Tuesday, May 26, 2009

Is the tide about to turn?

The Connecticut River rises in the mountains of Vermont and wends its way through four states into Long Island Sound and eventually the Atlantic Ocean. The Connecticut River rises in the mountains of Vermont and wends its way through four states into Long Island Sound and eventually the Atlantic Ocean. Along the way it historically provided the water power for hundreds of industries, among them the American precision machining industry that was born in Vermont. These hundreds of companies, now spun off into thousands, are the backbone of Yankee industry; many of which are small family-owned shops trying to adapt to the 21st Century through changing technology.

Yankees are a stoic bunch, not given to outward emotion; so when surveyors come asking for their outlook on the economy the Yankee turns taciturn and as a result those conducting the survey can be confused by the statistics that result.

Prior to last week’s Eastec in West Springfield, MA, held along the banks of the Connecticut River, forecasts of a reduced and non-buying attendance were common. But the Yankees proved the soothsayers wrong and they turned out in very large numbers to "kick the tires" on manufacturing equipment that will allow them to compete in a global economy. And no one was more pleasantly surprised than me, maybe because I don't qualify as a Yankee, since my family roots only go back 100+ years here. My wife’s go back 300 so she qualifies.

According to the organizers, the SME, attendance this year was down about 12% from 2008's approximately 13,700 and the number of exhibitors was down about 5% to 580. Not a bad showing in what is proving to be a soft year for many trade shows. Yankees are also known to be shrewd so maybe they sense a change about to happen.

For lasers Eastec was a marking show with a dozen and a half suppliers exhibiting their products, most of them in one of the five building exhibit spaces at the Big E Fairgrounds. There cheek-by-jowl were a baker's dozen of companies each showing the latest in laser marking/engraving technology. It was a powerful display of laser technology, so much so that one visitor was overheard saying to his partner, "Just look at all these #*@%& lasers!"

I spoke with representatives of each of the equipment suppliers and asked how they are managing in an unusual down year for laser marking sales, and how they view prospects for the rest of the year. I also asked their opinion of future opportunities for continued growth along the lines of the past three years.

Not unexpectedly consensus ruled among the answers received, after all this is a trade show and optimism is usually prevalent at shows. These suppliers reported mixed results for the year so far with most companies citing spotty successes but all admitting that sales are off compared to last year. A frequently heard comment was that buyers, and they are still out there, are shopping more assiduously, often asking for quotes from six or more suppliers. This is counter to previous years when, at most, three companies might bid against each other. One buyer has an Excel analysis of more than two dozen suppliers that lists all equipment specifications so that he can just click on a characteristic, marking area for example, and compare all the suppliers. So making a sale is tough but there are sales being made.

Suppliers favor a six-month horizon right now where they expect sales to increase slightly in the fourth quarter and really pick up in the first half of 2010. The trouble with six-month horizons is that they have an annoying habit of stretching out.

The suppliers all agreed with me that laser marking will likely lead the recovery in the industrial laser market. The reason: the technology is far from saturation, demands from regulatory actions are still in place, and, more to the point, business will respond quickly to consumers reentering the retail markets.

Monday, May 18, 2009

"As GM goes, so goes the country"

The Inn at St. Johns in Plymouth, Michigan, is a remarkable place to hold a technical conference. The Inn at St. Johns in Plymouth, Michigan, is a remarkable place to hold a technical conference. First built as a seminary in 1955 by the Catholic Archdiocese of Detroit, the sprawling brick complex was turned into a hotel, conference and golf center in 1998, without significant changes to the marble floored and walled interior except for remodeling and conversion of one wing to a multi-room hotel. Almost smack dab in the middle of the facility is a beautiful chapel left over from the seminary days. At this year’s two-track Automotive Laser Applications Workshop (ALAW) the auto sessions were held in one wing and the fabrication sessions in the other, so if you were bouncing between them to sit in on presentations of interest you had to pass by the chapel.

Given the parlous state of the economy in Michigan and this week the continuing bad news from the auto industry as General Motors and Chrysler were forced to reduce the number of U.S. dealerships, visitors to the area were left in a depressed mood. So much so that a visit to the peaceful chapel, with time taken to contemplate that all things eventually sort themselves out and the auto industry will rebound, albeit in a decisively different look, gave the more thoughtful of us a fresher, renewed outlook on life. But I must concede that in the dozens of times I passed the chapel I never saw anyone seeking a higher perspective on life.

Attendance at this year’s event was down from past performance and that was not unexpected as conferences across the country are seeing drops of 25% or more in paid attendance. Perhaps most disturbing was a remark by an industry veteran, “where are all the users,” a reference to the attendance list which was dominated by suppliers of industrial laser products and representatives of several applications development institutions. By my count about 30% of registrants were considered as commercial users of industrial lasers. And since ALAW was designed to disseminate laser processing information to end users, one would have to conclude that the economic recession, and its impact on travel budgets was the culprit. In reality ALAW, except for its early years, has traditionally not drawn big numbers from the auto industry. Reasons for this abound but maybe it is time for the current organizers to reassess the auto theme and expand the applications presentations to other industrial areas.

Presenters in the automotive track described some interesting applications that can and will have impact in the auto industry and beyond, for example in battery and fuel cell processing. The opening session on tailored blank and tube welding sort of fell flat as the economic news from that sector is not at all good, especially with the demise of a leading supplier of blanks recently announced and the gross numbers for auto units to be built this year down dramatically.

News emanating from R&D work on battery and fuel cell welding was a highlight as the attendees were introduced to new technology assessments on laser welding of heretofore unweldable dissimilar metal combinations and materials that prior to the introduction of high brightness solid-state lasers were unweldable.

ALAW still has ongoing problems with commercialization in some of the talks, and the organizers should heed the comments of attendees and do away with these obviously biased and too-focused speakers. Maybe they should look at the number of attendees that leave the room as these sales pitches are delivered.

Remote welding, definitely an auto application, is always interesting to view as technology changes make this process almost a necessity in this industry. However, with the ongoing bad news in the industry, the edge is taken off the breakthroughs that are being made.

All-in-all ALAW met my expectations in a year when conference attendance is down. Overall they did all right. I was sorry to see that too large number of registrants did not show, but those that did were treated to some interesting news they can carry back to their companies.

Tuesday, May 5, 2009

It's Spring, I see green shoots

It must be the Spring weather which finally has made it North to the Canadian border. It must be the Spring weather which finally has made it North to the Canadian border. The DABometer Recession Gauge has been hovering around neutral for the past few days and on more than one occasion has gone positive. The pundits call this green shoots.

Business acquaintances are mentioning recovery more often lately and an associate just returned from Southeast Asia reports that the restaurants where he dined in Hong Kong, Singapore, and Shanghai were all full. Frankly I chalk this up to the fact that these are big cities where everyone eats out all the time anyway. As a chill on this good news he also reported that the Business Class seats on the several airlines he flew were half empty. Just like the proverbial glass of water I guess.

Several contacts from the industrial laser processing world are sensing a shift in the bad news department. Hannover Messe just reported that over 210,000 people visited more than 6100 exhibits over a five day period at that industry show, a clear sign, the organizers say, that industry is putting the recession behind as they look to the future. However I notice, pointedly, that their press release does not make mention of this year's attendance number relative to the last. And a news release for the European Union headed “EU: Europe in Widespread Recession” didn’t exactly make my day. On the other hand I have a stack of press releases dating back to late December in which various European sources claimed that the recession was mild. The EU was quoted yesterday as saying they were way off the mark in earlier forecasts. Makes you sort of wonder if the bureaucrats in Brussels know which end is up. From now on I’ll take their forecasts with a grain of salt.

On the anecdotal front a machine tool distributor friend, who also sells laser cutting equipment, told me that he booked a $13 million order for fabricating equipment, with enough commission to send him to Florida for a few weeks. The word from China is that the government GNP goal will be met and that their stimulus package is working faster than thought. An expatriate former U.S. marketing guy tells me that the business for his new employer is booming in China and he expects to exceed his quota early this year.

Many of the phone calls I receive, you remember the phone don’t you, begin with “Has the turnaround started?” At first I thought this was just a joke, but then realized that these callers are seeing the same signs I am. My answer is that with a recent spurt of bad economic news from the manufacturing sector (led by the auto industry) it hasn’t happened yet. But contrary to the tea baggers around the U.S. some of the stimulus spending they abhor seems to be flowing to the right areas and things are not as gloomy as they were when the new year started. Not great, but green shoots are showing and that’s a cause for optimism.

The Feds report on the banking industry isn’t out yet and that might be an indicator. This might put a crimp in those shoots. But like my tough crocii that pop up in February when we have a couple of warm days and then hunker down when we have a particularly nasty late winter storm they always come back. My Asian reporter who went to see the birthplace of peonies on his trip, and who owns some Asian peony tree plants says that his took a beating with the bad Midwestern weather in March. Mine, Western varieties, are up a foot and thriving. So it’s no turnaround everywhere yet, like the news, but the signs are there. So be of good faith.