APPLIED PROCESS’S POSTHAVEN

Since Applied Process is involved in the heat treatment of manufactured goods, our business is a good barometer of US Industrial Production.  When people need more stuff Austempered, US Industrial Production is rising.  When people need less stuff Austempered US Industrial production is usually flat or falling.  In spite of what you hear or read in the news, US Industrial Production is rising (as it has been for 2-1/2 years) and should continue to do so for a while. 

In some sectors, production is still rising briskly.  Who would have thought in 2010 that by 2012 US ductile iron casting production would be UP by 50% and Chinese ductile iron production would be DOWN by 50%?  In fact, US manufacturers are facing a shortage of ductile iron castings as US ductile iron foundries are running at near capacity while a glut of Chinese iron foundry capacity is resulting in downsizing, business closures and government bailouts of state-run metal casting enterprises there.

A long awaited recovery in US construction activity is finally emerging which should help shore up overall industrial production as other sectors of industry are peaking in production.  HD Truck production is headed for a +250,000 unit year with HD trailer production at record levels.  AG equipment production may set another record.  US light vehicle sales are inching, once again, towards 16 million units.  Meanwhile the low value of the dollar versus the Euro, the Japanese Yen and the Chinese Yuan make imports more expensive and exported US goods more attractive to foreign buyers.

And…..don’t look now…..but US manufacturing workers remain the most productive on the planet.  According to the United Nations Bureau of Labor statistics, the average value-added for a US manufacturing worker is five times that of a Chinese worker, four times that of a Mexican worker, two times that of a German worker, 1.5 times that of a Korean worker and 1.3 times that of a Japanese worker.  Couple that with our new-found sources of domestic energy and the US is well-positioned to be the number one economy in the world for the foreseeable future.

As this is all going on, US manufacturers are looking for ways to reduce the mass and cost of their products.  Nissan recently reported that of the mpg gains on their 2013 US-produced models, 15% of the gain was attributed to mass reduction coming from material/process substitution.  Ford has indicated the desire to reduce the mass of their class-leading F-150 by 750 lbs. (340kg) by 2025, expecting most of that weight-loss to come from material/process substitutions.  HD truck trailer manufacturers are looking for “every pound” they can get, as every pound reduced in trailer weight is one more pound that their customers can add in paid-for shipped goods.

Applied Process offers an array of high strength-to-weight ratio options for the design community ranging from Austempered Ductile Iron (ADI) conversions from steel or aluminum, to Carbo-Austempered™ steel powertrain parts that can transmit more torque with the same, or less, mass.  Our engineers and technical staff are working with customers daily to develop product designs that are better, faster, cheaper and more sustainable.  It’s one of the most-fun parts of what we do at Applied Process.

Pay no attention to the man behind the curtain telling you that US manufacturing is “dead” or being “off-shored”.  Reality is quite the contrary.

Our Mission is to Grow the Pie for Austempering……and BOY is the pie growing!  Demand for Austempering remains at record levels.  Producers up and down the supply chain are straining their capacity, resulting in a flattening out of US manufacturing growth.  With certain parts of the economy still in recession, manufacturers have been slow to pull the trigger on capacity-expanding capital expenditures.  Orders in the capital equipment business have now increased, but the entire US manufacturing industry is the bottleneck right now……Applied Process Inc. included.  It will take several months to right-size capacities with demand but accelerating growth in US manufacturing is expected in 2012.

In a longer-term view, SAE Off-Highway Engineering magazine reported on recent comments by John Deere’s Chairman and CEO, Samuel Allen.  Mr. Allen stated that, “A steadily growing population will result in at least 30% more people to feed, shelter and clothe in the next 40 years.  This must be done with basically the same amount of land, water and other inputs such as fertilizer”.  Just think of that….a 30% increase in per-acre productivity.  Mr. Allen further stated that, “Largely as a result of productivity advances, the typical US farmer today feeds over 150 people; six times more than in 1960”.  In the 1930’s approximately 40% of the US population was directly employed in the production of our food.  Today, less than 2% of the US population is feeding the US and exporting food worldwide.  So dramatic productivity increases are not new to US farmers and ranchers.

John Deere is the leader in the US agricultural equipment industry.  The Agricultural equipment industry, worldwide, will play a central part in future productivity gains in food production.  But whether the equipment is green, red, yellow or blue; Austempered Steel, Carbo-Austempered^sm Steel, Austempered Ductile Iron (ADI), Carbidic Austempered Ductile Iron (CADI^sm), Austempered Gray Iron (AGI) and Locally Austempered Ductile Iron (LADI^sm) processed by the Applied Process companies and our affiliates will be getting the job done.

At Applied Process we’re all about Austempering.  In fact, our mission is to “Grow the Pie” and we appear to be succeeding.  Here in the US, while those working in construction and government are still seeing the worst of times, many of us in manufacturing are currently enjoying the best of times.  Times may be too good.  Up and down the manufacturing supply chain everybody is adding shifts, adding machines and STILL falling behind current demand.  The demand for Austempered Ductile Iron (ADI), Carbidic ADI (CADI), Austempered Steel, Carbo-Austempered™ Steel and even Austempered Gray Iron (AGI) has accelerated right past the pre-recession level.  Manufacturers in nearly every segment are finding demand that is outstripping capacities.  Right now agriculture and manufacturing are carrying the US economy.  Let’s hope for a good dose of political gridlock so our elected officials can’t jump in and “fix things”.

I sometimes hear people complaining about today’s work ethic.  When I look at our workers at Applied Process I see people who are kicking butt and taking names 24-7….and I’m really proud of them.  I wouldn’t trade them for a million bucks and 10 first-round draft picks.  At Applied Process we are passionate people providing innovative Austempering solutions.

This past week I had the good fortune to visit P.F. Markey in Saginaw, Michigan ( www.pfmarkey.com ), a supplier of industrial tools, inserts and machining supplies.  Jim Terry and the crew at P.F.Markey have a unique business proposition.  They guarantee you that you will save 10-20% on tools if you install their tool vending machines.  No crib. No crib attendant. Complete traceability and custom reporting.  Awesome.

One of life’s truths: “You miss 100% of the shots you don’t take”.  Wayne Gretzky.

Just a thought: if life expectancy in the US is increasing by one year per decade and we have a pending demographic and economic train wreck with our social programs, why don’t we just raise the eligibility age for Medicare and Social Security by one month per year….forever.  No change in contribution, no change in benefits, problem solved…….or is that too simple?