What’s your take on the current economic environment?
It appears that the economic times have certainly turned the corner. The interest in all our products, and the number of calls that we’ve had from customers looking for sources to have their products made here has been very interesting for us, especially in the last four to six months.
What has sparked your interest?
Many of our traditional customers have started asking who else has purchased our equipment, and who they can contact to get their parts made. This is something of a departure, and the way I interpret it is that their need for product is expanding, but they’re not as willing to spend their own capital on equipment purchases as they once were. So the trend seems to be that the smaller companies are buying equipment now to do work for the larger companies, and I believe that this outsourcing scenario is becoming part of the large company’s strategic plan. While our largest corporate customers are still buying equipment, from what we’ve seen they’re not buying enough to manufacture 100 percent of their requirements.
That’s good news for the smaller gear cutters.
It’s great news, and we’re getting calls from a lot of folks who’ve been standing on the sidelines for the last three or four years saying “Do I want to get into hard finishing gears? Will the business be there to justify such a large investment?” But large companies are now awarding contracts to smaller businesses, and I think that’s good for everybody. I think what we’ll see in the next 12 to 24 months is a number of the smaller gear houses coming online.
What other changes do you foresee in the manufacturing process?
My personal philosophy is that for American manufacturers to compete in a market that has traditionally been labor intensive, we have to minimize that labor content. And the obvious way to do that is with simple automation systems. These systems were invented and first installed by the automotive companies, but now we’re seeing small shops that have very few employees with a number of automated cells.
Many people probably assume that automation is just for producing large lots.
That’s not true. The idea is to be able to set up a machine and place enough parts on a carousel or in a magazine to run it unmanned for an eight-hour shift. That means you no longer have to have a person on that machine. And to take it a step further, if you can run 24 hours unmanned, that’s three shifts where nobody’s touched it, so your labor content is reduced dramatically. So it’s not the hundreds of thousands of parts that need to be run, it’s the hundreds to low thousands in batch quantities, and that’s a different level of automation than what was previously done. Automotive companies used to set up a line to run one part, and they ran 2,000 parts a day for a year, or for five or six years. Now we’re seeing the smaller shops becoming automated and running a thousand parts at a time with the cell completely unmanned.
Have new technologies made this possible?
The technology we’re talking about has been around for a decade, but 10 years ago it was very expensive, and five years ago no one was in an economic position to exploit it. But now all of that has changed, and there are quite a number of people who are looking at it very seriously. And it’s also true that, as our skilled workforce has become decimated, we can no longer expect to hire someone and just have them programming and operating machine tools.
What economic indicators do you follow?
We pay attention to AMT sales figures, and of course we read about what’s happening in the marketplace, but our observations are mostly internal. But the fact is that when you have six or seven major automotive projects going on in this country at one time, you know something’s happening. So Kapp, as well as its competitors, have done very well in the last two years, and it appears that all market segments are coming back very strongly.