Manufacturing Outlook for May 2020

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THE NEW JERSEY MANUFACTURING EXTENSION PROGRAM’S

2020 RETURN TO WORK AND RECOVERY GUIDE

PAGE 14

PLUS MANUFACTURING TIDBITS:

OSHA CITATIONS MANUFACTURING JOURNALIST TR CUTLER INTERVIEWS ERGONOMICS INTERNATIONAL ABOUT SAAS-BASED RISK ASSESSMENT PAGE 8

FORK TRUCK FREE SUPPORTS SOCIAL DISTANCING DURING COVID-19 PAGE 12

METALS OUTLOOK PAGE 41

[

APRIL ISM PMI: 41.5%

Released May 1st -The Full Executive Summary Report On Business - Page 28

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Manufacturing Outlook / May 2020

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Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE TIM GRADY NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER 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

TABLE OF CONTENTS

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34

PUBLISHER’S STATEMENT A word from our publisher

6 MANUFACTURING OUTLOOK A look at manufacturing around the globe

SOUTH AMERICA OUTLOOK Brazil in the spotlight

35 ASIA OUTLOOK China, Japan and India

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

8 OSHA CITATIONS

MANUFACTURING JOURNALIST TR CUTLER INTERVIEWS ERGONOMICS INTERNATIONAL ABOUT SAAS-BASED RISK ASSESSMENT

by Thomas R. Cutler

12 FORK TRUCK FREE SUPPORTS SOCIAL DISTANCING DURING COVID-19

by Thomas R. Cutler

14 COVER STORY: NJMEP 2020

RETURN TO WORK & RECOVERY GUIDE

by NJMEP

23 MANUFACTURING BUSINESSES

SELLING QUICKLY: WHICH ONES AND HOW MUCH THOMAS R. CUTLER INTERVIEWS MANUFACTURING BROKER FRANCES BRUNELLE

36 EUROZONE OUTLOOK A look at Europe

37 GLOBAL PMI OUTLOOK

by Norbert Ore

39 THE CREDIT MANAGER’S OUTLOOK

by Dr. Chris Kuehl

41 METALS OUTLOOK The cost, making and treating of metals

43 AEROSPACE OUTLOOK The aerospace industry

by Thomas R. Cutler

26 WAM PODCAST 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.

by Tim Grady

45 ENERGY OUTLOOK Energy and the environment

28 ISM MANUFACTURING REPORT ON BUSINESS

32 NORTH AMERICAN OUTLOOK Manufacturing in the US, Canada & Mexico

47 AUTOMOTIVE OUTLOOK Auto industry news

49 ISSUES OUTLOOK 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 Unless, by some miracle, operations and manufacturing go back to things the way they were pre-pandemic, it is likely that the entire structure of how modern manufacturing operates will change. In fact, where Industry 4.0 was optional but moving toward eventually, it is now unavoidable and critical.

Many jobs that were performed on-site and can be accomplished from home may shift there permanently.

Sales, particularly outside sales, is likely to change drastically if salespeople cannot visit the customer on-site.

The new normal for sales may be multi-dimensional marketing, ranging from Zoom or FaceTime meetings for face-to-face, to multi-faceted advertising packages rather than single channel or ad hoc programs. This sales and marketing paradigm shift is discussed in more detail in our Issues Outlook.

Management may not be in the Ivory Tower as much anymore. Tablets and cameras at workstations on the factory floor could put executives more in touch with line workers than ever before. Production managers might be a screen click away, able to see an issue in real-time rather than traveling to the actual work space to lay eyes on a situation to discuss potential solutions. Interactivity between employees will migrate from mostly face-to-face to touch screen and operator point-of-view discussions.

While there was considerable resistance to off-site employees until the COVID-19 shutdown, the ability of a company to continue production is a business continuity conversation that will be happening across companies of every size in every sector across manufacturing and non-manufacturing alike in the B2B universe. In fact, planning for the next shutdown needs to begin during this recovery as companies bring staff back and production lines begin moving again.

Some years ago, my own company, All Metals & Forge Group, found itself unexpectedly shut down for more than a week due to flooding of a nearby river that inundated the 1st floor of our building that was elevated to account for a 100 year flood – until the 500 year flood happened from non-stop drenching rains. There was no access to the building until the water receded – headquarters was shut down and we quickly learned what it was like to be crippled by events beyond our control. In that difficulty, All Metals & Forge Group formulated a business continuity plan that simply assumed the worst for its workplace. As long as we didn’t lose people, we could remain operational.

So far, COVID-19 has not deprived All Metals & Forge Group of our greatest resource – our people. Most companies will have people to put back in place without a loss of knowledge. But, going forward, all scenarios will be on the table as companies consider circumstances that were unimaginable just a few months ago.

Business continuity for businesses of all sizes, which has been on the sidelines for many years, will have a seat at the table. The new normal for sales and marketing will have a seat at the table.

In some cases, things will be like they were before. In many cases, nothing will be like it was before. A new way of doing business to survive the unthinkable will be discussed from board rooms to the desk of the sole proprietor. Why we hope this never happens again, we cannot assume it won’t.

COVID-19 may rear its ugliness again in the fall; it may fester until 2021; it may last until 2022. Regardless, business needs to plan that this may be just around the corner. The silver lining is that we will not assume it isn’t possible, and we’ll be prepared for it.

Lewis A. Weiss Publisher

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 / May 2020

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MANUFACTURING OUTLOOK

MAY 2020

MANUFACTURING OUTLOOK

by ROYCE LOWE

GLOBAL MANUFACTURING FALLS BACK UNDER SPREAD OF CORONAVIRUS. U.S. HANGS ON; EUROPE COMING BACK FOR MOMENT. BUT WORLD IN STATE OF UNCERTAINTY.

gains occurred in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities. Employment in other major industries, including mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, and information, changed little over the month.

Predictions for global economic growth in 2020 are being cut by the OECD and the World bank.

Global trade saw its first full-year drop since the financial crisis in 2019, when it fell by 0.4 percent after growing 3 percent in 2018. This reflects Trump’s protectionism and the U.S. - China trade war, as well as Germany’s industrial slump.

The U.S. Department of Labor recently announced it would award $100 million in grants to 28 publicprivate apprenticeship programs throughout the country. It will target the fields of IT, Healthcare and Advanced Manufacturing.

The BLS jobs report for February shows the addition of 273,000 non-farm payroll jobs. The unemployment rate was at 3.5 percent. In February, notable job

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The Bureau of Economic Analysis recently released its ‘second’ estimate for the annual rate of Real GDP growth in the fourth quarter of 2019, putting it at 2.1 percent. The figure for the third quarter of 2019 was 2.1 percent.

The ISM PMI figure for U.S. manufacturing fell back from 50.9 percent in January to 50.1 percent in February. The overall economy grew for the 130th consecutive month.

IHS Markit’s remarks on the U.S. showed manufacturing output weakening amid a slower upturn in new orders. Operating conditions improved at the slowest pace for six months, with new order growth slowing to a nine-month low.

Business confidence was the strongest since April 2019. Employment growth slowed despite a renewed backlog rise. There were supply-chain delays due to the coronavirus. Export orders were off.

MANUFACTURING OUTLOOK

U.S. LIGHT VEHICLE SALESÂ : GM, Ford, FCA, Nissan N.A., BMW Group, VW Group and others are no longer releasing U.S.sales figures. Here are some figures for Japanese and Korean companies.

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.

Manufacturing Outlook / May 2020

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MANUFACTURING TIDBITS

OSHA Citations Manufacturing Journalist TR Cutler Interviews Ergonomics International About SaaS-based Risk

by TR CUTLER Assessment

Had the opportunity to speak with the founders of Ergonomics International who introduced a costeffective evidence-based risk analysis software suite.

Mark Heidebrecht is a managing partner of Ergonomics International. He has provided forensic and expert witness services in the areas of biomechanics, human factors, ergonomics, and work physiology. He has testified in over 75 State Court and United States Federal Court cases as an expert witness and presented testimony at the Federal OSHA hearing regarding the National Ergonomic Standard. Heidebrecht has developed and implemented ergonomic programs and processes across North America.

Sam Bradbury is a managing partner of Ergonomics International. Bradbury is an international speaker and instructor on the topics of functional capacity, ergonomics, human factors, injury reduction, and engineered solutions for improved workplace quality,

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Manufacturing Outlook / May 2020

efficiency, and human error reduction. Expertise includes testing and measuring the physical demands of work as well as return to work testing criteria, prevention of musculoskeletal disorders in the workplace, the effective implementation of ergonomic risk reduction processes, upper/lower body functional testing, human factors analysis/ error reduction, and ergonomic team development.

Bradbury is certified by the Board of Certified Professional Ergonomists as a Certified Ergonomist and holds a Six Sigma Black Belt Certification.

Ergonomics International’s Evidence-Based Risk Analysis Software Suite utilizes standardized tools which have high validity and reliability. These tools provide management with real-time data to make evidence-based decisions, yet data is simple enough for ergonomic, safety, occupational health, Lean Manufacturing, and Six-Sigma professionals to understand and apply.

MANUFACTURING TIDBITS TRC: How does Ergonomics International’s Risk Assessment SaaS solution assist companies overcoming whether OSHA will cite them under the General Duty Clause?

Sam/Mark: A brief summation of the OSHA general duty clause, Section 5(a)(1) of the Occupational Safety and Health Act, requires that each employer furnish to each of its employees a workplace that is free from recognized hazards that are causing or likely to cause death or serious physical harm.

Traditional ergonomic analysis tools may overestimate risk sending companies down trails to fixing hazards that are not the true high risks. This also includes personal risk factors that may be more involved in certain musculoskeletal injuries that the company takes on as a hazard that is not really a hazard.

The SaaS system prioritizes and provides risk identification where employers may be most vulnerable and where they should likely focus dollars and resources on the reduction of risk.

Documenting the tasks and levels of risk associated with the task/job aids in providing a road map to companies on making change, understanding where changes have been made, the reductions in risk made and the resources spent to reduce those risks are better understood.

repetitive cycle of failure. This leads to increased work and resources to produce the same number of products at a higher cost.

The SaaS system evaluates the job or task to determine if the level of repetition exceeds known standards determined to be harmful.

TRC: What data-driven metrics are used to determine whether a hazard is recognized? Equally important, share how the software evaluates whether the hazard is causing, or is likely to cause, serious physical harm to employees.

Sam/Mark: Using epidemiological standards and processes, the SaaS system evaluates the actual task from multiple empirical levels that have been shown to be a hazard. This includes from the employee, epidemiological data on causation, and using standardized peer reviewed tools to cross validate decision making. The system then produces quantile levels of risk so that companies can determine where they are making effective changes, how much risk is greater than the normal population and what the potential cost associated with the risk will be if mitigation does not occur.

TRC: Is there a mechanism within the technology to determine whether a feasible means exists to reduce the hazard?

Sam/Mark: Many times, quality findings are present where mental or physical demands exceed the capabilities of the individual. This can occur when the speed of movement or decision-making thresholds are greater than of those of the individual based on known decision-making capabilities.

Sam/Mark: Yes, as an example the SaaS system can provide the company with a solutions “catalog� that provides them with potential solutions for a specific risk factor. These may be listed as both, administrative controls and/or engineered solutions.

An administrative control may be that the company looks at the built-in line rotation simulator to determine risk reduction or choose from a list of known engineered products available on the open market that could fix the problem or even state that the risk need further review.

These breakdowns lead to increased rework and failures in the quality verification leading to a

OSHA will not focus its enforcement efforts on employers who are making good faith efforts

TRC: Specifically, how does this technology help a QA/QC professional know whether an ergonomic hazard exists?

Manufacturing Outlook / May 2020

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MANUFACTURING TIDBITS

to reduce ergonomic hazards. This means the employers must implement ergonomic efforts at individual worksites. OSHA has issued citations to companies that have evidenced corporate commitment to lowering ergonomic hazards in their workplaces BUT have failed to effectively implement that commitment at specific sites. The General Duty Clause applies to conditions at individual worksites.

Therefore, corporate commitment must be translated to positive action at the individual workplaces, or OSHA will not hesitate to issue citations where appropriate.

TRC: Does the cost-effective assessment tool by Ergonomics International constitute a good faith effort?

Sam/Mark: The tool would offer a good faith effort to the reduction for ergonomics, this does

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Manufacturing Outlook / May 2020

not constitute a good faith effort for other safety concerns. A good faith effort is based on the documentation available to demonstrate this to the OSHA auditor. Having the SaaS system in place and using it effectively and documenting everything appropriately, however, if the employer is not documenting they have actually implemented and can demonstrate the changes are in place they could still be cited.

The tool documents that the employer has evaluated the risk, understands the level of risk, may or may not have implemented risk mitigation strategies, and has the data to make good decisions. Unfortunately, the system cannot control actual implementation of change or effective implementation of change. There is a human component involved.

MANUFACTURING TIDBITS Even in cases where OSHA does not cite an employer, if ergonomic hazards exist, it may issue hazard alert letters describing ways to reduce the hazards and resources available to assist employers in this process. An important new feature is that OSHA will follow up with some companies that receive these letters, checking to evaluate what actions the employers have taken to address ergonomic hazards.

TRC: What output is offered by the SaaS solution that documents the actions suggested and made by the employer?

Sam/Mark: The SaaS system can document project solution implementation to mitigation if the employer puts this information into the system.

The system will provide an engineered solution

documentation path which includes resource costs to make those changes and the return on investment associated with the changes based on the risks found.

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. Contact Cutler at trcutler@trcutlerinc.com.

presents The Manufacturing & Business Podcast Network

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Manufacturing Outlook / May 2020

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MANUFACTURING TIDBITS

FORK TRUCK FREE SUPPORTS SOCIAL DISTANCING DURING COVID-19

by TR CUTLER

The process of switching from fork truck environments to fork truck free environments has become an essential strategy during COVID-19. The return on investment (ROI) for industrial carts is achieved through the process change itself. With social distancing here to stay, carts are safer when equipped with quality components that require little or no maintenance and repairs.

Top tier delivery carts are more reliable for delivery than fork trucks and require reduced human interaction.

As fork truck free manufacturing plants grow, Lean Manufacturing principles are adopted.

The illustration above demonstrates how fork truck free utilizes Lean Manufacturing principles; defined by the practice of reducing and eliminating non-value-added activity.

Delivery cart systems are immediately transforming the material movement process and gets the right material in the right quantity to the right place at the right time. Nowhere is this more obvious than during

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Manufacturing Outlook / May 2020

MANUFACTURING TIDBITS COVID-19. From large footprint distribution centers to manufacturers with cellular manufacturing operations, having product (raw materials or finished goods) delivered directly to a workstation or packing location is most efficient.

Cart delivery and Lean Manufacturing methods during COVID-19 are speeding factory production, improving safety, and throughput.

Topper Industrial specializes in the design and building of custom delivery carts for material handling. Ed Brown, founder of Topper, holds many patents for components and the mechanics of custom-designed carts.

Industrial carts can be pushed, pulled in a train, and are able to turn in tight spaces. They can also link to complimentary vehicles like tuggers and automated guided vehicles (AGVs).

Ed Brown, Founder of Topper Industrial holds many patents in the Fork Truck Free environment Fork truck free flexibility critical during COVID-19 Unlike other industrial cart manufacturers with standard product lines, flexibility is critical now as workflow, workstations, and product delivery are being modified daily to ensure the best ergonomic and safest social distancing is respected. Catering to these variables during the pandemic (and for the foreseeable future) recognizes that not all material processes are the same and ever changing.

Topper Industrial holds a US Patent No. 10,093,334.

The patent covers Topper’s Walk Through, Wheels on the Ground Mother-Daughter Cart System. This Mother-Daughter Cart System is an industrial cart system that consists of one large mother cart and two or more, smaller daughter carts. The daughter carts are designed to fit within the mother cart’s framework. Once inside, the daughter carts are locked into the mother cart.

Most other systems have the daughter carts load from one side only. Daughter carts will be pushed up into a ramp on the mother cart for transport.

Daughter carts are able to be locked into the frame with wheels on the ground for transport and the operator is able to utilize the cart from both sides with a unique ability to push the carts all the way through the frame. This way, the mother cart and daughter carts are able to be tugged as one.

Ed Brown explained that the differentiation of these carts is found in the simplicity, functionality, maintenance, and overall operation. This is why the train of carts is towed by a tugger tractor and can make smooth, tight turns that are crucial in a factory with narrow aisles. At a time when fewer people can be on the plant floor making repetitive runs with fork trucks, cart delivery is both a viable and efficient alternative.

Author Profile Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, 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. Contact Cutler at trcutler@trcutlerinc.com Manufacturing Outlook / May 2020

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COVER STORY

A Message from Jacket Media Co. For many years, Manufacturing Talk Radio has worked closely with the Manufacturing Extension Partnership (MEP), a public-private partnership with Centers in all 50 states and Puerto Rico dedicated to serving small and midsized manufacturers under the auspices of the National Institute of Standards and Technology (NIST) within the U.S. Department of Commerce. The New Jersey MEP (NJMEP) has been the leading MEP for several years, and has recently released its 2020 Return To Work & Recovery Guide to aid New Jersey manufacturers in the reopening of their businesses safely for all staff members.

The following information is excerpted from the 2020 Return To Work & Recovery Guide, which may be read in its entirety by clicking the link at the end of this article or visit manufacturingoutlook.com. This informative and useful guide provides information that can assist all manufacturers and other businesses across the U.S. and is included in this issue of Manufacturing Outlook for that purpose. If you are a manufacturer or business somewhere other than New Jersey, you should become familiar with your state’s MEP which can help in all facets of manufacturing operations, and publishes information that can benefit all businesses in any state.

We commend John Kennedy, CEO of the NJMEP, and the fine efforts of his staff to create and disseminate this essential guide to restarting manufacturing in the state of New Jersey. We also welcome articles from any of the other MEP’s for consideration in future issues of Manufacturing Outlook, and ezine distributed to more than 35,000 people in the manufacturing sector.

WE ARE AN

ESSENTIAL

MANUFACTURER IN NEW JERSEY

2020 WE ARE AN ESSENTIAL RETURN TO WORK WE ARE AN MANUFACTURER ESSENTIAL & RECOVERY GUIDE IN NEW JERSEY MANUFACTURER MITIGATION PLAN POST-COVID-19 IN NEW JERSEY APRIL 22, 2020 — v1

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Manufacturing Outlook / May 2020

2020 RETURN 2020TO WORK & RECOVERY GUIDE

COVER STORY

TABLE OF CONTENTS Notice from NJMEP ..............................................................................................................................................................................................3 Legal Disclaimer ....................................................................................................................................................................................................4 Purpose ..........................................................................................................................................................................................................................5 Objectives.....................................................................................................................................................................................................................5 Expanding or Resuming Operations...................................................................................................................................................7 Personal Protective Equipment (PPE) ............................................................................................................................................10 Disinfection Protocol ........................................................................................................................................................................................ 11 Self-Distancing ......................................................................................................................................................................................................14 Monitor & Detection..........................................................................................................................................................................................17 Procedures for ‘Suspected’ Infection ..............................................................................................................................................19 Signage.........................................................................................................................................................................................................................21 Return to Work (RTW) Contingency Planning and Checklist ................................................................................22 References ...............................................................................................................................................................................................................23 Click on item above to go directly to that section

Manufacturing Outlook / May 2020

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COVER STORY

P. 973.998.9801 F. 973.860.4637

Helping New Jersey Manufacture Success

E. info@njmep.org njmep.org

NOTICE FROM NJMEP The New Jersey Manufacturing Extension Program, Inc. (NJMEP) is one of (51 w/ Puerto Rico) State-Based Centers in the MEP National Network. Our mission is to support the 11,000+ Manufacturing Firms and STEM Firms in the Garden State through: •

Company Assessments

•

Industry-Based Consulting

•

Training – Corporate/Individual/Apprenticeship

•

Advocacy

In an effort to provide extended support of Small & Mid-Sized Firms NJMEP has developed this as a guide to return to work & recovery as you maintain, resume all or restart operations.

NJMEP’s plan is based upon the COVID-19 Best Practices, as recommended by the Centers for Disease Control & Prevention (CDC), the Occupational Safety & Health Administration (OSHA), The New Jersey Department of Health & Senior Services, and other Governmental Regulations & Guidelines as described in this document.

This plan is available to any and all that seek direction on employees RTW and the resumption of 100% operations. In addition, NJMEP Staff will be made available to answer any questions remotely within their areas of expertise. Other key resources will be made available to support individual corporations with the development of a customized plan.

For questions regarding this document, please contact us at – 973-998-9801 or takeaction@njmep.org

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Manufacturing Outlook / May 2020

COVER STORY

LEGAL DISCLAIMER The purpose of this document is to recommend/suggest ideas that you may wish to consider as our Industry and your Business moves towards 100% reopening in the aftermath of the COVID-19 pandemic.

Keep in mind that there is no ‘one size fits all’ scenario.

Before you chose to implement any of the ideas suggested in this document you must evaluate and determine, with the assistance of your legal counsel, accounting and human resource teams, the legality and effectiveness of the potential application captured in this document.

As the overall intent of this document is to provide suggested ideas for your independent consideration only; NJMEP accepts no responsibility for any result or circumstance arising from or related to your decision to ‘use of not use’ any idea submitted herein.

This is to be considered a ‘living’ document which is subject to revision or further developments as they arise.

Manufacturing Outlook / May 2020

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COVER STORY

PURPOSE To educate Business & Industry on the Return to Work (RTW) protocols and procedures implemented for Safety & Protection.

1.

Scope: • To set expectations for employee behaviors that will help mitigate risk at work and at home.

•

2.

To provide employees information and resources regarding health & wellness.

General Overview: • Objectives

•

Employee Monitoring

•

Resuming Operations

•

‘Possible’ Positive for COVID-19

•

Personal Protective Equipment (PPE)

•

Signage

•

Disinfection Protocol

•

RTW Checklist

•

Self-Distancing

•

References

OBJECTIVES To help ensure the Health & Wellness of each employee and visitor.

1.

Implementation of Measures: a. Install additional sanitizing dispensers and guidelines (signage) for frequent cleaning on overly used surfaces and common areas.t b. Manage Shift-Changes and stagger lunch breaks to allow time to thoroughly disinfect common areas and to promote ‘Social Distancing’. c. Place signage throughout the facilities to remind employees of proper preventative measures.

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Manufacturing Outlook / May 2020

COVER STORY

2.

Establish Disinfection Protocols (Note – Disinfection Protocols on Page 11): a. Disinfection measures need to be put in place and implemented (either) as part of the routine – or scheduled to disinfect workplace surfaces, chairs, tables, etc. – to protect employees. b. Scheduled Complete sanitization and disinfection of facilities – employing approved protocol. c. Deep-Cleaning and Disinfection will be automatically triggered when an active employee tests positive for COVID-19 by a medical doctor. d. Deep-Cleaning must be carried out by an external, professional service. e. The ‘baseline of clean’ will be upheld.

3.

Establishing Social Distancing Procedures (support through NJ Department of Health): a. Social Distancing is an effective method to help prevent the spread of the virus b. Staying (at least) 6-feet from others. c. Eliminating select contact with others – handshakes, embracing co-workers, non-essential visitors or friends. d. Avoid touching commonly used surfaces. e. Avoid individuals that appear ill.

4.

Hazard Analysis for Cleaning Tasks & Wellness: a. A Hazard Analysis is created to establish overall wellness and disinfection protocols for each work area.

The Hazard Analysis must include: i. General Disinfection Measures ii. On-Site Health Screening iii. Daily Self-Screening iv. Self-Quarantine & Return to Work v. Visitors & Contractors Self-Screening

Manufacturing Outlook / May 2020

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COVER STORY

EXPANDING OR RESUMING OPERATIONS If a facility has been vacant for over 7-days, the need for a Deep-Clean is minimized. The longest the COVID-19 virus can live on a hard or soft surface is 5-days.

HOW LONG COVID-19 LIVES ON SURFACES 2-8 Hours 4 Hours 1 Day

ALUMINUM Soda Cans

Ladder

Computer Parts

COPPER Coins

Plumbing Parts

Wires

CARDBOARD Boxes

Paper Towel Rolls

Toilet Paper Rolls

PLASTICS 2-3 Days

Elevator Buttons

Safety glasses

STAINLESS STEEL Water Bottles

4 Days

Hard Hats Refridgerators

Tools

WOOD Office Furniture

Doors

Pencils

GLASS Up to 5 Days

Windows

Mirrors

Phone Screens

PAPER Magazines

Copy Paper

Notepads

METAL 5 Days

Doorknobs

Tools

Sinks

CERAMICS Mugs

Dishes

Pottery

SOURCE: https://www.webmd.com/lung/how-long-covid-19-lives-on-surfaces

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COVER STORY

If a facility has not been closed and/or vacant for 7-days, the following steps must be taken: 1. The company or an external professional service must clean the following: a. All Hard Surfaces including – but not limited to: Doorknobs Water Fountains Machine Switches Tables/Chairs Sinks Keyboards, etc.

Counter-Tops Towel Dispensers Screens Vending Machines Forklift/Tuggers Handrails Time Clocks Turnstiles All other high touch items

Light Switches Desks/ Phones Faucets/Handles Common Area Objects Machine Controls Tools

b. The company or an external professional service must clean with soap & water followed by the disinfecting with one of the following: i.

• Diluted household bleach solution – 1/3 cup of bleach to 1 gal of water

ii. • Alcohol Solution that is at least 70% alcohol iii. • EPA Registered Household Disinfectant c. While cleaning, employees or professional cleaning service must wear: i. Respiratory Protection, N95 or alternative classes of NIOSH approved respirators (OSHA N95 Guidance) ii. Eye Protection such as safety glasses or face splash shields iii. Disposable gloves made out of latex, nitrile or vinyl iv. Disposable gowns v. Specialized cleaning can be added and performed by company

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COVER STORY

2.

HVAC Filters must be cleaned, disinfected or replaced on schedule.

3.

Before work begins, each employee shall be informed of the following: a. How the initial cleaning was completed b. How to protect oneself on a daily basis c. How to clean each workspace throughout the day d. Protocol for an employee testing positive for COVID-19

4.

When at work, follow protocol of who to contact if feeling ill… a. If the employee becomes sick during the day, they should be sent home immediately. i. Surfaces in their workspace should be cleaned and disinfected. ii. Information on persons who had contact with the ill employee during the time the employee had symptoms and 2 days prior to symptoms should be compiled. Others at the facility with close contact within 6 feet of the employee during this time would be considered exposed. b. Employees who appear to have symptoms (i.e., fever, cough, or shortness of breath) upon arrival at work or who become sick during the day should immediately be separated from other employees, customers, and visitors and sent home. c. If an employee is confirmed to have COVID-19 infection, employers should inform fellow employees of their possible exposure to COVID-19 in the workplace but maintain confidentiality as required by the Americans with Disabilities Act (ADA). The employer should instruct fellow employees about how to proceed based on the CDC Public Health Recommendations for Community-Related Exposure.

NOTE: To properly execute this plan, it is in the best interest of the company to establish a team or individuals or supervisors that will be given the authority to make decisions in the best interest of the company. During the ‘Recovery & Return to Work’ period, focus on monitoring employees, sanitation of the facility & equipment and other essential duties described throughout this plan.

CLICK HERE TO READ THE REST OF THIS DOCUMENT

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Manufacturing Outlook / May 2020

MANUFACTURING LETTERS TO THE TIDBITS EDITOR

MANUFACTURING BUSINESSES SELLING QUICKLY: WHICH ONES AND HOW MUCH THOMAS R. CUTLER INTERVIEWS MANUFACTURING BROKER FRANCES BRUNELLE Frances Brunelle is the founder of Accelerated Manufacturing Brokers, Inc.

Brunelle shared that national statistics show that most manufacturing companies in the lower middle market are sold to buyers from more than 100 miles away.

TRC: What is this geographic distance relevant when selling a manufacturing enterprise?

FB: Manufacturers looking to selling their companies

must make sure that the broker being considered has a national, rather than just a local following to achieve the best results.

TRC: How does this wide scope of prospective buyers impact the sales process?

FB: Accelerated Manufacturing Brokers brings only the most qualified buyers into client companies. It is common for us to vet hundreds of buyers, and only bring a small handful to visit. (This can be achieved remotely during social distancing.) But those few are ALWAYS both professionally and financially qualified.

Anything less is a waste of time for everyone involved.

Manufacturing Outlook / May 2020

23

MANUFACTURING TIDBITS

TRC: Could you review some of the types of manufacturing businesses recently sold and a little bit of background information?

FB: There are many examples of recently sold manufacturing companies: National OEM – Testing & Measurement Instrumentation This was by far one of the most challenging projects we’ve managed in 26 years of business. We had to navigate the death of the company’s founder during the listing period and a company in crisis.

We vetted hundreds of people, deemed only 16 to be BOTH professionally and financially qualified.

Of those 16, only 4 groups were granted visits and all 4 submitted offers. Ultimately the company sold to a respected industry giant who will maintain the brand, respecting the legacy of the founding family.

We are proud to have been a part of this sale.

Coated Filter Media Manufacturer This deal had more lives than a cat. Our original buyer got cold feet and backed out (very rare). We had multiple LOIs (Letters of Intent) within a few short weeks. After settling on a second buyer, we had to successfully navigate our client’s loss of a major customer and got to the closing table with both sides happy.

Aerospace Component Manufacturer – New England With two LOIs submitted on this business, we found the perfect buyer for our client. However, with a 65% customer concentration, 12 acquisition lenders turned the deal down. We referred the buyer to one or our national lenders who understands the aerospace industry, in which it is almost impossible to not have a concentration. This business had 2 shareholders, one wanting immediate retirement and one wanting to continue working. We got them BOTH what they wanted.

Specialty Tooling and Wire EDM Manufacturer Client said the deal MUST close in 2018 for tax

24

Manufacturing Outlook / May 2020

purposes, but we had only 60 days from LOI to the end of the year. Add in 2 major holidays, a car crash, a snowstorm, and the client’s roof collapsing with equipment damage and a government shutdown with the financing coming from the SBA. We still closed it on December 31st. We obtained multiple offers and this business sold over list price.

Industrial Furnace Manufacturer Client was an industrial furnace manufacturer specializing in new and re-manufactured industrial vacuum, sintering, MIM, vacuum hot presses, and hydrogen furnaces. To ensure the continuity of the company the client requested we find a buyer with relevant industry experience, rather than simply a financial investor. This was like finding a needle in a haystack, but we found the perfect match!

Manufacturer of Fiberglass Products The largest company in the industry offered to purchase the client to gain their customers and close the plant. Our client gave us strict orders to find an acquirer who would keep the jobs in KY. We vetted over 200 companies, granted 7 visits, and received 6 offers. With the business development and sales skills of the family who made this acquisition, the largest company in the industry might not be the largest for very long!

Manufacturer of Architectural Curved Wood Panels After vetting more than 100 buyers, only four were granted plant tours. All four submitted LOIs. The business was sold to an out of state buyer who relocated to take the helm of this company keeping the jobs in the community.

Industry Leader of Micro-Precision Manufacturing We successfully sold this carve out of a publicly traded company. After vetting over 250 buyers, only 9 were granted visits. We obtained multiple offers and the business sold at more than the list price.

This business was listed with a local broker for more than a year with no result before we were called in to sell.

MANUFACTURING TIDBITS CNC Component Manufacturer Serving OEMs Client was concerned about the continuity and future opportunity for the staff who had helped the owner become successful. We were able to find the perfect match; an out of state buyer who previously ran a division of J&J. Midwest Industrial Equipment Repair Manufacturer After vetting hundreds of potential buyers, 3 strategic buyers with multiple holdings were granted plant tours and meetings. Two of the three made offers and the client was able to choose to whom they wished to sell. We accomplished this in record time which a local broker could not do in 4 years of listing the business.

TRC: Are you able to give some examples of the type of prices manufacturing sales commanded?

FB: While the range is significant most small manufacturers are sold from $2M to $20M. In many cases we are contractually restricted from sharing the sale price, but here are some examples of small manufacturing companies that have sold and for how much…

Northeast Manufacturer of Hydraulic Integrated Circuits Price: $1,895,000 LOI submitted less than 30 days of listing agreement being signed – sold to out-of-state buyer.

New England Pump & Valve Repair Facility Price: $2,295,000 3 LOIs submitted in one week – client got to choose to whom he wanted to sell.

U.S. Based Supplier of Sand Handling Equipment to the Foundry Industry Price: $2,950,000 Ohio based company sold to buyer from out of state.

Northeast Niche Manufacturer of Machine Tool Accessories Price: $1,250,000 Over 75 inquiries and potential buyers vetted. Only 2 brought to the client’s facility – both submitted offers. Sold to out-of-state buyer.

Ultra-Modern CNC Shop Providing Services to the Measuring Device Industry Price: $1,600,000 Over 250 inquiries and buyers vetted. Only 3 buyers were granted visits. All three submit offers. Two were out-of-state buyers.

Gun Barrel Manufacturer with New Rifling Technology Price: $2,200,000 South Carolina-based company sold to New England buyer.

TRC: Given the market fluctuations due to COVID-19, what is your prognosis for manufacturing company sales for the rest of the year?

FB: While it might seem counter-intuitive this year will be one of the most successful in manufacturing businesses sold.

Manufacturing Outlook / May 2020

25

MANUFACTURING TIDBITS

26

Manufacturing Outlook / May 2020

MANUFACTURING TIDBITS

The WAM Podcast was rated one of the Top 10 podcasts to listen to by ThomasNet, the leading industrial digital directory. Launched in October of 2018, The WAM Podcast is dedicated to conveying the stories of women and their career experiences in manufacturing and business. These remarkable stories and incredible insights spark the imaginations of women and men alike. The first guest was Betty Reid Soskin, an entrepreneur, business owner, wife and mother, activist, singer-songwriter and performer, a legislative aide, author, and at 97 is the oldest active park ranger in the National Park Service to date. She connects with every listener as she reflects on her life and times in a racially-divided America. It is beyond fascinating to hear the stories of these women from the toughest grind to the greatest successes, and most importantly, lessons learned!

Since then, accomplished women have been interviewing accomplished women to empower other women in business and manufacturing, delving into the diverse experiences of women across the broad landscape of manufacturing and business, from sole proprietor entrepreneurs to the highest roles at corporate titans and every role in between at every size company. It is exactly what America is all about – out-work or out-perform the other guy, and succeed in pursuit of the America dream.

Every show contains pearls of wisdom that can help someone navigate their career in manufacturing or business, but when that knowledge or experience is shared by women to women, it is incredibly impactful.

There is little doubt that this is a show that will change lives with positive input from top achievers.

The WAM Podcast can be found at www.wampodcast.com or through www.jacketmediaco.com where listeners will find other manufacturing-related podcasts and content. The listing by Thomas entitled The Thomas Top 10 Podcasts can be found at: https://www.thomasnet.com/insights/10-podcasts-to-keep-your-tech-andindustry-skills-sharp/?utm_content=featuredstory&position=2&linktype=title&channel=email&campaign_ type=thomas_industry_update&campaign_name=tiu200421&utm_campaign=tiu200421&utm_ medium=email&utm_source=thomas_industry_update&tinid=227152507

Manufacturing Outlook / May 2020

27

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 41.5% for April ISM PMI for the past 5 years

28

Manufacturing Outlook / May 2020

ISM REPORT OUTLOOK

reportonbusiness

Analysis by

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

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

ISM® Report On Business®: Manufacturing

Economic activity in the manufacturing sector contracted in April, and the overall economy contracted after 131 consecutive months of expansion, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The April PMI® registered 41.5 percent. The New Orders Index registered 27.1 percent, a decrease of 15.1 percentage points from the March reading of 42.2 percent. The Production Index registered 27.5 percent, down 20.2 percentage points compared to the March reading of 47.7 percent. The Backlog of Orders Index registered 37.8 percent, a decrease of 8.1 percentage points compared to the March reading of 45.9 percent. The Employment Index registered 27.5 percent, a decrease of 16.3 percentage points from the March reading of 43.8 percent. The Supplier Deliveries Index registered 76 percent, up 11 percentage points from the March reading of 65 percent, limiting the decrease in the composite PMI®. Of the 18 manufacturing industries, the two that reported growth in April are: Paper Products; and Food, Beverage & Tobacco Products. The 15 industries reporting contraction in April, in order, are: Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Textile Mills; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Wood Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Primary Metals; and Chemical Products. ISM ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

14

ISMMAGAZINE.ORG

PMI at 41.5% ®

PMI

The PMI® registered 41.5 percent. The 2018 2019 2020 PMI® contracted strongly in April after dropping below 50 percent in March. The PMI® recorded its lowest level since April 2009, when it registered 39.9 percent. The 50% = Manufacturing Economy 7.6-percentage point decrease in the PMI® Breakeven Line 42.8% = Overall Economy is the largest one-month decline since a Breakeven Line 41.5% 9-percentage point decrease in October 2008. Among the big six industries, only Food, Beverage & Tobacco Products expanded. For the second month in a row, all of the PMI® subindexes show a strong negative impact due to the ongoing coronavirus pandemic. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Manufacturing at a Glance INDEX

Apr Index

Mar Index

% Point Change

Direction

Rate of Change

Trend* (months)

PMI®

41.5

New Orders

27.1

49.1

-7.6

Contracting

Faster

2

42.2

-15.1

Contracting

Faster

Production

3

27.5

47.7

-20.2

Contracting

Faster

2

Employment

27.5

43.8

-16.3

Contracting

Faster

9

Supplier Deliveries

76.0

65.0

+11.0

Slowing

Faster

6

Inventories

49.7

46.9

+2.8

Contracting

Slower

11

Customers’ Inventories

48.8

43.4

+5.4

Too Low

Slower

43

Prices

35.3

37.4

-2.1

Decreasing

Faster

3

Backlog of Orders

37.8

45.9

-8.1

Contracting

Faster

2

New Export Orders

35.3

46.6

-11.3

Contracting

Faster

2

Imports

42.7

42.1

+0.6

Contracting

Slower

3

Overall Economy

Contracting

From Growing

1

Manufacturing Sector

Contracting

Faster

2

*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 Commodities Up in Price: Caustic Soda; Disinfectants & Soaps; Freight; Personal Protective Equipment (PPE); PPE — Gloves (2); PPE— Masks; and Precious Metals.

Commodities Down in Price: Aluminum (3); Copper (3); Corn; Crude Oil (3); Diesel Fuel (2); Distillates; Gasoline; Natural Gas (5); Scrap (3); Steel — Hot Rolled (3); Steel — Stainless; and Steel Products.

Commodities in Short Supply: Capacitors; Disinfectants & Soaps; Electrical Cable; Hand Sanitizer (2); Isopropyl Alcohol (2); N95 Masks; PPE — Gloves (2); PPE — Masks (2); and Resistors.

Note: The number of consecutive months the commodity is listed is indicated after each item.*Reported as both up and down in price.

Manufacturing Outlook / May 2020

29

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

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

New Orders (Manufacturing) 2018

2019

New Orders

2020

52.5% = Census Bureau Mfg. Breakeven Line

27.1%

20

Production (Manufacturing) 2018

2019

51.7% = Federal Reserve Board Industrial Production Breakeven Line

Production

2020

27.5%

ISM’s New Orders Index registered 27.1 percent. Of the 18 manufacturing industries, the two that reported growth in new orders in April are: Food, Beverage & Tobacco Products; and Paper Products. The 15 industries reporting a decline in new orders in April — in the following order — are: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; Transportation Equipment; Petroleum & Coal Products; Furniture & Related Products; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Wood Products; Primary Metals; and Chemical Products.

20

The Production Index registered 27.5 percent. The two industries reporting growth in production during the month of April are: Paper Products; and Food, Beverage & Tobacco Products. The 14 industries reporting a decrease in production in April — listed in order — are: Textile Mills; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; and Primary Metals.

Employment (Manufacturing) 2018

2019

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

Employment

2020

27.5%

20

Supplier Deliveries (Manufacturing) 53.1% 2018

2019

2020

76%

80

Inventories (Manufacturing) 2018

2019

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

‡Miscellaneous

2020

49.7%

Manufacturing (products such as medical equipment and

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

30

Manufacturing Outlook / May 2020

ISM’s Employment Index registered 27.5 percent. Of the 18 manufacturing industries, the only industry to report employment growth in April is Apparel, Leather & Allied Products.

The 16 industries reporting a decrease in employment in April, in the following order, are: Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Textile Mills; Machinery; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing‡; Wood Products; Computer & Electronic Products; Chemical Products; and Food, Beverage & Tobacco Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in April, as the Supplier Deliveries Index registered 76 percent. The 17 industries reporting slower supplier deliveries in April — listed in order — are: Printing & Related Support Activities; Petroleum & Coal Products; Textile Mills; Miscellaneous Manufacturing‡; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Furniture & Related Products; Machinery; Chemical Products; Plastics & Rubber Products; Paper Products; Nonmetallic Mineral Products; Fabricated Metal Products; and Primary Metals.

Inventories The Inventories Index registered 49.7 percent. The 10 industries reporting higher inventories in April, in order, are: Wood Products; Paper Products; Textile Mills; Furniture & Related Products; Primary Metals; Petroleum & Coal Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; and Transportation Equipment.

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

April 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

48.8%

Customers’ Inventories ISM’s Customers’ Inventories Index registered 48.8 percent. Of the 18 industries, the three industries reporting higher customers’ inventories in April are: Nonmetallic Mineral Products; Transportation Equipment; and Textile Mills. The nine industries reporting customers’ inventories as too low during April — listed in order — are: Wood Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Fabricated Metal Products; Furniture & Related Products; Chemical Products; Paper Products; Primary Metals; and Computer & Electronic Products.

Prices (Manufacturing) 2018

2019

2020

Prices The ISM Prices Index registered 35.3 percent. The three industries reporting paying increased prices for raw materials in April are: Furniture & Related Products; Textile Mills; and Food, Beverage & Tobacco Products.

35.3%

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

Backlog of Orders (Manufacturing) 2018

2019

2020

Backlog of Orders ISM’s Backlog of Orders Index registered 37.8 percent. The three industries reporting growth in order backlogs in April are: Food, Beverage & Tobacco Products; Paper Products; and Computer & Electronic Products.

37.8%

New Export Orders (Manufacturing) 2018

2019

2020

35.3%

New Export Orders ISM’s New Export Orders Index registered 35.3 percent. The only industry reporting growth in new export orders in April is Apparel, Leather & Allied Products. The 14 industries reporting a decrease in new export orders in April, in the following order, are: Printing & Related Support Activities; Transportation Equipment; Miscellaneous Manufacturing‡; Textile Mills; Plastics & Rubber Products; Furniture & Related Products; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Food, Beverage & Tobacco Products; Primary Metals; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Chemical Products.

Imports (Manufacturing) 2018

2019

2020

Imports ISM’s Imports Index registered 42.7 percent. The five industries reporting growth in imports in April are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Textile Mills; Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.

42.7% ‡Miscellaneous

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / May 2020

31

NORTH AMERICAN OUTLOOK

MAY 2020

NORTH AMERICAN OUTLOOK

by ROYCE LOWE

32

Manufacturing Outlook / May 2020

NORTH AMERICAN OUTLOOK The Institute of Supply Management PMI figure fell to 41.5 in April from 49.1 in March.

Production, new orders and employment are contracting; supplier deliveries are slowing faster and backlogs are contracting. Raw materials inventories are contracting, customer inventories are too low. Prices are down and exports and imports are contracting.

Of the 18 manufacturing industries, the two that reported growth in April are: Paper Products; and Food, Beverage & Tobacco Products.

The 15 industries reporting contraction in April, in order, are: Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Textile Mills; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Wood Products; Miscellaneous Manufacturing; Computer & Electronic Products; Primary Metals; and Chemical Products.

Comments from the industry quite obviously relate to Covid-19, from a 30 percent reduction in business from Computer & Electronic Products, to fear of closure from a Nonmetallic Mineral Products respondent. Food, Beverage & Tobacco is growing as is Paper Products, for the moment.

Commodities Up in Price Caustic Soda; Disinfectants & Soaps; Freight; Personal Protective Equipment (PPE); PPE —

Gloves (2); PPE— Masks; and Precious Metals.

Commodities Down in Price Aluminum (3); Copper (3); Corn; Crude Oil (3); Diesel Fuel (2); Distillates; Gasoline; Natural Gas (5); Scrap (3); Steel — Hot Rolled (3); Steel — Stainless; and Steel Products.

Commodities in Short Supply Capacitors; Disinfectants & Soaps; Electrical Cable; Hand Sanitizer (2); Isopropyl Alcohol (2); N95 Masks; PPE — Gloves (2); PPE — Masks (2); and Resistors.

Note: The number of consecutive months the commodity is listed is indicated after each item.

CANADA saw survey-record falls in production, new orders and employment, along with severe supply-chain disruptions. There were significant reductions in sales to the auto and energy sectors. Business sentiment is low, there is uncertainty, and an expected slump in energy sector spending. The Canadian PMI fell from 46.1 in March to 33.0 in April.

MEXICO saw a record low for its PMI and extraordinary contractions in production and new orders together with a severe lengthening of delivery times and supply-chain disruption.

New orders fell at the quickest rate since data collection began in April 2011. Firms shed jobs at record rates. The PMI for Mexico in April was down from March’s 46.9 at 35.0.

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Manufacturing Outlook / May 2020

33

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by ROYCE LOWE

BRAZIL saw record falls in production and new orders, with an accelerated rate in job cuts and purchasing activity. The PMI fell from 48.4 in March to 36.0 in April. Brazil’s crude steel production for the month of March was 2.635 MT, a decrease year-over-year of 8.2 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – slipped to its lowest level since the 2008/2009 financial crisis. Production and new orders fell at near-record rates, with new export orders falling to the greatest extent on record. New export orders indices fell to record lows in almost all countries, exceptions being Japan, China and Taiwan. Business confidence

34

Manufacturing Outlook / May 2020

was at its lowest in the series’ 22-year survey history.

Global manufacturing employment fell at the quickest pace in almost eleven years. Both input costs and selling prices fell in April. The Global PMI fell from 47.6 in March to 39.8 in April.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by ROYCE LOWE

CHINA saw production continuing to recover but at a milder pace, with total new orders in decline again, as export sales were way down. Input and output charges both fell in April. There was weaker demand and a subsequent reduction in employment and input buying. Input costs were down due to lower raw material prices. The April PMI was down slightly at 49.4, from March’s 50.1.

Business optimism was at a four-month low in April.

CHINA produced 78.975 MT of crude steel in March, down 1.7 percent year-over-year; Japan 8.200 MT, down 9.7 percent year-over-year; India 8.650 MT, down 13.9 percent year-over-year and South Korea 5.776 MT, down 7.9 percent year-overyear. Taiwan produced 1.580 MT in March, down 22.2 percent.

overseas demand. Supply chain problems were apparent. Employment fell at its fastest since June 2009. Input charges were at their lowest since September 2016, due in large part to lower oil prices. There is a general air of uncertainty in Japan. The Japan PMI fell from 44.8 in March to 41.9 in April.

INDIA is under general lockdown and there are widespread business closings. New business and employment are down at a record pace. Input and output costs were lowered markedly as suppliers and manufacturers offered discounts in efforts to get orders. The PMI fell from 51.8 in March to 27.4 in April.

China’s vehicle sales for March were off 43.3 percent to 1.428 million units, following an 80 percent drop in February.

JAPAN saw its production fall even faster than seen in March, with drops in domestic and

Manufacturing Outlook / May 2020

35

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by ROYCE LOWE

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) fell to 33.4 in April from 44.5 in March. This was the lowest value ever in the series - which started in June 1997. All major indices were down as the manufacturing economy contracted at a record pace.

Confidence was at a record low.

IHS Markit’s PMI for the UK fell from 47.8 in March to 32.6 in April.

Crude steel production in Germany in March was at 2.900 MT, down 20.9 percent year-over-year; in Italy 1.367 MT, down 40.2 percent year-over-year; in France 1.200 MT, down 13.2 percent year-overyear and in Spain 1.170 MT, down 14.6 percent year-over-year.

The UK produced 0.683 MT of crude steel in March, down 2.7 percent year-over-year.

Russia’s crude steel production for March was at 5.850 MT, down 4.4 percent year-over-year; Ukraine’s was 1.765 MT, down 10.3 percent yearover-year.

In March new car registrations declined 51.8 percent to 853,077 vehicles in the EU, Britain and the European Free Trade Association.

The Manufacturing & Business Podcast Network

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36

Manufacturing Outlook / May 2020

Manufacturing production, new orders and employment all fell at the fastest rate in the survey’s 28-year history. Vendor lead times increased to the greatest extent so far.

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS April 2020 will long be remembered for the economic devastation that wrought global activity. There are typically winners and losers in an economic cycle, but in this pandemic-induced crisis, winners are scarce and assets are stranded so the best we can hope for is breakeven. This month’s PMI numbers showed almost every major economy is struggling. The one exception is China as its manufacturing sector weathered what looks like a micro recession – one month – a first.

The ISM PMI® In April, the U.S. Manufacturing PMI® (41.5, -7.6) posted its largest one month decline since September

2008 when it fell 9.0 points. The past relationship between the PMI and the overall U.S. economy indicates that the PMI for April (41.5) corresponds to a 0.4 percent decrease in real GDP on an annualized basis, according to the ISM press release. However, this is based on the historical relationship between the ISM Manufacturing PMI® and U.S. GDP. It does not include provisions for the impact of the Covid-19 Global Pandemic which has already radically disrupted supply and demand.

Drivers: New Orders, Production, and Employment – all indicators of demand – collectively averaged 27.4 percent. That is the largest slowing of economic activity since April 1974! Given the plunge, April could represent the bottom of the cycle. Past recoveries suggest it takes five to six months to get the sector back to growth mode. Since 2001, the average monthly performance for these drivers has been 53.8 percent.

A Supplier Deliveries reading above 50 is typically associated with demand increasing/ delivery times slowing. The sub index surged 11.0 points to 76.0

Manufacturing Outlook / May 2020

37

GLOBAL PMI OUTLOOK (a new high) last month. However, April’s reading is

Commodities Up in Price: Caustic Soda; Disinfectants

misleading and inflates the headline PMI number

& Soaps; Freight; Personal Protective Equipment (PPE);

as supply chains remain strained from Covid-19 personnel shortages, limited operating hours, and plant closures. Thus, slowing delivery times are an indication of weakness in this case.

New Orders Minus Inventories: This key measure shows New Orders (27.1) contracted faster than Inventories (49.7). Compared to the average gap between the two (+7.0 pp beginning in 2011), an inventory correction must occur to balance supply and demand.

Customers’ Inventories: Three industries reported

PPE — Gloves (2); PPE— Masks; and Precious Metals.

Commodities Down in Price: Aluminum (3); Copper (3); Corn; Crude Oil (3); Diesel Fuel (2); Distillates; Gasoline; Natural Gas (5); Scrap (3); Steel — Hot Rolled (3); Steel — Stainless; and Steel Products. Commodities in Short Supply: Capacitors; Disinfectants & Soaps; Electrical Cable; Hand Sanitizer (2); Isopropyl Alcohol (2); N95 Masks; PPE — Gloves (2); PPE — Masks (2); and Resistors. Note: Parentheses indicate the number of consecutive months the commodity is listed. Asterisk indicates both up and down in price.

higher customers’ inventories in April: Nonmetallic

Sectoral Breakdown: Of 18 manufacturing industries,

Mineral Products; Transportation Equipment; and

two reported growth in April: Paper Products; and

Textile Mills. Nine industries reported customers’

Food, Beverage & Tobacco Products. 15 industries

inventories as too low: Wood Products; Printing &

reported contraction: Printing & Related Support

Related Support Activities; Apparel, Leather & Allied

Activities; Furniture & Related Products; Transportation

Products; Fabricated Metal Products; Furniture &

Equipment; Textile Mills; Fabricated Metal Products;

Related Products; Chemical Products; Paper Products;

Nonmetallic Mineral Products; Machinery; Plastics &

Primary Metals; and Computer & Electronic Products.

Rubber Products; Electrical Equipment, Appliances

Six industries reported no change.

& Components; Petroleum & Coal Products; Wood Products; Miscellaneous Manufacturing; Computer

Prices: The Prices Index (35.3, -2.1) largely reflects the recent fall in prices of metals and energy sources.

38

Manufacturing Outlook / May 2020

& Electronic Products; Primary Metals; and Chemical Products.

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 By this time, the use of the word unprecedented has become a cliché and everybody has become frustrated with the rash of uncertainties that have characterized this economic crisis. The reference to a “lockdown recession” seems to say it all. There has been nothing natural about this global economic collapse as it was not triggered by any sort of economic issue as had been the case with 2008 recession or any of the other downturns the world has faced in the last several decades. The decision to shutter the entire business community in order to deal with a pandemic is creating a crisis that has never existed before and that leaves business with few options other than to simply hang on.

The data collected by the CMI this month is as bad as it has been in the history of the index – numbers that rival the depths of the 2008 recession and in some cases are far worse. The most vexing issue is that nobody has a real sense as to when this situation will change. The optimistic scenario holds there will be a swift rebound just as soon as the restrictions are lifted and it seems that most states will be engaging in a phased recovery through the month of May. The pessimistic outlook holds that consumers will not be ready to resume old patterns and that business will be reluctant to fully engage and that this will extend the downturn well into the summer.

Now for the litany of bad reports. The combined score for the CMI fell to 40.6 this month and that comes dangerously close to the miserable numbers from 2008 when readings in the 30s became common. The index of favorable factors has fallen into the low 30s and that is in record territory. The

shutdown in the economy has been widespread and has left no opportunity for progress. The index of unfavorable factors had been holding up to some degree but this month it fell to 46.3 and will almost certainly trend in a more negative direction in future months. The extent of the collapse becomes more obvious with a look at the specific factors.

The sales numbers have never been this low – not since the origins of the CMI. This is no surprise at all given the shutdown orders, it is hard to sell much when the company has been shuttered and so have all the potential customers. The only good news is that this category can only go up from here. The new credit applications numbers have also cratered – down to 31.1 as there have been no sales. The dollar collection data has collapsed to 35.5 as almost every business is hanging on to what money they still have and have not been concerned with keeping current with their credit. The amount of credit extended sported the highest reading of the four at 41.6 but that is still obviously very low.

The only thing that kept this category in the 40s has been the demand from sectors that are still functioning – medical, some grocery operations and other sectors that were deemed essential.

The data from the unfavorable categories has been weak but not quite as catastrophic as is the case with the favorables and this is simply due to timing.

This crisis is still fairly young as it began in earnest in March. There has not yet been time for all the negatives to manifest but they have started to and will become more evident in future readings. The rejections of credit applications have remained in positive territory with a reading of 52.7 compared to one of 53.5 the month prior. The fact is that Manufacturing Outlook / May 2020

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CREDIT MANAGER’S OUTLOOK application numbers are way down and the only applications are coming from those few sectors that have stayed in business. Most of them have been doing reasonably well. The accounts placed for collection numbers are starting to reflect the stress with a reading of 47.4 as compared to 50.6.

This is still a matter of timing as many creditors have not yet reached the point where collection action is mandated. The disputes category has also managed to stay just within the expansion zone with a reading of 50.8 compared to 52.1 the month before. The dollar amount beyond terms reading has fallen off a cliff with a decline from 43.9 to 27.6. The vast majority of companies are suddenly unable to keep current on any of their obligations and are falling further behind with every passing day. The dollar amount of customer deductions slipped out of positive territory with a reading of 49.4 as compared to 50.4 in March. The filings for bankruptcies number has remained just barely in positive territory with a reading of 50.2 compared to the 53.2 that was registered last month. This is a situation that will worsen in time as more companies find themselves in trouble.

Manufacturing Sector The impact of the lockdown recession has been felt most profoundly in the service sector as opposed to the manufacturing sector. There are obvious exceptions to this as there have been manufacturers that have been devastated by a combination of factors. Those that are connected most closely to the energy sector have taken an enormous hit as oil prices have cratered and severely limited production around the world.

The airline sector has been another one that will be hard pressed to rebound quickly. Other sectors have fared better – such as those that are connected to the medical community. The manufacturers most sensitive to the consumer will be the ones that will be watching the reopening carefully.

The combined score for the manufacturing sector fell to 42.0 from the 49.8 reading notched in March.

The majority of the damage was in the favorable category as this reading went from 48.2 to 34.3. To illustrate the extent of this crisis, consider the fact that manufacturing was at 62.0 in February. The unfavorable category has been a little less affected but still notched a significant loss as it moved from 50.8 to 47.2. This relatively less dramatic decline is attributed to the fact there has not yet been enough time for creditors to get in real trouble.

The majority of the damage has been seen in

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Manufacturing Outlook / May 2020

the favorable categories – sales utterly collapsed and this was not a shock to anyone given the total shutdown of the economy. It had already shown a steep decline from February when it was at 65.7. By March it was down to 40.3 and now sits at a record low of 21.4. There is simply no activity to register.

The new credit application numbers show a similar collapse as they have gone from 61.4 in February to 45.0 in March to 35.7 in April. The dollar collections data follows that grim trajectory – 58.3 in February, 53.4 in March and 35.0 in April. The effort to keep current on the part of creditors has largely been abandoned in the face of the lockdown. The amount of credit extended numbers were on the same path – 62.8 in February, 54.0 in March and big tumble to 45.1 in April. The slightly less dramatic drop has been attributed to the fact that some select manufacturing sectors have been handling the lockdown slightly better than others.

There has not yet been enough time elapsed to make the unfavorable numbers crash to the extent the favorables have but that day is unfortunately coming. The rejections of credit applications actually remained in positive territory with a reading of 52.8 compared to the 54.4 notched in March. The fact is that those that are asking for credit are in very hot fields right now and are producing faster than they had been. The accounts placed for collection have also managed to stay just barely in positive territory with a reading of 50.0.

The manufacturers are just starting to encounter issues and there has not yet been enough time for them to get into collection trouble. If the shutdown extends a lot further the collection issues will magnify. The disputes category also managed to hang on to the expansion zone by the thinnest of margins. It was at 51.4 last month and has dipped to 50.6 in April. The dollar amount beyond terms is where the crisis has become obvious and this is what is setting up big problems later. The creditors are starting to slow down as far as keeping on top of their terms and these slow pays make it clear that companies are working hard to protect their capital. The numbers in February were solidly in expansion territory and they fell to 44.3 in March.

Now they are in record low territory at 28.6.

The dollar amount of customer deductions also managed to stay just in expansion territory with a reading of 50.1 after a March reading of 51.3.

There was also a positive result as far as filings for bankruptcies as it maintained a level of 51.1 after a 52.0 reading in March. Even with all the damage done in April there were five of the six categories still sitting in positive territory but only by the narrowest of margins. This will change in May but how much they change will be determined by the speed of the rebound.

METALS OUTLOOK

MAY 2020

METALS OUTLOOK

by ROYCE LOWE

Not surprisingly, the world steel industry is taking a beating in the midst of the coronavirus pandemic. The month of April saw the U.S. mill price for hot-rolled coil drop from just under $530 per ton to just under $470 per ton, that of coldrolled coil from around $690 per ton to around $640 per ton. This represents drops in hot-rolled from $590 to $470 since early March and from $750 to $640 for cold-rolled in the same time frame. A similar pattern was observed for hot-dip galvanized material.

epidemic, and demand dropping over the past few weeks, steel buyers are obtaining significant discounts from domestic suppliers, who are out looking for orders. Delivery lead times are short, and tonnages at service centers and endusers are down, particularly from automakers and associated parts manufacturers. This falling demand naturally leads to production cutbacks at mills, with capacity utilization rates dropping below 60 percent, or the lowest levels recorded since September of 2008.

Under these conditions, with the U.S. steel sector being an “essential industry� during the

Recovery in steel demand, and hence prices, will depend upon the scheduling of the lifting of restrictions, which is presently an unknown. In the Manufacturing Outlook / May 2020

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METALS OUTLOOK

wake of all this bad news, Nucor Corp and Arcelor Mittal recently announced increases in hot-rolled, cold-rolled and hot-dip galvanized flat products of a minimum of $50 per ton.

The U.S. construction industry is slowing, but still remains one of the better-performing enduser sectors. Domestic long-product prices are expected to fall in the near term, following an April reduction in mill scrap costs.

Stainless steel production for the year 2020 is forecast to fall by 10 percent to 46.8 million tons.

A similar pattern is being observed in Europe, where flat-rolled prices were largely unchanged in late March/early April, but reductions in auto output resulted in the inevitable lack of demand. Mills cut back production in the hopes of stabilizing prices, but the orders just aren’t there.

Even though the Chinese steel industry and Chinese manufacturing are improving, these factors alone cannot bring things back to normal.

The global steel industry is in for a fairly long recovery process, and normal may not be normal, if ever, for a good long time. In the midst of this, steel trading has been suspended in both India and South Africa, where virus conditions are virtually shutting down these countries. Brazil and Mexico are suffering similar, but not as drastic, conditions.

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Manufacturing Outlook / May 2020

Cleveland Cliffs, which recently completed the acquisition of AK Steel, has announced it is idling production at iron ore mines in Minnesota and Michigan. Meanwhile, “sources” say that AK Steel’s Dearborn Hot Strip Mill is to be idled. These same sources say it will not be coming back, and that slab rolling will be moved to Middletown, Ohio.

STEEL PRODUCTION WAS DOWN BY 6.0 PERCENT YEAR-OVER-YEAR IN THE MONTH OF MARCH for the 64 reporting countries – which represent 99 percent of world crude steel production – to 147,054 MT. Primary Global Aluminum Production in March was reported at 5.447 million tons, with production in China, at 3.100 million tons, representing 57 percent of world total. Production was 507,000 tons in GCC; 348,000 tons in the rest of Asia; 287,000 tons in Western Europe; 342,000 tons in North America and 354,000 tons in Eastern and Central Europe.

In the U.S., non-ferrous metal data show aluminum steady through April at $0.66 per lb; copper ranging from $2.18 per lb to $2.35 per lb through the month; nickel from $5.05 to $5.50 and zinc from $0.84 to $0.87.

Canada produced 1.060 MT of crude steel in March, down 15.3 percent year-over-year.

AEROSPACE OUTLOOK

MAY 2020

AEROSPACE OUTLOOK

by ROYCE LOWE

Planes are still mostly grounded. Boeing was to resume production at Puget Sound on April 24.

The company recently announced 10 to 15 percent job shedding. The federal panel of the National Labor Relations Board (NLRB) alleges Boeing threatened and fired workers for supporting union organization efforts at the 787 assembly plant in South Carolina. The complaint filing alleges that Boeing fired five workers and that its managers issued verbal warnings to employees who favoured union representation. Boeing has refuted all charges, and asserted the NLRB case allegations are without merit. The case may go to trial or negotiation.

NASA has selected Blue Origin, and what the latter refers to as its National Team - Lockheed Martin, Northrop Grumman, and Draper - to begin development of the Artemis Human Landing System (AHLS). According to Blue Origin, this program will be the next major milestone in the history of human space flight.

NASA’s goal is to land on the South Pole of the Moon, and its team will use existing and indevelopment technologies to this end.

Blue Origin will be the prime contractor and will lead program management, systems engineering, Manufacturing Outlook / May 2020

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AEROSPACE OUTLOOK safety and mission assurance, and mission engineering and operations, and will develop the Descent Element.

Lockheed Martin will develop the Reusable Ascent Element vehicle and will lead the crewed flight operations and training.

Northrop Grumman will develop the Transfer Element Vehicle that delivers the landing system into low lunar orbit for the final descent Draper will lead the descent guidance and provide flight avionics.

Boeing, SpaceX and other smaller companies are in the running for parts of this project. NASA wishes to have two complete systems vying for the final honor, namely a trip back to the moon by 2024. And this time to stay.

This is a project we will follow with interest. If they are going back to the moon to stay, it will be fascinating to know who they will choose to live up there.

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Manufacturing Outlook / May 2020

In the midst of the pandemic, Lockheed Martin Corp. is flying high. Its CEO, Marillyn Hewson, said the company had added almost 1,000 new employees in late March/early April, and doubled its payment advances to small and medium-sized suppliers struggling amid the Covid-19 pandemic.

It is expanding its efforts to help its employees and suppliers through this wider economic slowdown.

The CEO stated the company’s commitment to continue hiring during the crisis, and that in addition to the 1,000 new employees, 5,000 open positions will be advertised. Lockheed will donate $2 million worth of PPE items for first responders and health-cars workers, and will provide engineering support for select initiatives to accelerate production of PPE equipment.

This should help to consolidate Lockheed Martin’s position as the number one defense contractor.

ENERGY OUTLOOK

MAY 2020

ENERGY OUTLOOK

by ROYCE LOWE

Manufacturing Outlook / May 2020

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ENERGY OUTLOOK Over 106,000 clean energy workers lost their jobs in March, according to a new analysis released April 15 by E2 (Environmental Entrepreneurs), the American Council on Renewable Energy, E4The Future and BW Research Partnership.

And hundreds of thousands more of clean energy jobs are projected to go in the coming months.

The analysis of Department of Labor data found that 106,472 workers in clean energy occupations filed for unemployment benefits last month, wiping out all 2019 clean energy job gains across renewable energy, energy efficiency, clean vehicles, energy storage and clean fuels. These include electricians, HVAC and mechanical trades technicians and construction workers who work in energy efficiency, solar installers, wind industry engineers and technicians, and manufacturing workers employed by electric and other cleanvehicle manufacturing companies and suppliers.

These layoffs are just an initial indication of how badly the clean energy industry will be affected by the crisis, with projections that over 500,000 clean energy workers, or 15 percent of the entire clean energy workforce, will be out of a job in the months ahead unless directives come from the powers that be in the White House. Such a loss would wipe out the industry’s total job growth over the past five years.

BW Research Partnership alludes to the economic fallout from Covid-19 and its ongoing impact upon the entire range of clean energy activities, from the manufacture of EVs to the installation of solar panels.

Clean Energy has shown up well as one of the U.S. economy’s biggest and fastest-growing employment sectors, increasing 10.4 percent since 2015. Clean Energy jobs reportedly increased to 3.4 million at the end of 2019, with the industry adding more than half the entire energy sector’s job growth in 2019, over 70,000 jobs for a 2.2 percent growth rate - a pace faster than the U.S. workforce as a whole.

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Manufacturing Outlook / May 2020

Many jobs were lost, for example, in energy efficiency, which accounted for some two-thirds of all clean energy unemployment filings, as electricians, plumbers, construction workers and others could not access homes, offices and other buildings because of lockdown measures.

Jobs were lost in renewable energy, where solar and wind-energy companies struggle through delayed and canceled projects.

There were job losses also in the clean vehicle sector where electric and hybrid vehicles are manufactured.

Some of these affected projects will come back to life; others may fail due to lack of financing.

There is little doubt that solar and wind energy and electric vehicles are here to stay in the long term, but when they will come back on stream is at the moment an unanswered question.

Some groups of course will be rubbing their hands: they want everything to run on fossil fuels.

AUTOMOTIVE OUTLOOK

MAY 2020

AUTOMOTIVE OUTLOOK

by ROYCE LOWE

In the midst of the Covid-19 pandemic, governments around the world are ordering factories to close, and mostly-immobile buyers are not buying automobiles, as sales are forecast to drop by at least 20 percent, to a level last seen in 2007-2009. There may be a second round of Covid-19, making for more uncertainty in 2021.

The industry has pretty much committed itself to a super expensive move to electric cars, and will come out of the pandemic transformed, to what we don’t presently know.

Labor shortages caused by illness, the need for more deep-cleaning and other safety measures will slow down productivity for a while. VW is one of several carmakers that was reopening late April, and will use its experience from reopening 32 of its 33 plants in China to smooth its way.

When automakers stop production, demand for parts falls deeply and rapidly. All this means cash flowing nowhere. It has been estimated that the eight biggest carmakers in Europe and America could get through $50 billion of cash in the second quarter of this year.

Supply chains are another matter. Past natural disasters taught auto companies to diversify suppliers, with alternatives as backup. But this works only for fairly small parts; large parts such as door panels tend to be made close to factories where multiple producers are unlikely to be found. Similarly, doubling up on capacity for parts requiring expensive, complicated tooling is prohibitively expensive. Suppliers may come out of a crisis in worse financial shape than the companies they service.

Factories are reopening; the Chinese are up and running, dealerships too. Sales in China fell by 80 percent year-over-year in February, in March by 40 percent, with April, judging from the first 20 days of the month showing a year-over-year drop of 7 percent.

It has been suggested that the auto industry is running on “two clocks”. The first is near term, when investment in fossil-fueled, profitable vehicles has to continue, ensuring that firms have money to invest in electric ones. On this clock companies will sell EVs at a loss for several years.

Manufacturing Outlook / May 2020

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AUTOMOTIVE OUTLOOK On the second, longer term clock, battery prices will fall enough to ensure profitability. But margins on EVs may not match those of conventional automobiles for a goodly while.

VW’s boss, Herbert Diess, alluded to this complicated equation in January, when he spoke of the car industry needing to “slaughter some sacred cows.” VW is betting some 60 billion euros on EVs and other new technologies over the next five years. But are motorists interested? Apart from China, sales of EVs have been slow, and in Europe only two percent of cars sold in 2019 were battery powered.

Europe’s tough emission rules will likely push up EV sales, but not necessarily in America, where emission standards were recently relaxed. There again, the pleasure of breathing cleaner city air during lockdowns may persuade some to EVs. Many will keep their older cars longer, with falling oil prices and a glut of used foreclosures.

Hence Covid-19 may slow electrification, but it will not stop it. Car firms will continue development of EVs, come what may. There may be more mergers, such as the one still in the cards between PSA and Fiat-Chrysler.

The pandemic won’t hurt Tesla. It has no decision to make as to which way to go since all vehicles are electric, and has a good order backlog and lots of cash.

The biggest concern among carmakers may be that the virus changes attitudes toward cars. One scenario sees fear of infection putting commuters off trains and buses and ride hailing, hence into automobiles. On the other hand, more people working from home may reduce commuting of any kind. A prolonged recession might damage sales extensively.

LMC Automotive expects 2020 light-vehicle sales to fall to 12.9 million units, which would be a nine-year low. And quarter one this year ended with a 14.2 percent drop in car assemblies, which, coupled with a 9.8 percent fall in light-truck output, led to an 11 percent drop in light-vehicle production.

The automobile industry will pose many questions in the coming years. It is to be hoped it can come up with the necessary answers.

Thanks to The Economist for much of the information in this article.

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Manufacturing Outlook / May 2020

ISSUES OUTLOOK

MAY 2020

ISSUES OUTLOOK

by ROYCE LOWE

We all know Canada, America’s cousin to the north, snuggled up behind the world’s longest undefended border, with a population that over 70 percent lives within a hundred miles of this border.

Canada happens to be the world’s second-largest country in square miles, and has about 0.5 percent of the planet’s population. A lot of it is cold, long winters, lots of snow; parts are inhospitable, so not many people want to live there. Lots of Canadians go south for the winter ; snowbirds they’re called: have second homes in Florida.

The country came together in 1867, the year of what is called confederation. Newfoundland, however, held out until 1947. They play ice hockey, of course, in Canada, where a lot of the rules are said to have originated. And football, Canadian football, with a slightly bigger field than in the NFL, and only three downs. Many would-be NFL players start their careers in Canada.

William Shatner, Glenn Ford, and Jennifer Aniston hail from Montreal ; Raymond Burr was from British Columbia. Mary Pickford (Gladys Louise Smith) was from Toronto. Jim Carrey, Bill Murray, John Candy, Martin Short, and Dan Aykroyd all made a career in the U.S. Saturday Night Live was stocked with Canadians.

Insulin was invented in Canada, by Banting and Best.

Somewhat less than 20 percent of Canadians speak French as their mother tongue. Most of them live in Québec, where French is the official language.

People who speak French used to be called FrenchCanadians, but for some time now have been called Québécois.

Québec produces an incredible amount of hydroelectric power, from the James Bay project in the north of the province. A lot of electricity is sold to the north-eastern U.S., particularly to New York state.

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ISSUES OUTLOOK the day. Polar bears roam the streets of places like Churchill, where winter temperatures of minus 95 F are not uncommon.

West of Manitoba is Saskatchewan, one of the world’s breadbaskets…grain, grain, grain. There’s oil there too. Then come Alberta and British Columbia.

Alberta is renowned (notorious) for its tar sands, a 50,000 square mile area oil bath. B.C. has oil too.

Both Alberta and B.C. have exceptional beauty.

And way up north, in a place called Sept-Iles (Seven Islands), iron ore may be found in abundance.

Dofasco, as it was called, in Hamilton, Ontario, was the first steel plant in North America to use the Basic Oxygen Steelmaking process, back in 1954. In that same year, Atlas Steels, as it was, in Welland, Ontario, became the first steel company in North America to use the continuous casting process in the manufacture of steel billets.

East of Québec we find the Maritime Provinces; New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador. Of which more later.

Canada is, of course, a member of the latest freetrade deal, USMCA. In 2018, $13 billion of steel was traded between Canada and the U.S. Canada takes effectively half U.S. steel exports, and over 80 percent of Canada’s steel exports go to the U.S. In aluminum, there is a combined trade of $14.5 billion annually, and some 76 percent of Canada’s primary aluminum production goes to the U.S. where it is converted to finished products, many of which are for U.S. defense industries and for other U.S. domestic and export markets.

The province of Ontario, which borders Québec to the west, is Canada’s major manufacturing area. West of Ontario is Manitoba, where cars should be plugged in overnight in winter, and tires may turn square during

There’s a little bit about, an introduction to, Canada.

In future issues we’ll go into the country in more depth, as we will America’s neighbour to the south, Mexico.

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