Foundry Daily News

North American

manufacturing and molding shrinking?

<font face="arial, geneva, helvetica" size="2">A cursory review of headlines in trade publications and newspapers serving major injection molding markets around Detroit, Ohio, Indiana, or Illinois would lead one to believe that North American manufacturing is shrinking. The natural assumption is that injection molding, as an industry, is shrinking along with it.<br><br>What’s more is that many suppliers to U.S. injection molders are cutting budgets and staffs and, it appears, research dollars, concerned that a “mature” U.S. market holds little promise for growth.<br><br>This is a grim and fundamentally inaccurate outlook. Yes, every plant closing (and there have been many molding plants shuttered as a result of the shift in automotive from domestic manufacturing to foreign transplants) and every molding plant opening in China or India by a U.S. company gets a headline.<br><br>Yet this is misleading.<br><br>A shift since 1980</font>

<font face="arial, geneva, helvetica" size="2">What many perceive as an irreversible decline of North American molding may have started around 1980 when the first wave of outsourcing to Asia started. In the 1990s outsourcing to China and more recently to India gathered steam. Molding jobs moved offshore in substantial numbers. In the late 1990s and early this century, Mexico lost a substantial number of molding plants to China. Note that after that sharp decline, Mexico regained much of the lost ground and does more injection molding today than ever before.<br><br>Molding growth outside the NAFTA region has not resulted in a shrinking North American molding base. The reverse is true. Actual output—as measured in pounds of plastics consumed by molding plants in Canada, the United States, and Mexico—has grown an average 3.1% (with the exception of several recessions) since 1980. That is not the sign of a shrinking manufacturing environment.<br><br>Exports of manufactured goods are up sharply and that growth rate exceeds by far the import of manufactured goods. Sure, we still have a trade deficit, but manufacturing is benefiting from strong global demand for U.S. manufactured goods.<br><br>Sales of imported injection molding machines have grown since 1989 (when The Repton Group LLC first started tracking such imports on a monthly and annual basis). As of November 2006, the number of imported injection molding machines arriving inside the United States—as recorded by the U.S. Commerce Dept.—was up 10.1% over 2005.<br><br>Significant structural change<br><br>It is a fallacy to view the United States now as an isolated market. Courtesy of NAFTA, Canada, the U.S., and Mexico are evolving into one integrated market place. In the next year or so we hope to present you with combined economic data for this sizable market.<br><br>Some may call setting up a plant in Mexico outsourcing. We are not sure that is accurate. Northern Mexico is essentially an integrated part of the U.S. economy, with parts molded for U.S. as well as global consumption. Those plants are run most frequently by U.S. experts and a substantial number are owned by U.S. firms.<br><br>If you add the growth in injection molding in Mexico to the U.S. and Canadian totals, the overall IM market inside NAFTA grew about 4.1% in 2006. Spot data confirm this. The American Plastics Council reported that in the six months ending July 2006, sales inside Canada and the United States of polypropylene used in rigid packaging (much of which is molded) rose 6.2%. Other markets did well too, with growth rates ranging from 2%/year to more than 11% for electrical parts for automotive and housing.<br><br>What is needed among machinery and resin suppliers, moldmakers, and molders is a wider perspective, treating this market as an integrated unit with solid growth prospects. Note that the U.S. government’s U.S. Commercial Services unit reported that imports of injection molding machines into the maquiladora jumped 6.7% in 2005 and probably will have grown at an 8% annual rate in 2006.<br><br>Of course, outsourcing continues and molding jobs are moving away from the NAFTA territory to Eastern Europe, India, China, and some of the other Pacific nations. Yet the demand for North American molding remains. Established firms and startups have quietly stepped in to fill the voids.<br><br>What kinds of molding jobs are moving offshore? It used to be the low-value-added goods such as plastic flowerpots, cutlery, and even drinking cups. Over the past 10 years, more value-added jobs have also moved offshore with high-value-added electronics parts, medical components, and basic electrical items being molded abroad.<br><br>What is common to many of these jobs is that they are high-volume parts made in long runs with little manufacturing changes required, but labor-intensive trimming and assembly required. This is where low-labor-cost environments are favorable. Yet, a good number of such molding jobs are being repatriated.<br><br>So what is going on here?<br><br>Flexible manufacturing wins<br><br>The molding jobs coming back into the NAFTA territory (along with the ones that never left) are those in which the premium is on speed and quality. Specialized electronics and electrical parts for computers, office machines, and cars are molded in expanding volumes in North America.<br><br>What do we mean by speed and quality? We are talking about highly customized jobs where volumes are relatively low but where molders—working closely with part designers and OEMs—deliver newly designed parts to the market within months and, courtesy of advances in mold technology, sometimes inside weeks. Just think about the profusion of designs for small consumer products (mobile phones, calculators, and the like): Designs change constantly and overall product runs are short.<br><br>This favors molders close to the market and those who are truly high-tech. It means they can start molding perfect parts quickly, change from product to product within a few minutes or hours, and maintain consistently high quality.<br><br>The number of truly new injection molding plants supplying automotive is staggering. Old-line automotive parts makers are—as is well known—struggling as their primary customers such as GM, Ford, and Chrysler face declining sales.<br><br>At the same time, injection molders from Asia are setting up shop in the southern tier states to supply Hyundai, Honda, BMW, and Toyota. One recent example is South Korean injection molder and blowmolder KwangSung Co. Ltd. that started molding parts for Kia and Hyundai near Alexander City, AL. C&amp;S Plastics LLC (Fayetteville, TN) announced plans to double automotive parts production in 2007. On the other hand, Visteon announced plans to shut its molding plant near Chicago this year due to declining sales to the traditional carmakers. And Blue Water Automotive Systems Inc. shut down three molding plants because of declining sales to Detroit.<br><br>Another example of the importance of flexible manufacturing is Inplast USA LLC in Leitchfield, KY. This company is a joint venture of California-based molders Plastikon and Injex and is setting up a new plant in Kentucky to make automotive and medical high-quality parts. To combine automotive parts molding and cleanroom molding of medical components for diagnostic machines in one plant is rare. Yet both require high-quality molding operations.<br><br>Mexico rising<br><br>Is setting up plants in Mexico “outsourcing”? We believe not. Molding plants in several of Mexico’s northern states are fully integrated into the U.S. molding market, with key decisions on equipment, operational procedures, and the like made at the parts makers’ headquarters in the United States and Canada.<br><br>One prime example is Canada-based Bombardier of Montreal. This growing aircraft maker has been setting up a range of assembly plants in Mexico. This in turn is attracting plastics processors of all kinds, including injection molders, to set up parts-making facilities close to Bombardier’s primary assembly plant in central Mexico. The basic aircraft business was outsourced or moved, in bits, from Toronto and Montreal in Canada and from Wichita, KS. This is using the NAFTA agreement to its true intent: creating opportunities for North American companies to grow global market share and in turn create more jobs and more wealth in the region.<br><br>So don’t let the headlines deceive or discourage you. The North American molding market is changing, but it is also evolving and growing. Those willing to evolve and grow with it will find opportunity and wealth.</font>

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