Trouble in Tools

With the exception of the auto manufacturers, probably no U.S. businessmen stand to gain more from President Nixon's economic program than the machine-tool makers. The investment tax credit should boost lagging sales, and the 10% surcharge on imports should reduce competition from Europe, Canada and Japan. Yet even assuming that the new Nixonomics work, the industry's leaders see no real boom in the near future. Says Michael Sheu, marketing manager for Cincinnati's G.A. Gray Co.: "We're not expecting more than 7% to 9% in real growth next year."

That would be a healthy rise for most industries, but it is hardly enough to make up for the worst depression in the tool trade since the 1930s. "It's always feast or famine in this business," says Carl L. Sadler, president of Cincinnati's Sundstrand Corp. Orders for machine tools plunged from a high of $1.7 billion two years ago to some $900 million last year, and they will dip to about $750 million in 1971. Because the industry makes the machines that make other machines, it is carefully watched as a sensitive indicator of the U.S. economy. Orders for machine tools rise sharply only when major industrial customers--mostly the auto, aircraft and other metalworking companies--want to expand production.

Volatile Jobs. Because of general economic sluggishness, such metalworking firms have been paring production for most of the past two years. The best estimate is that they are now producing at only 62% of capacity, and machine-tool men reckon that demand for their own products will not really move up until their major customers' production figures reach 80%. Another problem is that foreign competitors have been underselling U.S. manufacturers by as much as 15%. Even though Nixon's program wilt tend to equalize prices, the overseas companies will present another threat. As a result of the recent economic slowdown abroad, they have developed excess production capacity and can offer quick delivery of tools to the U.S.

Domestic producers cannot be so prompt because they have laid off fully one-third of their 110,000 skilled workers in the past two years. Replacing them may be difficult; a major employer recently phoned six former tool assemblers before he reached one who was willing to leave his newfound, more secure job to return to the volatile world of machine tools. Thus in this sensitive sector of the economy, there may be a long wait for the prosperity that President Nixon has promised.

This file is automatically generated by a robot program, so reader's discretion is required.