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Machine tool builders expand reach--finally.

The United States had been No. 1 in machine tool creation and production since the start of the Industrial Revolution. No more!

It lost its role as No. 1 producer during 1979-1980, when it peaked as a $6 billion industry, according to Patrick McGibbon, vice president and chief statistical guru for the AMT-The Association for Manufacturing Technology. By 2006 it slipped to No. 7, producing $3.6 billion worth of metal-cutting and forming machines, according to Joe Jablonowski's figuring. He tracks world machine tool output and consumption in his Metalworking Insiders 'Report newsletter. Japan is No. 1.

Fortunately, although the machine tool industry has shrunk some because of bankruptcies, mergers, and imports taking a big share of the domestic U.S. market, it is finally globalizing itself. Leadership in machine tool building is an important cog in our industrial base. Metalworking machine tools, as small an industrial base as it is, are necessary in the creation of all the other machines that make up our industrial infrastructure. There is also the issue of military preparedness.

Missed the boat

There are many reasons why the U.S. industry slipped in its world ranking; a major one was that the industry, to a large extent, missed the globalization boat that really started in the 1970s. At the time, the builders were fat and profitable, serving the giant U.S. market. Why bother with the harder-to-sell foreign markets?

It's not that they didn't have adequate warning. I recall Jim Grey, executive director of the National Machine Tool Builders' Association (now AMT-The Association for Manufacturing Technology) used every opportunity to convince his members to explore foreign markets. To his frustration, most ignored his warning even as competitively priced imports started to gain acceptance in the lucrative U.S. market.

Al Moore, then AMT president, a decade ago took up the same drumbeat. He told his annual-meeting audience: "If you are not already [in the Asian/Pacific market] find a way to be there as the market for machine tools is already 67 percent larger than the U.S. market."

Finally, spurred by the recession that hit the industry, the emergence of giant markets opening in China and India and the help of AMT, the machine tool builders started to see the light. Admittedly some, such as Jim Gleason of Gleason Works, saw the writing on the wall early. Through the cultivation of foreign markets and acquisitions, Gleason's gear-making machines and tools have been international for decades.

One of the more dramatic corporate restructurings came at Hardinge Inc., a single-focused company in Elmira, NY, producing high-precision lathes. Today it produces a range of metalworking products--with plants in Switzerland, Taiwan, and China in addition to Elmira--and ships worldwide from all its plants except China, whose products are for the Chinese market.

"When we started this diversification some 12 years ago," says J. Patrick Ervin, Hardinge CEO, "we recognized that the volatility in any one given market would be greater than joint markets. We are split about evenly between North America, Europe, and Asia." He tells me some 50 to 60 percent of the machines built in Elmira are exported.

Big push internationally

"The international push by our members has really picked up tremendously," Steven Thiry, AMT vice president of business development, tells me. When the United States represented the biggest market, members just focused here. Now that it is no longer the largest and fastest growing, it is pretty simple where you have to go, he adds. He feels Russia will be the next large emerging market. It has hard currency as a result of its oil exports. Russia realizes that 85 percent of its machine tools are outdated. To build up its industry, it'll have to go shopping.

A smaller but no less dramatically successful company pushing exports is Drake Manufacturing Services, a producer of precision grinding equipment. Drake President James Vosnik says it has been successfully working the China market since 2000 and India since 2005. Depending on conditions in any particular year, exports will range from 25 to 45 percent of production. He'd like to reach an export level of some 40 to 45 percent.

Even Florence, KY-based Mazak USA, whose Japanese parent has plants in Japan, the United Kingdom, and China, is exporting. The Kentucky plant's primary markets are North and South America, but President Brian Papke says he's exporting about 10 machines a month to the UK plant and expects that activity to grow. "Last year we exported quite a few machines to Japan," Papke says.

Companies associated with the machine tool industry are also heavily into foreign markets. Gary Hargreaves, director of business development for Mastercam/CNC Software Inc., says the company's programs are distributed in 70 different countries and translated into 15 languages. He says about 50 percent of Mastercam's business is outside the United States.

In Asian countries more that others, Hargreaves says, as much as 90 percent of their products are pirated. He concedes China is not currently a big market precisely because of the piracy issues.

Exports increasing

Although dependent on the reporting of companies and countries that's not always accurate, the statistics relating to production and exports are close. They support the fact that the U.S. machine tool industry is becoming more globally-minded.

Jablonowski's World Machine Tool Output & Consumption Survey indicates that in 2006 the U.S. builders exported 49.9 percent of their production. Five years prior, in 2001, exports amounted to 36.2 percent and in 1999 the number was 33.5 percent.

AMT's McGibbon's statistics, based on U.S. Commerce Department numbers that include "manufacturing technology exports"--more than machine tools--are different but show the same trend. Exports in 1989 were $950 million and jumped to $2.3 billion in 2006. During that same period, exports to China zoomed from $41 million to $2.2 billion. Exports to India tripled from $20 million in 1996 to $60 million in 2006.

With the biennial IMTS in Chicago, AMT certainly helps to showcase U. S. builder's machines to the world, attracting attracts buyers from around the globe. Moreover, AMT has invested substantial resources to assist its members in expanding into foreign markets. For years it has provided marketing intelligence, helped members exhibit in foreign shows, and led trade missions of its members.

It has been supporting member efforts in China since 1993 and in 2004 opened a service center in Shanghai. It has already hired a director for a service center it'll open later this year in India.

The Shanghai center has some 26 member machines displayed there. Some 53 companies are currently using it; since it opened, 84 companies have used it. It serves as a free trade zone for the import of machines for demonstrations or trade shows and has a staff of trained service engineers that members can use.

Several U.S. companies have graduated from the center and opened their own sales/service centers. I'm told 10 AMT members have set up or are investigating manufacturing facilities in China. (More information on the centers can be found at

Imports have captured some 70 percent of the U.S. machine tool market. Now it's time for the U.S. builders to make a New Year's resolution to go hunting.
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Title Annotation:straight talk
Author:Modic, Stan
Publication:Tooling & Production
Date:Jan 1, 2008
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