollar has had a major impact on the ratio of imports to exports, fueling increased production. With the combination of overseas quality issues and rising labor costs in countries such as China, many companies are looking to produce closer to home with facilities in North America. With few alternatives for returns, many companies plan to spend their significant hoard of dollars by investing in their own businesses and upgrading their facilities. Many North American manufacturers are seeing shortages in manpower, and as a result, they are looking to new machine technology to improve their capacity and efficiency. A variety of market sectors, including automotive, aerospace and titanium manufacturing, are seeing increased production levels.

We see general strength in a wide variety of industrial markets, but I would comment specifically on several manufacturing markets. There is currently a structural boom in commercial aircraft that should last through this decade. With North American production levels at the highest they have ever been in this segment, demand for additional capacity continues to increase. Within this market is also a shift toward titanium components in modern aircraft design. As a result, the demand for titanium part production is beyond capacity, leading many North American manufacturers to invest in these capabilities.

The automotive manufacturing segment is also seeing a significant rebound since the recession. In addition, the increasing demand for newer, more compact designs has helped tooling investments for new engines and transmissions and has also spurred growth in the die and mold industry. Also, the firearm and oil and gas industries are doing very well. Barring any catastrophic events, I believe all signs point to continued growth as we look toward 2012.

MAJOR TRENDS
There is a growing trend toward automated capabilities as many manufacturers focus on securing returns with improved efficiency, productivity and capacity. Automated technologies offer that level of performance with flexibility for future expansion. Manufacturers are also looking to automation to fill in labor gaps due to shortages in skilled manpower. With material handling systems, robotic cells and in-machine automation technologies, manufacturers can more easily focus their skilled labor on value-added activities for improved efficiency.

We believe that technologies are continuing to evolve in machines so that they are not only more productive, but also smarter. The onboard computing power continues to strengthen, giving us the opportunity to make the machines not only easier to use (through better operator interactions) but also more reliable and safe as we monitor more operating conditions.

The technologies are also evolving in a way that enables us to make machines that are more stable and accurate, making the production of parts more consistent. You can see the same trends the world over, with demand for more productive, more reliable, more accurate and easier-to-use machine tools. Finally, we are expecting standards to begin to emerge in the industry that will promote the networking of machines, enabling data to be shared across the shop floor. This will, over time as these standards are embraced, also contribute to higher productivity.

CRITICAL ISSUES
The shortage of skilled manpower is an issue that this industry is facing and will continue to face without some level of action. There are numerous openings across North America for skilled operators, application engineers and process engineers. In an effort to facilitate an expansion of the skilled labor pool, more manufacturers are going to be investing more heavily in recruiting, training and education initiatives. We are expecting that the young people and our education institution in the U.S. will awaken to the opportunities that exist in manufacturing for high paid, exciting jobs.

PERSONAL INSIGHTS
Despite perceptions that the overall economy is struggling, North American manufacturing has been a positive growth area for the economy during the past year. We are expecting to see growth rates continue to be above the overall GDP growth rates through 2012. This growth will enable manufacturers to continue investing in their businesses, and North American manufacturing will continue to be a pretty good thing to be associated with in the year ahead.

Makino, Inc., 7680 Innovation Way, Mason, OH 45040-8003, 888-625-4664, Fax: 513-673-0962, www.makino.com.