Manufacturing Outlook October 2020 by Manufacturing Outlook

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PRINTING:

A PROVEN STEP FORWARD, EVEN DURING A TIME OF UNCERTAINTY

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MANUFACTURING OUTLOOK PAGE 6

42% OF SMBS RISK FAILING IN Q4 2020 AMERICANS SAY THEY PREFER PRODUCTS MADE IN USA AND WILL PAY MORE FOR THEM PAGE 22

SEPTEMBER ISM PMI: 55.4%

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Released October 1st -The Full Executive Summary Report On Business - Page 24

Manufacturing Outlook / October 2020

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Boost your sales while protecting your cash flow. Email ExportHelp@exim.gov or call 202.257.4082 to get started today.

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Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON ROSEMARY COATES LAWRENCE MAKAGON Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

Text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. © 2020 Jacket Media Co. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher. Manufacturing Outlook is a registered trademark of Jacket Media Co.

TABLE OF CONTENTS

5 PUBLISHER’S STATEMENT A word from our publisher

SOUTH AMERICA OUTLOOK Brazil in the spotlight

MANUFACTURING OUTLOOK A look at manufacturing around the globe

ASIA OUTLOOK China, Japan and India

THE CASS TRANSPORTATION INDEX REPORT A look at shipping volumes and costs

EUROZONE OUTLOOK A look at Europe

10 COVER STORY: 3D PRINTING: A PROVEN STEP FORWARD EVEN DURING A TIME OF UNCERTAINTY by Greg Elfering, President of Ultimaker Americas

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

14 42% OF SMBS RISK FAILING IN Q4 2020 by Thomas R. Cutler

16 EDUCATING MANUFACTURERS ABOUT PUSH MARKETING IN THE COVID ERA by Thomas R. Cutler

18 THE MANUFACTURING OUTLOOK FOR JACKSONVILLE by Thomas R. Cutler

22 AMERICANS SAY THEY PREFER PRODUCTS

MADE IN USA AND WILL PAY MORE FOR THEM by Rosemary Coates

GLOBAL PMI OUTLOOK by Norbert Ore

34 THE CREDIT MANAGER’S OUTLOOK by Dr. Chris Kuehl

38 METALS OUTLOOK The cost, making and treating of metals

40 AEROSPACE OUTLOOK The aerospace industry

42 ENERGY OUTLOOK Energy and the environment

ISM MANUFACTURING REPORT ON BUSINESS

Auto industry news

AUTOMOTIVE OUTLOOK

NORTH AMERICAN OUTLOOK

ISSUES OUTLOOK

Manufacturing in the US, Canada & Mexico

Issues around the globe

Open call for...

Contributing Writers for new and existing content. Let’s start a conversation – Contact us at info@jacketmedia.com or visit mfgtalkradio.com/writer for more information.

PUBLISHERS STATEMENT Publisher’s Statement

The K-Shaped Recovery is Every Recovery As manufacturing moves through this odd time in America, we are hearing about different ‘shapes’ of the recovery using letters of the alphabet: V, U, W and K. The first three are fairly self-explanatory; the K-shape could actually be said for every recovery because it conveys that some parts of the economy are in growth and others are in contraction. That is nothing new. One only needs to read the ISM’s Manufacturing Report of Business® included in every issue of this ezine to see that some industry segments report growth while others report contraction in any given month, year after year. Even in a booming economy, some industries suffer. During the first decades of the 20th Century, as the automobile became more common on America’s bumpy roads, buggy whip manufacturers suffered, wagon making declined, horse tack leather workers lost their jobs, because that mode of transportation was fading away. In the midst of this pandemic, those businesses unable to deliver their goods via mail, package delivery services, independent delivery services, or curbside delivery are suffering. Even pre-pandemic, in the midst of a strong economy over the past 10 years, anchor stores and well-known retail names in shopping malls were under extreme pressure, and had been for almost a quarter of a century as different ways to shop popped up on the Internet. Retail stores that rely on in-person foot traffic are fading away. However, consumption, at present, remains strong, and as long as consumers are buying, manufacturing will continue to make products. If consumer spending contracts, then manufacturing will pull back, but despite a few comments about a recession in the main stream news, the main economic indicators which include New Orders, and Production, with a 13.1 point spread between New Orders at 60.2 and Inventories at 47.1 show quite the opposite. However, some segments are on the top leg of the ‘K’ and others are on the bottom leg of the ‘K’, which isn’t at all unusual. As manufacturing recovers, new technologies are going mainstream including 3D printing for production runs and cybersecurity to protect manufacturers from the theft of their Intellectual Property (IP) including designs, inventions, and even their customer lists and pricing information. It is no longer that bad actors want to get in and out quickly; they want to get in and stay in as long as possible to gather as much information as possible before they get booted out. Companies need to look into their systems now, because the cyber-thieves may already have come in through a weakness in existing systems. To stay on top of these rapid developments, be sure to subscribe to this ezine at manufacturingoutlook.com, and listen to the podcasts at jacketmediaco.com, including Manufacturing Talk Radio to get the information you need each day to stay ahead of the pack. Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast.

Manufacturing Outlook / October 2020

MANUFACTURING OUTLOOK

OCTOBER 2020

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI AT 2-YEAR HIGH IN SEPTEMBER. JAPAN STILL IN CONTRACTION. GERMANY PULLS UP EU PERFORMANCE. INTERNATIONAL TRADE COMES BACK TO LIFE.

by ROYCE LOWE The Bureau of Labor Statistics jobs report for September shows a gain of 661,000 non-farm payroll jobs, with the unemployment rate falling to 7.9 percent. Manufacturing gained 66,000 jobs, of which some two-thirds were in the non-durable goods component, led by motor vehicles and parts (14,000) and machinery (14,000). Despite these gains over the past five months, employment in manufacturing is 647,000 below February’s level. Transportation and Warehousing added 74,000 jobs in September. The Bureau of Economic Analysis recently released its ‘third’ estimate for the annual rate of Real GDP growth in the second quarter of 2020, putting it at minus 31.4 percent. The figure for the first quarter of 2020 was minus 5.0 percent. The ISM PMI figure for U.S. manufacturing eased slightly from August’s 56.0 percent to 55.4 percent in September. The overall economy returned to a fifth month of expansion.

Manufacturing Outlook / October 2020

IHS Markit’s remarks on U.S. manufacturing for September show the best improvement in operating conditions since January 2019. Production rose at its fastest rate in ten months, and there was the secondsharpest rise in employment since November 2019 on the heels of a solid rise in new orders and a second monthly rise in backlogs of orders. New export orders picked up. Production expectations moderated in September, in light of increasing uncertainty regarding the coronavirus and the upcoming election. The Markit PMI for September was up very slightly from August’s 53.1 to 53.2 GLOBAL STEEL PRODUCTION WAS UP BY 0.6 PERCENT Y-O-Y IN THE MONTH OF AUGUST for the 64 reporting countries – which represent 99 percent of world crude steel production – to 156,244 MT. U.S. crude steel production for August was 5.588 MT, down 24.4 percent year-over-year. Canada produced 0.825 MT of crude steel in August, down 25.7 percent

MANUFACTURING OUTLOOK year-over-year. Mexico produced 1.250 MT of crude steel in August, down 17.3 percent year-over-year. Brazil’s crude steel production for the month of July was 2.701 MT, an increase year-over-year of 6.5 percent. The UK produced 0.566 MT of crude steel in August, up 11.2 percent year-over-year. Crude steel production in Germany in August was at 2.830 MT, down 13.4 percent year-over-year; in Italy .939 MT, up 9.7 percent year-over-year; in France 0.722 MT, down 31.2 percent year-over-year and in Spain 0.696 MT, down 32.5 percent year-over-year. Russia’s crude steel production for August was at 5.550 MT, down 4.6 percent year-over-year; Ukraine’s was 1.827 MT, down 5.7 percent year-over-year.

CHINA produced 94.845 MT of crude steel in August, up 8.4 percent year-over-year; Japan 6.446 MT, down 20.6 percent year-over-year; India 8.478 MT, down 4.4 percent year-over-year and South Korea 5.800 MT, down 1.8 percent year-over-year. Taiwan produced 1.625 MT in August, down 12.4 percent. Primary Global Aluminum Production in August was reported at 5.485 million tons, with production in China, at 3.170 million tons, representing 57 percent of world total. Production was 480,000 tons in GCC; 347,000 tons in the rest of Asia; 280,000 tons in Western Europe; 331,000 tons in North America and 349,000 tons in Eastern and Central Europe. THE ECONOMIST magazine, in its latest weekly report on world economies highlights changes in Gross Domestic Product (GDP), Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted. Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. Manufacturing Outlook / October 2020

CASS INDEX OUTLOOK

SEPTEMBER 2020

CASS TRANSPORTATION INDEX REPORT

by CASS INFORMATION SYSTEMS, INC. The Cass Freight Index shows the “V” shape of the recovery. Earlier in the year, as the economy was starting to reopen, there was a lot of speculation surrounding the “shape” it would take – everything from an “L” to a “V” to a “W” to a Nike swoosh to a square root sign. Well, in looking at the Cass freight data, it was a “V.” We should see positive y/y comps for the first time all year in October, if the absolute level just holds at September levels. Cass Freight Index - Shipments Related specifically to how much freight is moving, Cass Freight Index shipment volumes were only 1.8% below year-ago levels (Chart 1), significantly better than last month’s (7.6%) y/y change, and the best comp reported since November 2019. The raw index number rose 7% from August’s level to the highest reading since (also) November 2019. The shipment index is now 27.5% higher than the April lows, and we see it staying strong through year-end, as inventories remain relatively lean, and we expect freight to keep moving. Consumer confidence, while still low, is seeing signs of life, which is encouraging. Maybe it’s due to optimism around the election, or optimism from businesses continuing to re-open, and/or optimism around healthcare advances, but if this continues, we expect it to be good for the Cass Index readings ahead.

Manufacturing Outlook / October 2020

Consumer turning a corner? Looking at the international piece of the puzzle, imports are growing, which drives a lot of freight moving through the domestic system. Data for both the Ports of LA and Long Beach through August shows the surge in imports. The Port of LA just announced a 17% y/y increase in September import volume, so this trend likely continued to strengthen in September, as the Cass shipment data demonstrated. We have talked before about the “inventory dump” at the West Coast ports due to low inventory levels, where large U.S. importers are bringing in a disproportionate amount of their containers to southern California and then moving truck or rail around the U.S. to avoid stock-outs. This results in higher transportation costs, but it’s necessary to keep goods in stock (vs waiting for the longer transit time it takes for containers to get from Asia to the East Coast or Gulf Coast ports). Air cargo remains tight, and there will be high rates through year-end due to (1) most commercial belly capacity staying out of the market until probably mid-to-late next year, and (2) an increase in consumer electronics product launches in Q4 2020 (such as the iPhone 12). Freighters have been operating for months near peak levels, so peak season ahead will be tight and yields high. Imports strong into U.S. West Coast ports The weekly rail traffic data showed further improvements through September and just

CASS INDEX OUTLOOK posted positive y/y comps in October – both overall and excluding coal & grain. This data set tracks closely with the Cass Freight Index, so given that total rail carloadings have just turned positive here in October, we expect Cass Index trends may turn to y/y growth this month as well. Expenditures With respect to overall spend on transportation, the Cass Freight Index for expenditures increased 1.2% y/y in September – 7% higher than last month, 29% better than May’s low, and the highest freight spend we’ve seen since June 2019 (and that’s with significantly less contribution this year from fuel surcharge revenue – Exhibit 7). As a reminder, the expenditures index measures the total amount spent on freight. Diesel prices lower y/y, otherwise dollars/bill (yield) would be even higher. Cost per shipment (simply the expenditures index divided by shipments) is increasing as trucking rates rise. There are real constraints on driver and industry supply and fewer trucks running (Exhibit 9), so as freight has rebounded, the capacity squeeze has driven rates up significantly. We don’t see much capacity entering or returning the rest of the year, so as supply/demand remains tight, we expect continued growth in the average freight bill. Cost per shipment moving higher, as capacity has tightened in the truckload market. Both large and small trucking fleets have shrunk in 2020. Truckload Linehaul Index The Truckload Linehaul Index, measuring permile linehaul rates, takes a look at the largest (and most fragmented) market in the domestic transportation landscape. This index declined 3.4% y/y in September. Still, this was the highest reading since December 2019, indicating a turn in truckload pricing. We believe it is not higher only because it’s mostly tied to contract rates and not the faster-moving spot market. As contract rates are repriced over the coming quarters, this will play catch-up and turn to y/y growth. The combination of rising and healthy demand with limited supply is causing shippers to pay more to get their freight moved, as “turn-downs” by carriers are still at very high levels. This is evident from the spot rates posted in through

early October. Spot rates are tracking much higher y/y (including fuel surcharges) in the dry van, flatbed, and reefer markets, with dry van now above 2018 peak levels. All truckload spot rates near, at, or above high 2018 levels. We note the Cass Truckload Linehaul Index has a strong correlation to the quarterly yield metrics reported by the publicly traded TL carriers. Cass Truckload Linehaul index shows a turn underway into Q4 with public carrier rates. Cass Intermodal Price Index The Cass Intermodal Price Index, measuring total per-mile costs, looks at the smaller intermodal market and shows much worse trends than TL, falling to a new low of (21.4%) y/y in September (and down 4% sequentially from August – not due to fuel). This is the lowest absolute reading since September 2010. There are two main drivers of this – 1) the fuel surcharge – while the Cass Truckload Linehaul Index excludes fuel surcharge, the intermodal index includes fuel surcharges, and 2) intermodal pricing has been on a lag vs TL pricing, so as intermodal demand improves further and TL contract rates move higher, intermodal rate increases should follow. In summary, the Cass Freight Index showed a big step up in September, in both shipping volumes and overall spending. We expect the rising price environment to continue through year-end and into 2021, as contract pricing in both TL and intermodal are reset higher. Demand should be strong at least into Q1 2021 due to inventory restocking, so we believe we’ll see positive y/y shipment growth in Q4 of this year. Manufacturing Outlook / October 2020

COVER STORY

PRINTING: A PROVEN STEP

FORWARD EVEN DURING

A TIME OF

UNCERTAINTY by Greg Elfering, President of Ultimaker Americas

â&#x20AC;&#x153;Weather the stormâ&#x20AC;? has been the mindset of many executives since the pandemic started to affect their business operations in Q1. Due to the uncertainty and complex issues related to the pandemic, there has been an increasing amount of pressure on executives to find solutions that improve production, transportation, and logistics. However, the pandemic served as a catalyst for change. The trends discussed before the virus broke out, such as digital transformation, autonomous factories, and shortened supply chains have accelerated as markets and expectations shifted. Now, those who do not pivot and adapt heading into 2021, will quickly be left behind, beaten by their competitors.

Manufacturing Outlook / October 2020

COVER STORY Fortunately, 3D printing and additive manufacturing has been the light at the end of the tunnel for many executives and has enabled manufacturers across industries to make strides towards recovery and sustainable economic improvement. As a result, the industry will see increased rates of adoption as 3D printing was the focal point across industries amid the pandemic. After showcasing how the technology helps deliver products in a quicker, more consistent, and reliable manner even when demand was at an all-time high, thereâ&#x20AC;&#x2122;s no doubt the space will experience continued growth. Rewind to the Beginning of 2020 Before the pandemic, there was a steady evolution of large centralized 3D printing operations taking place at different organizations. Companies were trying to integrate vertically, which meant controlling both the means of production as well as the materials needed to create goods. The focus was on a specific concentrated area of production, most likely a physical warehouse or factory. From there, companies were at liberty to print on their own schedules and follow their specific processes, while minimizing outside disruption, to achieve the best results.

When the pandemic struck, the benefits of 3D printing were spotlighted. Additionally, before COVID-19, 3D printing was starting to hit its stride in the market. The awareness level was rising as more companies deployed the technology in their assembly lines and production methods, shifting the most popular uses of the technology away from prototyping. Due to the low cost or investment, rapid production speed, and the ability to create highly customized pieces,

3D printing provided the best option for companies across the aerospace, construction, automotive, and industrial goods industries. 3D Printing Utilization During COVID-19 With the supply of items running low in hospitals for the first months of the pandemic, hospitals desperately looked for solutions. Stories inundated the media about how individuals with access to 3D printers, and the companies that created them, volunteered their services to solve the growing crisis. Companies began mass-producing a wide variety of innovative critical replacement parts which directly were utilized by frontline workers as well as the patients that needed them. 3D printing allowed the creation of critical replacement parts that were designed in not only a shorter period of time but also were pragmatic in regards to safety and, when applicable, reusability. The efficacy of 3D printing in healthcare proved the value of the technology for other industries. But healthcare was not the only field which suffered during COVID-19. The pandemic exposed some vital flaws in both company supply chains as well as business operations. Supply chains are built upon many intertwining factors and the beginning months of the pandemic showed that if one of the links goes down or is delayed, the entire process suffers greatly. With 3D printing, more of these operations can be moved closer if not to the site of production, which ensures that issues in one part of the world have a limited impact on continuous production cycles in other parts of the world. Manufacturing Outlook / October 2020

to the production team, or providing more autonomy for the workers themselves. Beyond that, they can receive training from a variety of sources, including 3D printing academies, while also receiving individualized attention by an expert to receive the advice or help needed when creating a part. Where Does the Industry Go Moving Forward?

In addition, 3D printing empowers manufacturers to solve problems within their own factories. Once the pandemic limited access to supplies, many companies leaned on the technology to enable iterations of ideas, and gave manufacturers the opportunity to print production parts. Workers have the ability to identify an issue on the factory floor and immediately work on finding a solution. Whether it be printing prototypes, collaborating by sharing designs with other locations, building manufacturing aids, and creating end-use parts on demand, 3D printing is able to make these processes easier. One of the major benefits of 3D printing is the open-sourced designs that can be found by makers across the community. Once a design is used and approved, they can be shared freely for anyone else with a printer to replicate. Now with printers in separate locations, the same design can be used to produce a good which rapidly shortens supply chains while keeping the same integrity amongst manufacturers. Users can continue applying the processes they are comfortable with, but also utilize the software to share and access design files with colleagues in separate locations. COVID-19 exacerbated issues within closed systems operations where only a handful of employees knew how to operate machinery. 3D printing makes systems accessible to all employees, whether that means being able to easily operate the printers, continuing to use materials familiar

Manufacturing Outlook / October 2020

A fourth industrial revolution is underway. Back in May, Forbes predicted that COVID-19 would cause manufacturing to experience five years of innovation over the course of the next 18 months. 3D printing will play a large part in that transformation, but it will be critical to help professionals gain the knowledge necessary to implement the technology seamlessly. With the educational components available, the skill gap is beginning to close. Jobs that used to be only available to highly skilled CAD (computer-aided design) software engineers are now accessible to all types of factory workers. Utilizing easily accessible systems and having a hands-on approach to solving problems has increased the productiveness of companies. A current trend, which will surely continue for years to come, is the democratization of 3D printing. The technology is being applied to an increasing range of applications and products while the toolset to operate the machines is at the disposal of a growing base of new mechanics. Becoming a maker is as easy as having a basic understanding of how to operate the printer and then selecting parts from a touch screen. Within the subset of desktop printers, printing continues to rise, and more employees are able to create parts that perform better than traditional manufactured parts. They can also reiterate old products to perform completely new functions. With an understanding of ease, the focus shifts to the availability of materials for companies to use along with their printers.

COVER STORY

Manufacturers know that when it comes to creating a product, there are a few things that must be identified. First the idea must be developed, then the next step is figuring out how the product can be built that upholds high quality and durability standards, and finally ensuring that the product is safe for use. Ultimaker has made the effort to work with third-party chemical companies in a constructive way. These companies have invested heavily in their polymers and materials so, in a partnership with a 3D printing company, they are making an investment in the technology as well. Together, both sides are able to create a regulated but open market where companies and makers can receive access to the materials they need for production. Customers overwhelmingly support these open marketplaces and systems because they can freely collaborate and compare designs. Finding a way to consistently strengthen the design phases of products, while providing customers with a good experience from beginning to end, is one of the rare features that 3D printing is able to take advantage of.

While 3D printing may have proven its capability during the critical situation of COVID-19, its applicability and productivity are easily reproducible for any manufacturer across any industry. Forecasts for the industry expect to see exponential growth over the next few years as more industries move forward with exploring the technology. In addition, it allows for supply chains to be shortened, which increases efficiency. This not only saves money for businesses but also provides more control that is desperately needed. When humans face a crisis that halts standard operating procedures almost entirely, they adapt and evolve to create plans that function at a higher level. Moving forward into 2021, it is clear that additive manufacturing and 3D printing will become the norm for businesses across the world. Author profile: Greg Elfering, is President of Ultimaker Americas, a manufacturer of small footprint 3D printers. He has 15+ year of experience with additive manufacturing and 3D printing. He can be reached at iaverback@shiftcomm.com.

Manufacturing Outlook / October 2020

MANUFACTURING TIDBITS

42% of SMBs Risk Failing in Q4 2020 by T.R. CUTLER

While there have been some spotty encouraging trends in the manufacturing sector, the impact has been too deep for too long.

To get an understanding for just how bad things are in the small business economy right now, small business owners compared Q4 2019 revenues to what they anticipate for Q4 2020, and the percentage of those revenues they would need to attain to stay in business into 2021. The number one factor slowing recovery is low consumer confidence caused by the increasing Coronavirus cases. The prognosis for many small manufacturing businesses during Q4 is not good according to an Alignable Pulse Poll of 6,300+ small business owners. Alignable is the largest online referral network for small business owners with over 5.5 million members across North America. The survey, conducted from September 18-21, 2020, asked how much revenue small business owners expect to earn in Q4 2020 and how much they need to stay in business. Combining those answers, the data revealed that 42% of small businesses might be forced to close permanently before 2021. Drilling into the data, 38% of B2B firms could shut down in Q4. Nearly two-thirds (63%) of respondents said they would apply for additional relief funding if made available. When the Coronavirus Crisis hit the U.S. in March, Alignable started tracking it, expecting it to rise and then fall as the country tackled this problem.

Manufacturing Outlook / October 2020

When it comes to another round of federal relief funds, the data showed that 72% of businesses experiencing negative financial impacts would apply for additional funding if offered. However, 37% of that group said they would only apply if the terms provided greater flexibility around using the money.

MANUFACTURING TIDBITS

Percentage of SMEs that could close by the end of 2020 One in five respondents expect more than half of their clients might shutter before the end of the year. An additional 26% estimated that 25% to 50% of their clients were at risk. This clearly illustrates the underlying pressures facing B2B businesses; when too many clients shut down, the underlining business will be in serious jeopardy without a dramatic uptick in new business sales. National Small Business Week is about celebrating opportunities for SMEs. The Small Business Economy represents over 45% of GDP and is responsible for 65% of all new jobs created. Those numbers are evening greater in the manufacturing sector. Recovery is going to take a sustained and significant effort on the part of every manufacturing business in the country.

W H AT P E R C E N T O F B U S I N E S S C L I E N T S A R E AT R I S K O F FA I L U R E ?

20%

54% 26%

Less than 25%

25% to 50%

51% or More

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 21st year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. More than 4600 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com. Manufacturing Outlook / October 2020

MANUFACTURING TIDBITS

Educating Manufacturers About PUSH Marketing in the COVID Era by T.R. CUTLER

The wrong questions are being asked by manufacturers who are scrambling to figure out a new marketing paradigm due to COVID.

purchase. It is false. Even page 1 of the Wall Street Journal does not guarantee a single new customer or purchase order.

Too often the wrong questions include: What’s the circulation of a publication? What’s the conversion-to-inquiry from a published feature article?

Until COVID, many manufactures attended national conference and tradeshows to generate the bulk of leads. That will not happen any time soon. Trade shows are being cancelled in favor of remote events which have poor traction unless particularly specific in application.

What’s the conversation-to-sale from a published feature article? These questions are being asked to cost-justify the cost or expense of getting an article published. Conflating sales functions with marketing is a fundamental error. The reality is that in all industrial decision-making processes there are many key influencers. If the solution is based in technology, automation, lean manufacturing, or best-practice processes, published content which speaks to all involved can become the factor of whether a sale happens. Too many have watched Constant Contact commercials on television and assume that vast amounts of eager customers (or prospects) will immediately engage and

Manufacturing Outlook / October 2020

The next default for naïve manufacturing marketing is to buy print advertising. When calculating the cost and return-on-investment, it rarely generates sufficient inquires and sales to cost-justify the expense. Super specific print advertising to a targeted audience, such as software for moldmakers, can be effective, but it still requires multiple placements over time. There are no quick lead generation programs. The right questions The most important questions for manufacturers in the COVID era, begins by clearly knowing the target customer. This must be answered prior to creating messaging. What are the prospects pain points? How does a solution provider best offer a unique value proposition?

MAANUFACTURING TIDBITS What is the competition doing to be seen by the same customer prospect universe? Sadly, too often manufacturers get sucked in Google Adwords or even use the competitions name to divert interested customers. There is not a constant evaluation and declaration of why a solution bests the competition. A feature article campaign The cumulative short-term impact of a consistent weekly drip campaign to prospects, sorted by industry sector, job function, and from credibly respected publications, transform manufacturersâ&#x20AC;&#x2122; marketing outcomes. One article cannot create velocity of customer awareness. One article in one publication will not convince the myriad of decision-makers described earlier. A bucket of published feature articles from which to advance a sale is the only solution. If a salesperson is speaking to a lean manufacturing team, utilizing published articles with a variety of published content assuages the concerns of each person. An operations manager is going to be differently influenced and persuaded that a C-Suite executive. A QA/ QC professional wants to hear diametrically different information than an industrial engineer. Most PR firms fail when marketing for the manufacturing sector Most PR firms pitch a story. They have no relationships with the industrial sector and email hundreds (even thousands) of editors who summarily delete the email pitch. There is zero nuance about the way most PR work with manufacturers. They are pitching a new plantbased burger the same way they are pitching robotics and automation. They may get an article, even several published. Without a consistent stream of newly published fresh content, the marketing messaging campaign fizzles. The manufacturers are disillusioned because the conversion-to-sale was non-existent. Instead there must be a guarantee to get no fewer than nine feature articles published each quarter. Thirtysix feature articles a year, fed into a power email drip campaign and supporting sales teams, is instrumental in shortening the sales cycle (often 90 â&#x20AC;&#x201C; 180 days less) and building a brand, reputation, thought-leadership, and yes, customers. Typically, the second year of this type of marketing outreach campaign consists more about customer case studies and profiles. When bolstered by aggressive press releases crosspromoting published article, it is like putting content on steroids. It works. In 1999, TR Cutler, Inc. founded the Manufacturing Media Consortium. It now has 8,000 members worldwide. These are the editors, freelancers, staff writers and reporters,

the economists and thought leaders who are the microphones to the latest and greatest information about the industrial, distribution, and manufacturing sectors. The state of manufacturing feature articles: short, informative, and consistent Twenty years ago, it could not have been imagined that most content would be read on a phone 67% of the time. Nor could one foresee the death of an extensive whitepaper or exhaustive client case study. Now (like the article being read) the manufacturing feature article is typically 700 â&#x20AC;&#x201C; 1000 words, with a pie chart. This modality defines the scope of these feature articles. It is not bad, simply different. The attention span of manufacturing decision-makers requires being in front of them with concise information, interesting perspectives, variety of nuanced speaking in the vernacular and issues of each decision-maker, and most of all consistency.

MANUFACTURING TIDBITS

The Manufacturing Outlook

for Jacksonville by T.R. CUTLER

Manufacturing Outlook / October 2020

MAANUFACTURING TIDBITS During a time of economic, health, and industrial flux, it is important to look at specific areas that are thriving despite these conditions. There are many factors which influence these geographic data such as a favorable cost of living.

Another factor which annures to the industrial success and manufacturing outlook for Jacksonville is the JAXPORT.

2020 alone for a reason. Across the Jacksonville region’s seven counties, manufacturers take advantage of excellent logistics and transportation infrastructure including rail, air, maritime, and highway. Low costs for doing business and our business friendliness is difficult to find elsewhere.” As various economic development organizations put forth their best-case for investing, the affordability of construction and real-estate becomes paramount. Recent Industrial Wins in Jacksonville Aundra Wallace, President of JAXUSA Partnership (pictured above) shared, “JAXUSA Partnership has announced seven new manufacturing projects in

Wallace added the Jacksonville area has a robust talent pool fed by nearly 200,000 area graduates annually in programs that offer support

Manufacturing Outlook / October 2020

MANUFACTURING TIDBITS extending more than 5,000 square miles and more than 130 million square feet of distribution center and warehousing space within close proximity to

for manufacturing, aviation, aerospace, and technology. Beyond the myriad of technical reasons Jacksonville’s manufacturing industry is booming, skilled talent is attracted to the region’s quality of life and low cost of living. When a location checks every box, it’s hard to overlook what Northeast Florida has to offer. Manufacturing industry outlook JAXUSA is optimistic about the local manufacturing industry in 2021, based on volume of projects the region has seen recently and continues to see, whether by referrals from site consultants, Enterprise Florida, or direct contact from companies. Brokers in industrial manufacturing consider the Jacksonville region a dynamic market. JAXUSA has seen strong foreign investment interest due to room to build, lack of congestion, and good rates. America’s Logistics Center As Florida becomes increasingly populated, Jacksonville is high on companies’ lists because of its great logistical location, confluence of interstates, railroads, and ports. Jacksonville’s FTZ (free trade zone) No. 64 encompasses all seven counties in the region, plus two others, making it the largest in the state

Manufacturing Outlook / October 2020

JAXPORT JAXPORT’s Harbor Deepening project which will deepen the St. Johns River from 40 ft. to 47 ft. extending to the Dames Point Marine Terminal, will allow for more service to and from Asia. Now more than halfway through the year, it is safe to say Jacksonville, Florida is weathering well through the wrath of 2020, especially on the advanced manufacturing front. This year to date, JAXUSA Partnership has announced seven new manufacturing projects, totaling nearly 300 new jobs and over $55 million in capital investment, all in the midst of a global pandemic. New advanced manufacturing projects in Jacksonville announced in 2020 include: Made in Space, a California-founded advanced space manufacturing company, this year relocated its headquarters to a new 19,000 sq. ft. facility on Jacksonville’s Southside with an expansion that will bring $3 million in capital investment to the region.

MANUFACTURING TIDBITS West Virginia-based plastics manufacturer Flying W Plastics announced plans for a new facility in Northwest Jacksonville. The company will invest $8 million in the facility and create 35 new jobs. H&M Metal Processing, an advanced manufacturing company based in Ohio, will invest $3 million in real estate, renovations, and custom-built processing equipment for a 35,000 sq. ft. manufacturing facility in downtown Jacksonville. Collins Aerospace, a manufacturer of technologically advanced and intelligent solutions for the global aerospace and defense industry, announced it will create more than 100 jobs and invest $10.6 million into a new 140,000 sq. ft. facility in Jacksonville. Commercial Metals Company will invest $30 million to enhance their Jacksonville manufacturing facility, creating 10 additional jobs. ESG Aerosystems Inc., an aerospace manufacturing company established in Jacksonville by Germanbased parent company ESG GmbH, will create 25 new jobs and invest $200,000 in capital investment. FON, Inc., a business specializing in Fiber Optic Cables for the defense and aerospace industries, will create an additional 22 jobs due to the companyâ&#x20AC;&#x2122;s growth. Jacksonvilleâ&#x20AC;&#x2122;s continued success in industry during these unprecedented times, provides much needed optimism. Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 21st year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. More than 4600 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com. Manufacturing Outlook / October 2020

MANUFACTURING TIDBITS

Americans Say They Prefer Products Made In USA and Will Pay More For Them by ROSEMARY COATES

THE RESULTS ARE IN - Americans say they prefer products that are Made in the USA and they are willing to pay up to 20% more for them. The Reshoring Institute recently surveyed nearly 500 Americans across the country and asked if they prefer to buy products that are labeled “Made in USA.” Would they be willing to pay more for these items? Nearly 70% of the respondents said they prefer American-made products. Slightly more than 83% said they would pay up to 20% more for products made domestically. Our quick survey validated what we have been hearing anecdotally from consumers and manufacturers everywhere. The strong preference for American-made products has been a growing trend over the past several years. Respondents to the survey were both consumers and industrial buyers.

Manufacturing Outlook / October 2020

Perception of Better Quality We also asked a series of questions about the perceived quality of products Made in the USA. Over 46% of respondents believe that products manufactured in America are better quality than those manufactured in other countries. In our survey, there was no evidence offered that American-made products are better – it was simply a perception. Reshoring Over Time In the late 1990s and early 2000s companies sought cheaper labor in other countries such as China, Mexico, and Taiwan. Products made in China and sold in the U.S. grew particularly fast after China joined the World Trade Organization (WTO) in 2001, and markets were opened for U.S. manufacturers to sell into China and for Chinese manufacturers to

MANUFACTURING TIDBITS sell in the U.S. In addition, the low-cost production environment and the rapid industrialization of China made it an attractive destination for American manufacturers seeking low-cost sourcing and manufacturing. In parallel, American’s voracious appetite for low-cost goods and consumerism accelerated manufacturers seeking low-cost production to move offshore. As China’s manufacturing sophistication and capability expanded, so did offshoring trends in America. During the presidential election of 2012, both Obama and Romney were criticizing China for stealing U.S. jobs, subsidizing their industries, and currency manipulation. This sparked the start of the reshoring movement in America. Today, reshoring has become part of many businesses’ strategic plans. What the Data Suggests What our data suggests is that there exists a belief that products Made in the USA are better. Our data results were consistent with the data collected from a Consumer Reports survey from a few years ago. Americans consistently prefer “Made in the USA” products over imported products from another country.

What does this mean for companies looking to Reshore to the U.S.? U.S. consumers look for, appreciate, and buy products that are made in the USA. In addition, American consumers are willing to pay more for products made here. Manufacturers should take note. You can find the full results here: https://reshoringinstitute.org/made-in-usa-survey/ About the Author Ms. Coates is the Executive Director of the Reshoring Institute and the President of Blue Silk Consulting, a Global Supply Chain consulting firm. She is a best-selling author of: 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith - How to Avoid and Defend Supply Chain Disputes Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters. She is passionate about Reshoring.

Manufacturing Outlook / October 2020

ISM REPORT OUTLOOK

THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON ® BUSINESS BREAKING NEWS

ISM PMI at 55.4% for September ISM PMI for the past 5 years

SEPTEMBER 2020 55.4%

Manufacturing Outlook / October 2020

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in September, with the overall economy notching a fifth consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The September PMI® registered 55.4 percent. The New Orders Index registered 60.2 percent, a decrease of 7.4 percentage points from the August reading of 67.6 percent. The Production Index registered 61 percent, down 2.3 percentage points compared to the August reading of 63.3 percent. The Backlog of Orders Index registered 55.2 percent, 0.6 percentage point higher compared to the August reading of 54.6 percent. The Employment Index registered 49.6 percent, an increase of 3.2 percentage points from the August reading of 46.4 percent. The Supplier Deliveries Index registered 59 percent, up 0.8 percentage point from the August figure of 58.2 percent. Of the 18 manufacturing industries, 14 reported growth in September, in the following order: Paper Products; Wood Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Machinery; Textile Mills; Computer & Electronic Products; and Transportation Equipment. ISM

Timothy R. Fiore, CPSM, C.P.M.,

Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

MANUFACTURING

PMI at 55.4% ®

PMI

Manufacturing grew in September, as the 2018 2019 2020 PMI® registered 55.4 percent, 0.6 percent55.4% age point lower than the August reading of ® 56 percent. The PMI signaled a continued rebuilding of economic activity in September, 50% = Manufacturing Economy with all subindexes either remaining in moderBreakeven Line 42.8% = Overall Economy ate to strong growth territory or slowing their Breakeven Line rate of contraction (Employment and Inventories). Five of the big six industry sectors continue to expand. The New Orders and Production indexes continued at strong expansion levels. The Supplier Deliveries Index continues to reflect supplier difficulties in maintaining delivery rates due to factory labor safety issues and transportation challenges. Eight of the 10 subindexes were positive for the period. A reading of ‘too low’ for Customers’ Inventories is considered a positive for future production.

Manufacturing at a Glance INDEX

Sep Index

Aug Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

55.4

56.0

-0.6

Growing

Slower

4 4

New Orders

60.2

67.6

-7.4

Growing

Slower

Production

61.0

63.3

-2.3

Growing

Slower

Employment

49.6

46.4

+3.2

Contracting

Slower

14 11

Supplier Deliveries

59.0

58.2

+0.8

Slowing

Faster

Inventories

47.1

44.4

+2.7

Contracting

Slower

Customers’ Inventories

37.9

38.1

-0.2

Too Low

Faster

Prices

62.8

59.5

+3.3

Increasing

Faster

Backlog of Orders

55.2

54.6

+0.6

Growing

Faster

New Export Orders

54.3

53.3

+1.0

Growing

Faster

Imports

54.0

55.6

-1.6

Growing

Slower

Overall Economy

Growing

Slower

Manufacturing Sector

Growing

Slower

*Number of months moving in current direction. Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.

Commodities Reported ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

ISMWORLD.ORG

Commodities Up in Price: Aluminum (4); Aluminum Extrusions; Copper (4); Freight (2); High-Density Polyethylene (HDPE) (3); Lumber (3); Natural Gas (2); Polypropylene (3); Polyvinyl Chloride; Precious Metals (3); Propylene (2); Resins; Sanitizers; Steel (2); Steel — Cold Rolled; Steel — Hot Rolled; Steel — Scrap (2); and Steel Products. Commodities Down in Price: Oil. Commodities in Short Supply: Aluminum; Cable Assemblies; Capacitors; Lumber (2); Personal Protective Equipment (PPE); PPE — Gloves (7); PPE — Masks; Polypropylene; Resins; Resistors; and Sanitizers. Note: The number of consecutive months the commodity is listed is indicated after each item.

Manufacturing Outlook / October 2020

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI® New Orders (Manufacturing) 2018

2019

September 2020 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders

2020

ISM’s New Orders Index registered 60.2 percent. Of the 18 manufacturing industries, the 12 that reported growth in new orders in September — in the following order — are: Wood Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Furniture & Related Products; Paper Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Chemical Products; and Transportation Equipment.

60.2%

52.5% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2018

2019

Production

2020

61%

51.7% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 61 percent. The 14 industries reporting growth in production during the month of September — listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Machinery; Chemical Products; Fabricated Metal Products; Nonmetallic Mineral Products; Transportation Equipment; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; Plastics & Rubber Products; and Miscellaneous Manufacturing‡.

Employment (Manufacturing) 2018

2019

Employment

2020

ISM’s Employment Index registered 49.6 percent. Of the 18 manufacturing industries, the eight industries to report employment growth in September — in the following order — are: Textile Mills; Furniture & Related Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; and Transportation Equipment.

49.6%

50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2018

2019

2020 80

59%

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in September, as the Supplier Deliveries Index registered 59 percent. Sixteen of 18 industries reported slower supplier deliveries in September, listed in the following order: Paper Products; Nonmetallic Mineral Products; Textile Mills; Fabricated Metal Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Wood Products; Miscellaneous Manufacturing‡; Machinery; Computer & Electronic Products; Chemical Products; Furniture & Related Products; Primary Metals; Electrical Equipment, Appliances & Components; and Transportation Equipment.

Inventories (Manufacturing) 2018

2019

2020

Inventories The Inventories Index registered 47.1 percent. The four industries reporting higher inventories in September are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; and Paper Products.

44.3% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

47.1%

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Manufacturing Outlook / October 2020

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI®

September 2020 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2018

2019

2020

Customers’ Inventories ISM’s Customers’ Inventories Index registered 37.9 percent. Of the 18 industries, the two reporting higher customers’ inventories in September are: Apparel, Leather & Allied Products; and Printing & Related Support Activities.

37.9%

Prices (Manufacturing) 2018

2019

2020

62.8%

52.5% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2018

2019

2020

55.2%

Prices The ISM Prices Index registered 62.8 percent. The 15 industries reporting paying increased prices for raw materials in September — listed in order — are: Wood Products; Textile Mills; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Primary Metals; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Printing & Related Support Activities; Computer & Electronic Products; Chemical Products; Transportation Equipment; Paper Products; and Food, Beverage & Tobacco Products.

Backlog of Orders ISM’s Backlog of Orders Index registered 55.2 percent. The 10 industries reporting growth in order backlogs in September, in the following order, are: Electrical Equipment, Appliances & Components; Wood Products; Plastics & Rubber Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; Chemical Products; Food, Beverage & Tobacco Products; Transportation Equipment; Furniture & Related Products; and Machinery.

New Export Orders (Manufacturing) 2018

2019

2020

54.3%

New Export Orders ISM’s New Export Orders Index registered 54.3 percent. The 10 industries reporting growth in new export orders in September — in the following order — are: Furniture & Related Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Paper Products; Food, Beverage & Tobacco Products; Transportation Equipment; Fabricated Metal Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; and Chemical Products.

Imports (Manufacturing) 2018

2019

2020

54 %

‡Miscellaneous

Imports ISM’s Imports Index registered 54 percent. The 10 industries reporting growth in imports in September — in the following order — are: Wood Products; Electrical Equipment, Appliances & Components; Paper Products; Transportation Equipment; Nonmetallic Mineral Products; Furniture & Related Products; Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products.

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Manufacturing Outlook / October 2020

NORTH AMERICAN OUTLOOK

OCTOBER 2020

NORTH AMERICAN OUTLOOK by AMELIA ROY

The Institute of Supply Management PMI figure eased slightly from August’s 56.0 to 55.4 in September, although this is still very positive, strong territory. Tim Fiore, committee chair for the ISM™ Manufacturing Report on Business® stated, ‘This is a strong report on month-over-month gains, although we are not at pre-Covid levels.’

Tobacco Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Machinery; Textile Mills; Computer & Electronic Products; and Transportation Equipment.

New orders and production are growing; employment is contracting; supplier deliveries are slowing at a faster rate; backlogs are growing; raw materials inventories are contracting; customer inventories are too low; prices are increasing and exports and imports are growing. Production and new orders were down from August; employment contracted at a lower rate.

The four industries reporting contraction in September are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; and Primary Metals.

Of the 18 manufacturing industries, 14 reported growth in September, in the following order: Paper Products; Wood Products; Food, Beverage &

Manufacturing Outlook / October 2020

Comments from the industry are mostly positive, but Petroleum and Coal Products are feeling a lack of demand. There is a great demand for wood in China. There are supply-chain problems, and in certain cases problems with employees testing positive for COVID-19.

NORTH AMERICAN OUTLOOK Commodities Up in Price Aluminum (4); Aluminum Extrusions; Copper (4); Freight (2); High-Density Polyethylene (HDPE) (3); Lumber (3); Natural Gas (2); Polypropylene (3); Polyvinyl Chloride; Precious Metals (3); Propylene (2); Resins; Sanitizers; Steel (2); Steel — Cold Rolled; Steel — Hot Rolled; Steel — Scrap (2); and Steel Products. Commodities Down in Price Oil Commodities in Short Supply Aluminum; Cable Assemblies; Capacitors; Lumber (2); Personal Protective Equipment (PPE); PPE — Gloves (7); PPE — Masks; Polypropylene; Resins; Resistors; and Sanitizers. CANADA saw expansion of new orders at the fastest pace since June 2018, together with a sharper rise in employment. This further brought up production levels and stimulated job creation. Heavy supply-chain pressures continued, contributing to the accumulation of backlogs and incomplete work as firms faced longer delays in

raw material deliveries. The PMI for September rose from August’s 55.1 to 56.0. The increase in employment was solid, but there were attendant signs of struggles to keep up with increasing workloads, and there was a continuing accumulation of incomplete work, together with stock depletion. Business sentiment in Canada remains positive. Canadian light vehicle sales for September were up 2.4 percent year-over-year to 169,876 units. MEXICO’s PMI was up for the fifth consecutive month, but manufacturing is still in contraction. Business conditions worsen, but at a softer pace. New orders and production fall at rates sharper than any seen pre-virus. The business sentiment regarding future output goes positive in September. The PMI for September was at 42.1, slightly up from August’s 41.3. Mexico’s manufacturing problems are Amelia Roy, Staff Writer being put down to COVID-19.

Manufacturing Outlook / October 2020

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA by JEANNE-MARIE LOWRIE

BRAZIL saw continuing improvement in September with reported nearrecord expansions in new orders and production, together with renewed growth in export sales. There were quicker expansions in employment. Hiring was on the up, as was purchasing, and optimism regarding future production. The PMI rose from 64.7 in August to 64.9 in September. The JP MORGAN GLOBAL MANUFACTURING PMI â&#x20AC;&#x201C; a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) â&#x20AC;&#x201C; rose from 51.8 in August to 52.3 in September - a 25-month high. There were further increases in production and new orders, and new export orders increased for the first time since August 2018.There was an easing in the pace of job losses. There was growth in all three major categories, with a 10-year high in investment goods. Of the 29 nations for which data were available, 21 registered growth in September. The month also saw the first increases in international goods trade since May 2018. Global supply chains stayed stretched by increases in demand for input stocks

Manufacturing Outlook / October 2020

as economies re-opened. Average vendor lead times increased for the 14th consecutive month. Business optimism improved to a 28-month high September, with strong confidence at consumer, intermediate and investment goods producers. New export business continued its decrease during the past two years, with lower new export orders being registered across much of Asia, with the notable exception of China, which saw a slight increase for the first time in eight months. Input cost inflation increased to a 20-month record, with part of the increase being passed on to Jeanne-Marie Lowrie, Staff Writer clients.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by CHRIS ANDERSON

CHINA saw a continuing solid manufacturing performance in September. There were marked increases in production and new orders, with new orders up at the strongest rate since January 2011. There was an accompanying solid rebound in export sales, and a stabilization in employment. There was a sustained increase in backlogs of work. There was a further significant increase in input costs, but a lower increase in selling prices.

JAPAN’s PMI rose to a seven-month high in September, from August’s 47.3 to 47.7, but is still in contraction, and it is a function of slow decreases in new orders and production, rather than increases. Employment stayed relatively stable. There is confidence that production will increase over the next twelve months, with more than double the number of manufacturers seeing an increase than seeing a decrease.

The September PMI, at 53.0, was very slightly down from August’s 53.1. Operating conditions have now strengthened in each of the past five months, and the latest month culminated in the best quarterly performance since Q4 in 2010. There was an increase in general optimism regarding production increases over the next twelve months.

INDIA’s manufacturing PMI reached its highest level since January 2012, with production up at the third-fastest rate in survey history, and similar increases in new orders. There was renewed expansion in export sales. The PMI rose from 52.0 in August to 56.8 in September.

Chinese passenger car and commercial vehicle sales rebounded in August by 11.6 percent year-over-year, to 2.186 million units, according to data from the Chinese Association of Automobile Manufacturers. Sales for the first eight months of the year are still down 9.7 percent on 2019, from 16.2 million units to 14.6 million units.

There was a further reduction in employment, which in many cases was attributed to efforts to maintain social distancing guidelines. The overall degree of optimism was at its highest in over four years.

Chris Anderson, Staff Writer

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Manufacturing Outlook / October 2020

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE by CHRIS ANDERSON

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), backed by a strong recovery in Germany, rose to 53.7 in September from 51.7 in August, as manufacturing showed its best performance for over two years. There was a sharp increase in both production and new orders, together with a resurgence in exports. There were improvements in all three sectors: consumer goods, intermediate goods, and investment goods, with investment goods at their strongest for over two years. There was a solid rise in backlogs. There were continuing job losses, but at the slowest rate since February. There were continuing delays in vendor deliveries. Business confidence regarding future production improved during September, to its highest level since April 2018. Car sales in Western Europe were down 33.1 percent on a YTD basis, with August sales down 15.5 percent year-over-year. (August 2019 was a particularly strong month.) French sales, YTD, were down 32% year-over-year; German down 28.8%; Spanish down 40.6%; Italian down 39.0 % and UK down 39.7 %. Forecasts are putting the reduction in sales for the year at 24 percent. Plug-in electrics in Europe in August were up year-over-year by 171 percent. Tesla model 3 was August’s best selling plug-in. Some 11 percent of cars sold in Europe in August were plugin hybrids or battery electric vehicles. IHS Markit’s PMI for the UK was at 54.1 in September, down slightly from 55.2 in August. There was continuing improvement, with increases in new orders - both domestic and export. There was good growth in all three sub-sectors, with intermediate the strongest. Large manufacturers showed the fastest growth ; small-sized firms the slowest. New export business was up for the second successive month, with stronger demand from Europe, Asia and North America.

Manufacturing Outlook / October 2020

There were job losses for the eighth consecutive month, but the rate of loss eased to the lowest since February. Sixty percent of manufacturers are looking for higher production in the coming year, although there are concerns over COVID-19 and Brexit. Boris Johnson reneged on an international treaty he signed just last year, making a chaotic split between the UK and the EU at the end of this year increasingly likely. Boris Johnson’s reneging on an international treaty recently signed has the potential to poison relations with the EU bloc for a generation. The EU is threatening legal action, and the EU’s chief negotiator says, “The UK has not engaged in a reciprocal way on fundamental EU principles and interests.” The German ambassador took the comments to a higher level, “In over 30 years as a diplomat, I have not experienced such a fast, intentional and profound deterioration of a negotiation. If you believe in the partnership between the UK and the EU like I do, then don’t accept it.” NO DEAL will mean border chaos and increased business costs.

Chris Anderson, Staff Writer

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS Four months of growth led by the U.S., Germany, and the U.K. have supported a V shaped recovery. Fourteen of the 18 surveys we follow grew at an average PMI of 56.3 in September, up from 54.2 in August. The remaining four surveys contracted at a 46.6 average in September: Mexico (42.1), Japan (47.7), South Korea (49.8), and Australia (46.7). New orders and production indexes are trending in the right direction and are positioned to support continued expansion. Lagging employment numbers will add significantly to all global indexes when re-openings progress and confidence recovers. The JPM Chase Global Index has trended upward since April with Q3 above the historical average. Overall, economic data for manufacturing and services activity point to a continuing recovery. Further improvement, as evidenced by the September PMI™ (55.4, -0.6), will drive manufacturing growth through the balance of the year. New Orders (60.2, -7.4) and Production (61.0, -2.3) made major contributions to the rapid acceleration. The past relationship between the PMI®and the overall economy indicates that the PMI®for September (55.4) corresponds to 3.7-percent annualized GDP growth, according to the press release.

Drivers: In addition to the improvement in New Orders and Production, the PMI® expansion was aided by slower Supplier Deliveries (59.0, +0.8). Inventories (47.1, +2.7) indicated some liquidations are starting to take place and Employment (49.6, +3.2) moved at a slower rate of contraction. New Orders Minus Inventories: This key measure at +13.1 (60.2 minus 47.1) shows New Orders continued to expand faster than Inventories in September. Compared to the average gap (+6.8), inventory availability can become an issue and concerns about constraints may become more prominent and a problem to supply chains. Customers’ Inventories: Only two industries reported higher customers’ inventories in September: Apparel, Leather & Allied Products; and Printing & Related Support Activities. Fifteen industries reported customers’ inventories as too low: Wood Products; Primary Metals; Fabricated Metal Products; Paper Products; Furniture & Related Products; Machinery; Plastics & Rubber Products; Textile Mills; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Computer & Electronic Products; and Miscellaneous Manufacturing. We continue to believe a Customers’ Inventories Index at this level (37.9, -0.2) Norbert Ore, Director, Of Industrial Surveys, indicates inventory replenishment will be Head Strategas Research Partners broad based and spill over into 2021.

Manufacturing Outlook / October 2020

CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK by DR. CHRISTOPHER KUEHL MANAGING DIRECTOR OF ARMADA CORPORATE INTELLIGENCE THIS REPORT REPRINTED COURTESY OF THE NATIONAL ASSOCIATION OF CREDIT MANAGERS (NACM.ORG) WHERE MORE IN-DEPTH INFORMATION CAN BE FOUND.

Combined Sectors This is the point at which data analysts begin pulling their hair out (assuming they still have some). When there is a collapse as complete and dramatic as the one experienced in the second quarter of this year it becomes nearly impossible to make sense of the data that comes in afterwards. What does a rebound of 30 points in the third quarter mean after a dive of 35 points in the second quarter? Does that mean there was an actual decline of maybe 5.0% or is there more to this than that. The truth is that data will be hard to interpret for a while as we wait for some sense of normalcy to return. The data in the CMI is similar as there has been a significant surge in the data but it is coming off some record lows. Overall, there was a slight decline from where the index stood just a month ago. The combined score stood at 56.5 and is now at 56.0. This is a fairly minor decline and the important point is that the reading is still in the mid-50s. The combined score for the favorable factors improved by quite a bit and that is considered a very positive sign. It had been at 62.9 and now stands at 63.3 – the highest point reached in well over a year. The last time these numbers were even close to that level was in January and February when they stood at 62.2. The rebound in these factors bodes well for the coming months. The combined index for the unfavorable factors slumped a little as it fell from 52.2 to 51.1 and that is the lowest reading since June. The detail in the favorable and unfavorable sectors point in some interesting directions. There was a dramatic fall in the favorable factors as the crisis emerged but the unfavorables didn’t respond as

Manufacturing Outlook / October 2020

negatively at first. Now they are becoming the problem and the favorables are carrying the load. It is all a matter of timing. The initial impact of the shutdown was felt in everything from sales to applications but issues like bankruptcies and collections took a little longer to develop. This month the sales numbers remained very high at 65.5 – only a bit down from the 65.8 registered last month. The new credit applications reading improved a little from 63.4 to 63.6 and most importantly there was an improvement in dollar collections as these went from 61.2 to 63.3. To cap off a nice month of gains the amount of credit extended went from 61.3 to 60.8 – a slight decline but still above the 60 line. This makes the second month in a row for all four readings sitting above 60. The rejections of credit applications stayed stable with a reading of 51.6 compared to last month’s 61.5. Given the large number of new applications this is a very good sign. Often there are increases in applications during stressed economic times but too few qualify. One area of concern is the accounts placed for collection as they moved from 51.6 to 49.4. This suggests there are companies that are reeling from the lockdown and are falling behind. The disputes readings also deteriorated from 51.8 to 48.7 and for the same reason. The dollar amount beyond terms also sagged a bit but remained in solid territory with a reading of 54.6 after sitting at 58.2 the prior month. The dollar amount of customer deductions slipped a bit as well but stayed above the 50 line that separates expansion from contraction. It went from 52.2 to 51.1. The filings for bankruptcies actually improved with a reading of 51.3 as compared to last month at 47.7

CREDIT MANAGERâ&#x20AC;&#x2122;S OUTLOOK

Manufacturing Outlook / October 2020

CREDIT MANAGERâ&#x20AC;&#x2122;S OUTLOOK Manufacturing Sector As has been repeated ad nauseum the lockdown recession of 2020 has hit certain parts of the economy far harder than others. The sectors that have been most sensitive are those where interaction is the foundation of the business â&#x20AC;&#x201C; everything from hospitality to tourism, restaurants and retail. The manufacturing sector has been far less affected and, in some respects, has been benefiting from the shift in consumption from paying for services to spending on goods. The combined score for the manufacturing sector fell a little from 56.0 to 55.3 but this is still firmly in the expansion zone. The index of favorable factors improved from a reading of 62.0 to one of 62.5 while the index of unfavorable factors slipped and has gotten a lot closer to contraction territory. The reading last month was 52.1 and this month it is sitting at 50.5. There is some distress showing up in segments of the manufacturing sector that serves aerospace, travel in general as well as some parts of retail.

Manufacturing Outlook / October 2020

Then good news is in the favorable sectors as they continue their climb out of the lockdown. The sales numbers are not quite as high as the record setting levels of last month but they remain very respectable at 65.1 (last month they sat at 67.2 and that was nearly unprecedented). The data for new credit applications improved a little but essentially stayed stable with a reading of 60.8 as compared to the 60.4 notched in August. The dollar collections data improved nicely with a reading of 63.9 compared to the 61.3 from last month. The amount of credit extended left the 5os behind with a reading of 60.3 as contrasted with the 58.9 in August. This marks the first time that all these factors have been in the 60s since last January and that suggests that there has been a real recovery as far as current and future business is concerned. The unfavorable data was not as inspiring but it could certainly have been worse. The rejections of credit applications sank a little from 52.5 in August to 51.7 in September. This takes a little enthusiasm

CREDIT MANAGER’S OUTLOOK

away from the expanded number of applications as there are more applicants that do not qualify and seem to be desperately seeking someone willing to take on more risk. The accounts placed for collection is worrying as these numbers are now in contraction territory with a reading of 49.4 after getting into expansion territory last month with a 50.9. The disputes category also fell out of expansion as it went from 51.7 to 48.1. There is quite obviously a segment of the manufacturing community that has not been able to shake off the lockdown impact. The dollar amount beyond terms category had made some dramatic progress last month with a reading of 57.8 but that has slowed a bit since as this month’s reading has fallen to 52.3. This is certainly still in expansion territory but not in as comfortable a position as had been the case. The dollar amount of customer deductions slipped out of expansion territory as well with a reading of 49.8 compared to the 51.9 in August. The filings for bankruptcies regained its expansion status with a 51.6 compared to the 47.9 in August. The bankruptcy numbers have been in contraction since May and this reversal is more than welcome. Overall, the manufacturing data has been trending in a positive direction with gains seen in everything from the Purchasing Managers’ Index to capacity utilization, industrial production and durable goods orders. Granted, there is still a long way to go to offset the damage that was done earlier in the year but the data has been trending in the right direction.

Author profile

Dr. Christopher Kuehl (PhD) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999. He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division – Finance, Credit and International Business. He prepares NACM’s monthly Credit Managers Index. He is the Economic Analyst for the Fabricators and Manufacturers Association and writes their biweekly publication, Fabrinomics, which details the impact of economic trends on the manufacturer. Chris is the chief editor for the Business Intelligence Briefs, distributed all over the world by business organizations and he is one of the primary writers (with Keith Prather) for the Executive Intelligence Briefs. He also makes close to a hundred presentations each year to business and industry associations in the US and overseas. He is on the Board of the Business Information Industry Association in Hong Kong and serves as a resource for the media and for many trade publications. Chris has a doctorate in Political Economics and advanced degrees in Soviet Studies and Asian Studies and was a professor of international economics and finance for over 15 years prior to starting Armada.

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METALS OUTLOOK

OCTOBER 2020

METALS OUTLOOK A NEW U.S. STEEL PLAYER

There is news from the U.S. steel front this month, news that may change both the present and future outlook of the industry. Cleveland-Cliffs Inc., headquartered in Cleveland, Ohio, an iron ore and steel producer, will acquire ArcelorMittal USA and its subsidiaries for approximately $1.4 billion. This will give Cleveland-Cliffs access to six steelmaking facilities, eight finishing facilities, two iron ore mining and pelletizing operations, and three coal and cokemaking operations. As such, Cleveland-Cliffs, with a potential annual capacity of 17 million tons, will overtake Nucor Corp. as the biggest flat-rolled steel producer in North America. This acquisition by Cleveland-Cliffs adds to that of AK Steel in March this year. AK Steel - formerly Armco - has long been a major player in the U.S. steel industry, and is renowned for the quality of its flatrolled products, particularly its stainless and alloy products. The company is a major factor in the U.S. automotive industry.

Manufacturing Outlook / October 2020

by ROYCE LOWE

Cleveland-Cliffs’ name will now be put at the forefront of the U.S. steel industry. It will have nowhere to hide. It will have much experience on its side, and it is to be hoped it uses it wisely. It will need to invest heavily in technology if it is to keep up with the likes of Nucor. There’s little doubt that the equipment and technology it has inherited from ArcelorMittal (who inherited it from names of yore in the U.S. steel industry) does not measure up to that at Nucor and Steel Dynamics Inc. The sale by ArcelorMittal USA does not include Dofasco Inc., in Hamilton, Ontario. Long before its acquisition by ArcelorMittal, the Canadian company was globally recognized as a world leader in the production of quality flat-rolled steel products. We don’t yet know what plans Cleveland-Cliffs has for future expansion, but we’ll certainly be interested to find out.

METALS OUTLOOK In fact, increases are global, as the hot-rolled price in Europe shows, from 410 Euros per ton in early August to 500 Euros per ton in early October. Some facilities in Europe were slow to ramp up following idling due to the pandemic, and a return to full capacity is not expected until early 2021. Demand is coming back, in some cases quicker than anticipated, and there are stock shortages on some products. Imports into the EU are down 20 percent from January to July. There is ongoing uncertainty to go along with the present optimism. The U.S. has lifted tariffs on Canadian aluminum imports. There will only be imposition if certain import limits are exceeded.

The timing for acquisitions in the steel business may or may not be good at the moment. Demand is up and prices along with it. Scrap costs are up, there are gaps in stocks, and increasing demand from the auto and construction industries. Recent prices on hotrolled, cold-rolled, and hot-dip galvanized coil are at levels not seen in some months. Since early August, up to early October, for example, U.S. hot-rolled has gone from $440 per ton to just over $600 per ton, cold-rolled from $610 per ton to $770 per ton. Similar price increases were the norm in the Canadian market.

Non-ferrous metal data show aluminum down slightly at $0.805 per lb. in early September to $0.785 in early October; copper effectively unchanged at $3.00 in September, but showing a six-month gain from $2.20 to $3.00; Nickel down in September from $7.10 to 6.50, but showing a six-month gain from $6.00 to $6.50. Zinc was down slightly in September, from $1.15 to 1.09, but showed a six-month gain from) $0.85 to $1.09. Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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AEROSPACE OUTLOOK

OCTOBER 2020

AEROSPACE OUTLOOK

by ROYCE LOWE

MORE FLACK FOR BOEING Events often occur at the most inopportune times. Boeing, long the U.S. aeronautical flagship, has been dragged upwards and downwards and sideways since the two fatal crashes of its 737 MAX. What has been said and written about the company since has put info about others in the business in the shadows. But we’re not in normal times, and enquiries and trials and oversight committees are out there in force, and Boeing has just had nowhere to hide. The company is in the spotlight, and this is made worse by the fact that ‘nobody’s flying.’ The 737 MAX may have been the subject of more testing than any other commercial airliner. All the better, since it has brought home the need for improved quality and engineering integrity that many of the investigations have brought to light. At last look, test flights had been carried out in the U.S., Canada and Europe. The information from the flights has, in some cases, been analyzed. The European Aviation Safety Agency (EASA) conducted three days of test flights on the 737 MAX around Vancouver. These tests will be put together with those from the U.S. and Canada, and further analysis carried out. The FAA boss, Steve Dickson, a licensed 737 pilot, recently flew a

Manufacturing Outlook / October 2020

MAX himself, and although generally pleased with the plane’s performance he said ‘more work was needed to rectify the jet.’ At time of writing there is no set date for the aircraft’s return to service.

A 238-page Congressional report has been released which pointed to a series of design mistakes in the 737 MAX, as well as failure by the FAA to properly oversee the aircraft’s certification process, resulting in two crashes and 346 fatalities. The report says that Boeing put profit before safety and described allegations

AEROSPACE OUTLOOK that Boeing pressured its employees to expedite the 737 MAX design and certification process as evidence of disturbing cultural issues. The report said concerns on the part of Boeing employees relative to design were inadequately addressed.

end of the year. To add to all this, according to a WSJ source, the FAA is reviewing Quality Control issues at Boeing’s South Carolina plant on the heels of revelations of flaws in composite material structures of some 787 Dreamliners.

The report was effectively scathing, and left Boeing’s reputation in tatters, that of the FAA ‘adversely affected.’ The report went on to call the crashes, ‘the horrific culmination of a series of faulty technical assumptions by Boeing’s engineers, a lack of transparency on the part of Boeing’s management, and grossly insufficient oversight by the FAA.’ A recent lawsuit names almost two dozen former Boeing officials, pointing to passivity of the board toward operational problems on earlier Boeing models and overly trusting of (former CEO) Dennis Muilenburg’s explanations for the disasters.

Boeing subsequently slowed deliveries of the wide-body 787 as it inspects more recently completed aircraft. A new defect has been found on a tail assembly fabricated at a plant in Salt Lake City.

The EU’s safety chief, Patrick Ky, said the plane could receive certification to fly again by the

Boeing’s worries are not over. Both United Airlines and American are looking at layoffs in the order of 15,000 employees each.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / October 2020

ENERGY OUTLOOK

OCTOBER 2020

ENERGY OUTLOOK

by JOCELYN BRIGHT

WIND AROUND AMERICA The U.S. has worked itself up, over the years, to become the country that raised the bar when it came to production of oil and gas. The recent, ongoing coronavirus pandemic has put a damper on consumption and prices, to the point where companies in the business are losing very serious money. Nobody’s flying, and since virtually the beginning of the year, people have been driving a lot less. It’s strange to say that the pandemic is pushing investment toward renewable energy, from such major oil companies as BP, Enel, Total and Shell. The pandemic has highlighted the uncertainty of the oil and gas business, making the case for renewables stronger. BP’s chairman recently wrote down the value of the company’s assets by some $17 billion as a shift away from fossil fuels was accelerated by the pandemic. BP will invest $12 billion in renewables.

Manufacturing Outlook / October 2020

It’s certain that a large number of people both in and out of the oil and gas business might be described as climate change deniers, but this doesn’t alter the fact that the vast majority of countries are moving in the renewable direction. Wind power and offshore turbines come to mind. Germany and Denmark are two of the leaders in this technology, which has to date seen the installation of 4,000 wind turbines in 11 countries in Europe. It is hoped that if the U.S. could see 1,700 turbines installed by 2030 off the seven Eastern states working on this now, that would be great. The knowledge and technology are available, and the U.S. needs to pick them up and run with them. There is an investment tax credit for offshore wind, and it is hoped Congress will come up with a five-year extension.

ENERGY OUTLOOK So, if the U.S. has a really good decade for building wind turbines, they’ll have half as many as Europe has now. The bright spot is that a lot of European countries have worked out the kinks in the process. They have become less expensive and more efficient. The (U.S.) National Renewable Energy Laboratory is helping the International Energy Agency with the design of a 15 megawatt turbine that could become the industry standard. This adds up to 40,000 jobs, just with offshore, throughout the U.S. by the end of the decade. Renewables are here to stay, and they will grow like the proverbial wildfire. On the other hand, oil and gas, especially gas, for power generation, are not going anywhere, despite the green push. Someday the world may be powered exclusively by renewable energy sources, but this day, should it come, is a way away. Fossil fuels are here for a goodly time. Right now, oil is

not in a happy place, and may stay there for some time. But the world will rely on it for awhile to come, and the industry will surely see better times in the coming years. It’s perhaps timely that the major oil companies are moving into renewables. There shouldn’t be a fight between fossil fuels and renewables, rather cooperation. Surely the two can see what’s good for the planet, and act accordingly. On a final note, Boris Johnson, Britain’s Prime Minister, announced on October 6 that by 2030 all UK homes will be powered by offshore wind. It should be noted that Boris is in trouble at the moment, with Brexit and a general waning popularity. But it’s a good thought.

Jocelyn Bright, Staff Writer

Manufacturing Outlook / October 2020

AUTOMOTIVE OUTLOOK

OCTOBER 2020

AUTOMOTIVE OUTLOOK

by LAWRENCE MAKAGON

Manufacturing Outlook / October 2020

AUTOMOTIVE OUTLOOK

A NEW “ARRIVAL”

There seems to be no way, these days, that we can get away from alternate ways of propelling automobiles when talking about the industry. The internal combustion engine seems to be the bad guy. Earlier this year both UPS - minority - and Hyundai-Kia - $110 million - invested in Arrival Element, a company in the UK in the business of producing electric commercial vehicles. Arrival says it’s reimagining the entire electric vehicle process, whereby it starts from scratch, rather than trying to adapt the EV concept to traditional designs. It has what it calls a micro factory strategy, which involves the manufacture of small to medium commercial vehicles. This is in contrast to normal, massive facilities used to build just one model of vehicle. The micro factories, at 10,000 square meters (approx 100,000 square feet) allow a shorter production time, around six months. The goal is to build such facilities near big cities and key customers, allowing a level of flexibility not found in traditional automobile production. More than half of Arrival’s 1,100 employees are software engineers, and together with hardware engineers, they have designed a lot of core concepts, their own chassis, powertrain, body and electronic components. The core components are modular, plug and play. Arrival’s CEO is a lady named Tracey Yi. She has great plans for the company. The UPS minority investment goes along with a commitment to purchase 10,000 custom-built electric vehicles, with priority access to purchase additional electric vehicles. Hyundai-Kia, with a major investment of $110 million, will work in close cooperation with Arrival on new vehicle development. Arrival has plans to open it’s first U.S. micro factory, which will focus on the company’s bus manufacture. Hyundai has shipped the first 10 units of its XCIENT fuel cell, the world’s first fuel cell heavy-duty truck, to Switzerland. The company will produce 50 trucks in 2020, and a total of 1,600 by 2025. The trucks will be powered by a 190-KW fuel cell system that will do 400 kms (approx 250 miles) on a single charge. Hyundai will develop a tractor unit with a driving range of 1,000 kms on a single charge. Ford, meanwhile, will operate under Jim Farley, its new choice for boss, a ‘car guy’ who enjoys racing 1960s sports cars. Farley takes over from the slow, ponderous Jim Hackett, seems more dynamic and is high-tech, all of which will be important in view of Ford’s aspirations in the EV area. Farley recently announced that America’s best-selling truck, the F-150, is being towed into the electric age. The truck has been boosted and torture tested, has power with a capital P , and will just tow and tow, to six tons. It will be available to be driven hands-free over more than 100,000 miles of divided highway in the U.S. and Canada.

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Ford is investing in a new $700 million manufacturing center of excellence at the Rouge. This is all to keep Ford ahead in the truck game, which it owns in the U.S. Of the over 2 million full-sized pickups assembled in the U.S. in 2019, Ford assembled nearly half, or twice as many as any other automaker. It seems that any automaker that wishes to be taken seriously these days needs to be researching or building alternately-powered vehicles. The race is only just beginning, but some companies are already out in front. The auto industry will always be newsworthy.

Lawrence Makagon, Staff Writer Manufacturing Outlook / October 2020

ISSUES OUTLOOK

OCTOBER 2020

ISSUES OUTLOOK

by ROYCE LOWE

MANUFACTURING “SCHOOL” In the month of September, 66,000 manufacturing jobs were returned to the U.S. economy, twothirds of them to the durable goods sector, mostly motor vehicles and parts, and machinery. Considering the jobs lost in March and April in the sector, some 1.8 million, and those regained since, the bottom line is that there were 647,000 fewer manufacturing jobs in late September than there were in February. That’s due to the pandemic; that’s quite a shortfall.

allot millions of dollars to something that might be called an apprenticeship scheme. Industry giants have been persuaded to back these schemes, and to pass on their own experience and money.

It’s a favorite topic: employment. So is unemployment. It’s often a percentage figure, showing how well the economy’s doing, fodder for politicians to take credit for. But 647,000 is a big number, and what does it mean for the U.S. manufacturing sector?

Even before recent technological advances, American manufacturers were struggling to attract enough employees with appropriate skills to keep their factories operating. People with STEM (Science, Technology, Engineering and Math) training were not interested in manufacturing; those interested often didn’t have the necessary skills. A recent (pre-COVID) study from the Manufacturing Institute forecast that 2.5 million manufacturing jobs would go unfilled in the coming decade due to a lack of trained workers. Even with the slow recovery from the spring economic collapse, there are 400,000 manufacturing jobs open.

Manufacturing jobs - or lack of them - have been a hot topic for years, but particularly from the point of view of the people with the skills to work in a sector that is becoming increasingly technologically advanced. The industry is unanimous in stating that there are just not enough people with the necessary skills to make the sector operate at anywhere near optimum efficiency. None of this is news. What is news is the impetus, when it’s there, to do something about the situation. It’s been left too much up to politicians, people with the power to pass bills to

Manufacturing Outlook / October 2020

Stephen Gold, the president and CEO of the Manufacturers’ Alliance for Productivity and Innovation (MAPI) has recently joined the forum on this topic, and some of what is written here is taken from what he recently published.

U.S. manufacturers are looking for technological evolution, as 85 percent of CEOs, in a recent MAPI study see investments in smart factories rising in the next year. In this event, the skills gap could grow even wider.

ISSUES OUTLOOK There has long been a stigmatization of vocational training/apprenticeship schemes in the U.S. In the past four decades, the push has been to go to college. Vocational training was for those who couldn’t go to a ‘real’ school. This set up a psychological roadblock. In 1980, there were 7.5 million four-year college enrollments,14 million in 2020. The figures for two-year colleges, including technical schools, were 4.5 million and 5.8 million respectively. All this is not to say that there are no apprenticeship schemes in the U.S. The speed of change and the lack of qualified personnel is forcing manufacturers’ hands. A 2019 MAPI study found that well over one-third of manufacturers were building relationships with local academic institutions (high schools, community colleges and universities), another 25 percent were adopting massively open online courses (MOOCs) and other forms of online education, and 20 percent were developing internal training courses to increase new-technology skills.

Those bastions of apprenticeship schemes, Austria, Germany, and Switzerland, put their prospective employees into such schemes around the age of seventeen. The normal age in the U.S. is nearer the late twenties. Isn’t this an opportune time to ramp up programs in the U.S.? With so many unemployed in manufacturing, what better time to offer a unique experience to those youngsters who maybe can’t afford to go to university, but would surely have a go at a job in manufacturing. It would give them a chance to get cosier with machines, friendly with robots, and familiar with the technological advances that are coming in, for example, automotive and alternate energy, to name just a couple of fields. The time has never been more opportune, nor more urgent.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / October 2020

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