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Gear change needed
editorial
Gear change needed
Richard Felton EDITOR
T
he US powder metallurgy industry is in something of a quandary. How does it turn from its unswerving focus on the increasingly unprofitable Big Three US auto manufacturers to embrace the fast up and coming Japanese car makers to which Americans are turning in growing numbers? Cloyes Gears has pointed the way, winning quality awards from Nissan. Time was that what was good for Ford and GM was good for America. That has not been true for some years, but only now are the cracks really beginning to
show. What the cracks reveal is an automotive industry faced with massive structural change that is all too likely to end with the Big Three being somewhat smaller. GM and its subsidiaries are carrying debts of around $300 billion - yes, that’s right, three with 11 noughts after it. Meanwhile Ford and its credit arm are struggling with debt of around $160 billion. GM earned around $2.8 billion last year - nowhere near enough to service its debt. And together, these quite astonishing sums of money - $450 billion plus add up to a massive problem that has seen both companies junk bonded by credit rating agency Standard & Poor's in recent weeks. It is added to daily by their "legacy debts" of labour contracts that pay people who have been laid off and make the companies liable for pension and healthcare costs of retired staff as well. It's easy enough to see how the management of companies that have achieved such a position of extremis through complacency would assume that they should be able to pass on some of
When you gotta go... Q: AFTER 14 years at the top of the game, where is there left to go? A: Further on and further up, to a new game. Randall German is to leave Penn State and the Centre for Innovative Sintered Products that he brought into being and nurtured to the point where it is recognised as one of the few true centres of excellence for the powder metallurgy industry. The strong bridges he has built between industry and academe stand as a tribute to hard work and innovative thinking, never mind innovative powder metallurgy. He is to join Mississippi State University as a chaired professor in the Mechanical Engineering Faculty and director of the Centre for Advanced Vehicular Systems (CAVS) on October 1. The main CAVS research centre is on the university campus, but an extension centre is also
metal-powder.net
being constructed near the Nissan plant at Guangzhou in southern China. And, unsurprisingly, there is already talk of extended co-operation between the two universities, with mathematical modelling being carried out at Mississippi and experimental work at Penn State. So who is to take over at Penn State? It seems likely that the university will move quickly to install an interim director to underscore their intention to maintain CISP at the forefront of powder metallurgy and the university as a leader in materials science. The smart money appears to be on Associate Professor Ivica Smid, a hardmetals expert who has been teaching at Penn State for some time. So it's welcome Ivica. Whether it's goodbye Rand is very much an open question...
the pain to their suppliers in the form of reduced prices. But it is not easy to sympathise with their line of thought. PM suppliers are caught in a vice in the US, one jaw of which is labelled raw material price increases and the other customer resistance. But that is not their only problem. The rather tardy response of US industry to the realities of the global market has given others a head start. And although some members of the PM Tier One and Tier Two community - GKN Sinter Metals and Metaldyne in particular - have moved with commendable speed to take on the challenge of China, complementing their longer-standing drive to internationalise their businesses, others have not. So it would seem to be high time for US companies to start engaging with Nissan, Toyota and Honda on home ground and to impress them with the industry's undoubted technical and price capabilities (See P16). A good start to building relationships with the Japanese companies would be for the Metal Powder Industries Federation to end the use of the irritating and disparaging term "Little Three" to describe them. Some Little. Industrial entities that between them build in excess of nine million vehicles a year and have a substantial and growing bridgehead in the US market can not fairly be described as little. Nor can their potential appetite for US-sourced products. Another company with a growing stake in the US market has certainly not been caught napping by globalisation. Austrian hardmetals specialists Plansee last month announced the merger of its subsidiary Sinterstahl's PM interests with those of Mitsubishi, forming a global Tier One supplier second only to GKN Sinter. The company's mid-term report makes it clear that the internationalisation of its business does not stop there. With new targets in North and Latin America, Eastern Europe and Asia, Plansee is a business from which some US companies could learn a trick or two.
July/August 2005 MPR
3
Gear change needed
Richard Felton EDITOR
T
he US powder metallurgy industry is in something of a quandary. How does it turn from its unswerving focus on the increasingly unprofitable Big Three US auto manufacturers to embrace the fast up and coming Japanese car makers to which Americans are turning in growing numbers? Cloyes Gears has pointed the way, winning quality awards from Nissan. Time was that what was good for Ford and GM was good for America. That has not been true for some years, but only now are the cracks really beginning to
show. What the cracks reveal is an automotive industry faced with massive structural change that is all too likely to end with the Big Three being somewhat smaller. GM and its subsidiaries are carrying debts of around $300 billion - yes, that’s right, three with 11 noughts after it. Meanwhile Ford and its credit arm are struggling with debt of around $160 billion. GM earned around $2.8 billion last year - nowhere near enough to service its debt. And together, these quite astonishing sums of money - $450 billion plus add up to a massive problem that has seen both companies junk bonded by credit rating agency Standard & Poor's in recent weeks. It is added to daily by their "legacy debts" of labour contracts that pay people who have been laid off and make the companies liable for pension and healthcare costs of retired staff as well. It's easy enough to see how the management of companies that have achieved such a position of extremis through complacency would assume that they should be able to pass on some of
When you gotta go... Q: AFTER 14 years at the top of the game, where is there left to go? A: Further on and further up, to a new game. Randall German is to leave Penn State and the Centre for Innovative Sintered Products that he brought into being and nurtured to the point where it is recognised as one of the few true centres of excellence for the powder metallurgy industry. The strong bridges he has built between industry and academe stand as a tribute to hard work and innovative thinking, never mind innovative powder metallurgy. He is to join Mississippi State University as a chaired professor in the Mechanical Engineering Faculty and director of the Centre for Advanced Vehicular Systems (CAVS) on October 1. The main CAVS research centre is on the university campus, but an extension centre is also
metal-powder.net
being constructed near the Nissan plant at Guangzhou in southern China. And, unsurprisingly, there is already talk of extended co-operation between the two universities, with mathematical modelling being carried out at Mississippi and experimental work at Penn State. So who is to take over at Penn State? It seems likely that the university will move quickly to install an interim director to underscore their intention to maintain CISP at the forefront of powder metallurgy and the university as a leader in materials science. The smart money appears to be on Associate Professor Ivica Smid, a hardmetals expert who has been teaching at Penn State for some time. So it's welcome Ivica. Whether it's goodbye Rand is very much an open question...
the pain to their suppliers in the form of reduced prices. But it is not easy to sympathise with their line of thought. PM suppliers are caught in a vice in the US, one jaw of which is labelled raw material price increases and the other customer resistance. But that is not their only problem. The rather tardy response of US industry to the realities of the global market has given others a head start. And although some members of the PM Tier One and Tier Two community - GKN Sinter Metals and Metaldyne in particular - have moved with commendable speed to take on the challenge of China, complementing their longer-standing drive to internationalise their businesses, others have not. So it would seem to be high time for US companies to start engaging with Nissan, Toyota and Honda on home ground and to impress them with the industry's undoubted technical and price capabilities (See P16). A good start to building relationships with the Japanese companies would be for the Metal Powder Industries Federation to end the use of the irritating and disparaging term "Little Three" to describe them. Some Little. Industrial entities that between them build in excess of nine million vehicles a year and have a substantial and growing bridgehead in the US market can not fairly be described as little. Nor can their potential appetite for US-sourced products. Another company with a growing stake in the US market has certainly not been caught napping by globalisation. Austrian hardmetals specialists Plansee last month announced the merger of its subsidiary Sinterstahl's PM interests with those of Mitsubishi, forming a global Tier One supplier second only to GKN Sinter. The company's mid-term report makes it clear that the internationalisation of its business does not stop there. With new targets in North and Latin America, Eastern Europe and Asia, Plansee is a business from which some US companies could learn a trick or two.
July/August 2005 MPR
3