The vast majority of manufacturers are predicting challenging times ahead for the industry.
That’s according to a recent report from the Precision Metalforming Association (PMA) that shows the economic consequences of the COVID-19 global outbreak continue to worsen as the shutdown lingers.
The PMA Business Conditions Report recorded its sharpest decline in the forecast across almost every category since the organization began publishing the monthly report in 1979.
Of the approximately 100 respondents to the survey, 87 percent now predict a decline in economic activity during the next three months, up from 31 percent in March.
Manufacturers also expect a more substantial drop in incoming orders, with 82 percent predicting a decrease in orders compared to 25 percent last month. Current average daily shipping levels also declined in March, with 65 percent reporting lower activity than three months ago, up from just 14 percent the previous month.
Despite those challenges, some manufacturers are trying to hold onto hope that conditions will improve.
“We were chugging along in pretty good shape,” Larry Kooiker, president of Holland-based metal fabricator Agritek Industries, told MiBiz. “We’ve had a number of very good years and this just rocked our world.”
Last month, when non-essential businesses in Michigan were first ordered to close to help slow the spread of the highly contagious virus, Agritek received “letters left and right” directing the company to keep working to feed into the transportation and food supply chains that were deemed essential, according to Kooiker.
“I thought we were going to be down a little bit, but we were going to be OK,” Kooiker said.
A week later, the food, transportation, heavy truck, medical and military businesses that had written to Agriteck started shutting themselves down.
“All the stuff that was essential just started drying up,” Kooiker said. “People were closing their plants and going to minimal staff and then just within two weeks, it rippled through the system.”
Business at Agritek is now down 70 percent from just a month and a half ago, according to Kooiker, who said he is cautiously optimistic that the company will “get a good pop” of business back in the coming months.
“We don’t have any illusions that we’re going to go from 30 percent capacity back to 100,” he said. “We’re just hoping we can get back to 60 or 70, so we’re only down 30 (percent).”
So far, Agritek has laid off 60 of its employees.
“You get hurt in more ways than one,” Kooiker said. “It has a cumulative effect.”
The percentage of manufacturers with a portion of their workforce laid off or on short time in April spiked to 40 percent, up from 14 percent in March, according to the PMA survey. This is the highest percentage reported since the recession of 2008 and 2009. From November 2008 through December 2009, the survey’s respondents reported a minimum of 42 percent of workers laid off or on short time, with a peak of 85 percent occurring in April 2009.
Tier 2 automotive supplier Pridgeon & Clay Inc. has idled one of its plants in Grand Rapids and has a minimal staff manufacturing parts for commercial trucks at the company’s second location. Most of the company’s remaining employees have been furloughed, according to company CEO R. Kevin Clay.
“We’re just all trying to chip in as much as we can to keep as many people around, because we do believe this is a short-term situation,” Clay told MiBiz.
Pridgeon & Clay entered the crisis with a strong balance sheet, and Clay expects the company to exit in a similar condition, albeit with significant shifts in timing and drastically different projections for the year.
“When things come back, I don’t think people are going to be inclined to buy heavy goods, durable goods, as much,” Clay said. “What we thought we were going to do in 2020, we’re thinking that’s now moved to 2021 and then the growth really doesn’t happen until 2022.”
This week, research firm IHS Markit revised its U.S. light-vehicle sales projection to drop to 12.5 million units for the year, a nosedive from the firm’s January forecast of 16.8 million units.
“When we all emerge from this, it’s going to be a little bit of a different world,” Clay said. “There are going to be some challenges and some threats, but at the same level, there will be new opportunities. Threats are only threats until you figure them out, then they become opportunities.”