01 January 2003

Industry quotes to thumbs-up 2003

Some manufacturing industry segments are turning upward, according to attendees at the recent ISA 2002 Technical Conference and Exhibition in Chicago.

"I said the economy would turn in July or August, and it hasn't," said Michael A. Lane, president of Wago Corp., a Germantown, Wis.-based manufacturer of electronic, electrical, and automation control products. "Since then, it's been flat.

"We're seeing light at the end of the tunnel, however. I think it will turn by the end of the first quarter at the latest. My 2003 budget is based on that," Lane said.

"The automotive segment worries me," he said. "The Japanese [automakers] are retooling, and Detroit isn't. They could find themselves two years behind." Business areas Wago sees picking up, Lane said, include packaging, automation, and materials handling.

BURNING UP THE BACKLOG

Systems integrators exhibiting at the show agreed business could be better.

"It still feels like we're treading water," said Karl Swanson of PCT Engineered Systems in Davenport, Iowa. "There's some increased spending on projects but not enough to feel we've turned the corner." PCT specializes in the metals (steel and aluminum, for example) and the conversion market, including plastic film and coatings.

"We had quite a bit of work in the till before the slowdown. Now we're burning up the backlog," said Robert Rosa of Engineered Energy Systems, a Livingston, N.J.-based systems integrator firm specializing in building automation systems and upgrades. "WeOK for the next six months, but I don't know what will happen after that." Rosa said pharmaceutical manufacturing was his firm's strongest business segment.

Alan Traylor, vice president of marketing for TSI Inc., said he sees some positive signs coming out of this year: "We were ready for expansion last year when 9/11 hit." But it ended up being a "very busy time after that because our company is tied to environmental issues." Traylor's company, which is a measurement and analysis company, did well in the biohazard analysis area.

"We see next year as being really good, with people undoing the strings on the capital budgets," he said.

Despite capital budgets being tight, Davis Mathews at Phoenix Contact said, some areas are selling, such as his company's wireless products.

Dick Verville, marketing manager for industrial measurement and control at Honeywell, said he sees project activity improving, but right now that has not added up to additional revenues. "It's a struggle like everybody else," he said.

He does see good signs in South America, Asia, and "particularly China." Europe has been difficult, along with North America, he said. Verville said he doesn't see very many companies earning huge profits this year, and that will affect Wall Street. "Wall Street is a severe punisher of those that don't make their numbers," the Honeywell marketer said.

"The economy is pretty flat," agreed Jerry Mason, marketing manager for Parker Hannifin Corp.'s Partek/Atlantic tubing unit in Tucson, Ariz. "The semiconductor industry, in particular, is in the toilet," Mason said. "I'd say the instrumentation market generally is flat."

"In Germany, the economy is slow-at a 0.5% national growth rate," said Martin Braband, president of Tixi.com GmbH, manufacturer of an intelligent modem for direct programmable logic controller (PLC) connections. "There was a big [negative] impact on the economy since 9/11," he said, "but our business is slowly picking up." Tixi's market includes manufacturers and building controls for PLC users. Its modem can link operators with PLCs to report conditions such as "tank empty" or "burner stopped burning,"Braband explained.

INSTALLING LOTS IN CHINA

While the U.S. and much of Western Europe continue to experience slow growth, other parts of the world are looking good.

"We're seeing good business in just about every area but North America, including parts of eastern Europe and the Middle East," said Jane Lansing, Emerson Process Management vice president for corporate marketing.

Lansing, who specializes in PlantWeb mar keting, said Emer son has benefited from large equipment installation jobs in China and western Africa, where there are upstream offshore drilling projects. Even parts of Latin America have been active, she said.

Industry segments that have held up well, she said, include pharmaceutical makers, oil and gas, and hydrocarbons. The pulp and paper industry generally has been "not good" from a business point of view, Lansing acknowledged. Chemical companies have generally been another slow-to-no-grower segment, she said.

Jim Cummings, president of systems integrator firm Total Systems Design Inc. in West Chester, Pa., said 85% of his firm's business comes from pharmaceutical makers. In that segment, construction is "fairly active" in Puerto Rico, Ireland, and Singapore.

WHEN ECONOMY TURNS . . . LOOK OUT!

Another systems integrator vendor, VI Engineering Services Inc. in Farmington Hills, Mich., said it is seeing signs that once-delayed projects "are becoming live orders," said Dean Streck, vice president of operations. VI, which has roots in the automotive industry, also serves life sciences areas, including pharmaceutical and biomedical firms.

"They need to make large investments to stay ahead in research and in manufacturing tests. For example, if they manufacture a new pacemaker version, it must be tested extensively," Streck said. Like Cummings, Streck said his firm is also seeing more business coming from information technology infrastructure projects.

Similarly, Bruce Fuller, product line marketing manager at Everett, Wash.-based Fluke, said companies are making moves right now. He said the semiconductor industry, while money is tight, will purchase product if it sees a cost benefit. "If it affects their production lines, they can find the money." Right now, Fuller said, the pharmaceutical industry is doing well for his company.

At MTS Systems Corp., sales and marketing manager Arnold Dumas said pharmaceuticals, biotech nology, petroleum, petrochem, and food and beverage are doing well. He said pharmaceuticals are doing well simply because they have the money right now. He said the big demand from customers now is accuracy and repeatability.

Manrique Brenes, product manager at San Jose, Calif.-based Cisco Systems, said as far as the manufacturing sector at his company goes, the automotive industry is doing quite well. "Automobiles are where we have our largest active engagement."

There does seem to be a pent-up demand just waiting to cut loose, said Mary Gardner-Stanley, a product specialist at Richmond, Va.-based Weidmuller. "There are so many things being quoted right now-when the economy does come about, look out."