USA manufacturing activity shows improvement

Manufacturing Activity Slides, but Shows Improvement
By THE ASSOCIATED PRESS


June 2, 2003

NEW YORK (AP) -- Business at the nation's manufacturers declined for the third consecutive month in May, but at a much slower rate, a private business group reported Monday.

The Institute for Supply Management said its manufacturing index was 49.4 percent last month, up from 45.4 in April. A reading below 50 means manufacturing activity is slowing; above 50 indicates the industry is growing.

The result was somewhat better than forecasts by analysts, who had expected the long slowdown in the manufacturing sector to continue and had projected a reading of 48.5.

``There are signs of life in manufacturing,'' said Norbert J. Ore, who oversees the index for ISM.

Ore noted that his group's gauge of new orders to factories and production both topped 50 percent after two months of declines and that the prices paid by manufacturers for materials rose at a much slower rate.

``These are all signs of encouragement that manufacturing is recovering from the decline due to the war,'' he said.

Investors had been looking forward to improved results following the release Friday of better-than-expected manufacturing figures. Those figures, reported by the Purchasing Management Association of Chicago, often foreshadow results of the national survey.

The last time the ISM index showed growth in manufacturing was in February, when it reached 50.5.

The May index hints at some good news for manufacturers. ISM's measure of new orders to factories rose from 45.2 percent in April to 51.9 in May. Production at plants also improved, rising from 47 percent to 51.5.

Other components of the ISM index continued to show a decline, but nevertheless improved. The measure of employment, for example, rose to 43 percent from 41.4 percent.

Of the 20 industry sectors surveyed by ISM, 11 reported growth including petroleum, glass, stone and aggregate materials; chemicals; and fabricated metals.

Ore said there was a split among supply managers surveyed by his group, with some seeing an uptick in business while others still saw their business stalled or are uncertain.

``This is not really unusual when the economy is at a crossroads,'' he said. ``Judging by the reversal in a number of the indexes this month, we are apparently at or near a crossroads.''

The ISM index is based on a survey of the managers who buy raw materials for manufacturing companies, giving them insight into the pace of industry.

I just love the spin the economists do.
Manufacturing is still going down the toilet, but the rate has slowed so things are looking up.
So my question is, will the downward slide stop before everybodys head is underwater?
It doesn't do much good to stop sinking if you've already drowned.

Les

I guess you didn't see this other bit of news,and IMO our politicians,Wall Street,and the financial system could care less about the middle and lower class,more bankruptcies to come for sure.

Our politicians can wave the flag and claim to be patriotic;they are traitors undermining our Constitution and individual property and freedom.

Bush was cozying up to the Chinese yesterday.

http://english.peopledaily.com.cn/200306/02/eng20030602_117571.shtml

Yes,China wants "peaceful reunification" according to President Hu Jintao.

They'll be humane using soft rubber tank treads or give you a free trip to one of there reeducation camps or prison factories,my comment.

"On his part, Bush said his government will continue to follow the one-China policy, abide by the three joint communiques between the two countries and oppose "independence of Taiwan." He stressed that this policy has not changed and will not change."


I believe Lenin said "The Capitalist will sell us the rope with which we will hang them!"

=============================================

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030602/bs_nm/textiles_w estpoint_bankruptcy_dc_2


Exerpt from below:

"The United States is poised to lift textile export quotas for China and other World Trade Organization countries at the end of next year, a move many analysts expect will shift even more manufacturing to China. "

WestPoint Stevens Files for Bankruptcy
Mon Jun 2,12:02 PM ET

By Emily Kaiser

CHICAGO (Reuters) - WestPoint Stevens Inc., the second-largest U.S. linens company, filed for bankruptcy protection on Sunday, the latest U.S. textile maker to buckle under intense competition from foreign suppliers. WestPoint, which makes Martha Stewart (news - web sites) brand bed linens and bath towels for discount retailer Kmart Corp., said in a statement on Monday that it has reached an agreement in principle with its bondholders for a financial restructuring that is expected to speed up its reorganization.


Shares of WestPoint, which have been trading at well under $1.00 all year, plunged by more than half in morning trade.


Richard Hastings, retail analyst with consulting firm Bernard Sands, said the bankruptcy filing was widely expected, and won't hurt Kmart or other U.S. retailers which depend on WestPoint for supplies.


"This is a company that needed a financial fix-up a long time ago," he said. "The industry segment that they're in is fundamentally not healthy. There has been diminished pricing power and rising competition from lower-cost overseas manufacturers."


This is the second time West Point, Georgia-based WestPoint has sought bankruptcy court protection from creditors. It emerged from its first Chapter 11 bankruptcy in 1992.


Kmart's largest shareholder, hedge fund ESL Investments Inc., is also a major bondholder in WestPoint.


WestPoint last month had been preparing to negotiate a swap of debt for equity with bondholders, led by ESL, a person familiar with the matter told Reuters in May.


The head of ESL, Edward Lampert, became chairman of Kmart when the retailer emerged from bankruptcy last month.


As part of WestPoint's agreement with bondholders, Holcombe Green agreed to resign as chief executive officer. WestPoint named Chip Fontenot, its president and chief operating officer, as interim CEO.


WestPoint said its common stock would be canceled as part of the restructuring agreement, and current shareholders would likely receive nothing. Shareholders rank last in line to get paid in bankruptcy cases, and usually receive no money. Shares of WestPoint Stevens fell by 57.6 percent to trade at 4.5 cents in early over-the-counter Bulletin Board trading.


FINANCING DEAL


WestPoint, founded almost 200 years ago, employs about 14,600 people and recorded $1.8 billion in 2002 net sales. It makes Martha Stewart and Joe Boxer brand goods for Kmart, and also markets linens under brand names such as Patrician, Martex and Utica.


The company is seeking New York bankruptcy court approval for $300 million in financing from a group of lenders led by Bank of America, according to court documents. WestPoint said it would need up to $175 million over the next 20 days in order to keep operating.


WestPoint's financial troubles come as many U.S. companies turn to cheaper foreign suppliers such as China and Central America for textiles.


A number of U.S. textile companies including Fruit of the Loom Ltd., Pillowtex Corp., Burlington Industries Inc. and Malden Mills Industries Inc. have filed for bankruptcy in recent years. Fruit of the Loom has since been acquired by Warren Buffett (news - web sites)'s Berkshire Hathaway Inc..


The United States is poised to lift textile export quotas for China and other World Trade Organization (news - web sites) countries at the end of next year, a move many analysts expect will shift even more manufacturing to China.


In its bankruptcy filing with the U.S. Bankruptcy Court for the Southern District of New York, WestPoint listed total assets of $1.33 billion and total debts of $2.16 billion, as of March 31. (With additional reporting by Daniel Sorid in New York)



[This message has been edited by Barry Briscoe (edited 06-02-2003).]

http://www.nationaldefensemagazine.org/article.cfm?Id=1113

June 2003

U.S. Must Resolve Industrial Base Issues

by Lawrence P. Farrell Jr.


The question of whether the United States may be overly dependent on foreign suppliers for critical military equipment has been debated for decades.

The Army, particularly, has been concerned about the reliance on non-U.S. suppliers for critical items used in the manufacturing of ammunition.

The issue now is taking added importance in the aftermath of the U.S.-led war in Iraq, which some of our NATO allies—whose industries are suppliers to the U.S. military—did not support.

What worries Army leaders is the hypothetical situation in which a country that does not agree with U.S. policies may take retaliatory action by refusing to export certain items that are needed in the production of ammunition.

During the recent conflict, for example, the Swiss government refused to sell components to Honeywell, because it did not agree with the U.S. military stance on Iraq. The problem was solved and did not impact U.S. combat operations, but it served as a cautionary tale nonetheless.

In the ammunition sector, there are at least 71 items (out of 302 critical items) for which there is only one U.S. supplier. Approximately 10 percent of our ammunition components come from 13 different countries. (By the way, under this definition, Canada is considered part of the North American industrial base and not viewed as foreign.)

The reality is that the United States, in many instances, depends on foreign sources for critical components, because making them domestically is not profitable for a U.S. company. Declining U.S. orders in the post-Cold War era resulted in a 68 percent decline in industrial capacity. The basic problem is that many ammo items have episodic demand and are produced in small quantities. Further, manufacturers must make significant capital investments, making their products marginally profitable.

Under our capitalist approach to industrial policy, companies that cannot make a profit from government contracts go out of business or into other lines of business. When that happens to a company that makes a critical component for ammunition, the U.S. government has no choice but to seek a foreign source.

That happened, for example, when the only U.S. supplier of cotton linters shut down its operations, unable to stay alive on declining government orders. Linters are indispensable items in ammunition production. Now, the U.S. Army buys them from Germany.

Another example is a mortar fuze that we also purchase from Germany, because we do not have a U.S. supplier.

The flap with the Swiss over the Iraq war got the Army’s attention, because the Swiss supply a unique propellant for the 25 mm armor piercing round employed in the Bradley fighting vehicle.

The dependency on foreign suppliers for raw materials also is an issue of concern. As it turns out, the world market for tungsten is dominated by China. Only one U.S. firm currently can process tungsten, which is widely used in tooling for many industrial applications. China has been capturing a growing share of the market and has been tightening exports (much like OPEC controls oil exports), making tungsten more expensive for other countries to buy. A tungsten mine in California had to shut down, because it could not compete with the Chinese.

No matter how one feels about the merits of globalization, it would be fair to say that, when it comes to national security, it does not make sense to put the U.S. military at risk because a supplier nation disagrees with our policies.

Congress has spoken on this issue before. Legislation passed in 1999 stipulated (under the so-called “806 section”) that if a military component is viewed as being at risk, the Defense Department must restrict that procurement to U.S. sources.

In an effort to better focus on these ammunition industrial-base challenges, the Army created a program executive office for ammunition. That office has been working with the Joint Munitions Command on a comprehensive strategy to guide future industrial-base decisions.

Meanwhile, the top leadership of the Army is grappling with a related but separate problem: what to do about the Army’s ammunition production facilities, which are costly for the Army to run but may be needed for national security reasons.

The Army Materiel Command supports the notion of migrating to public-private partnerships. After all, 95 percent of all munitions are produced by the private sector.

The government today owns and operates 14 facilities that run 73 production lines and employ 7,000 workers. Already, the government has contracted out the operation of 69 production lines to private firms, in arrangements known as GOCOs (government owned contractor operated).

What the future holds for Army plants is uncertain. A study by the Rand Corporation, which has not been released, reportedly recommends privatization of those plants. AMC is working on alternative approaches, in an effort to address industry’s concerns that there are few incentives in place for any company to want to invest in recapitalization of aging facilities.

Any final decisions would be made by the secretary of the Army.

As a 2005 round of base closures approaches, it is important for the Army to come up with a viable industrial base strategy that protects the national interests but also makes financial sense.

In previous base-closure rounds, ammo plants were not included in the BRAC process. The Army closed facilities over the years, but did so outside the BRAC deliberations. This time around, it may be different.

There is no question that the industrial base must be properly sized and modernized, but there clearly is no magic or simplistic solution.

Undoubtedly, any strategy to reshape the industrial base will require close cooperation between government and industry. It is important for the nation’s security to ensure that our ammunition production capabilities remain the best in the world.

One strategy to consider is to bring single source/foreign source items under Army responsibility for capitalization, either at Army organic or private U.S. facilities. The Army could then compete the contracts on a cost-plus award fee basis. Since there would essentially be no capital barrier to market entry, there would be ample competition for most of the items and a resulting robust industrial base, even if each competition only resulted in one award.

The Army is working this area hard. Now is the time for industry to make an input. What do you think?



=============================================
More job losses


http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2003/06/02/BU270141.DTL

Exerpts:

Unlike many people who have lost their jobs during the economic slump, Soong does not hold out much hope that his career will get back on track when the economy picks up. He belongs to a growing contingent of technology professionals who believe that prospects for their field have permanently dimmed because companies are sending work overseas.

Soong and others like him are forming the beginning of an anti- offshoring movement. In California, Connecticut, New Jersey and Washington, groups of computer professionals are searching for ways -- from legislation to tax incentives -- to somehow slow the flow of high-paying jobs overseas.

"There are millions of people like me now who are realizing (their) job's gone, and it's never coming back," said Soong. "I'll try to find something in another profession, but, oh -- those jobs are gone too."

Cost cutting and improved technology have led more and more U.S. companies to send skilled work like computer programming overseas. Forrester Research estimates that 3.3 million service-sector jobs will have left the United States by 2015.

In the 1980s and 1990s, workers marched the streets to protest trade agreements such as NAFTA and the movement of manufacturing jobs from the United States to Mexico and Asia. Now that the jobs of more educated, nonunionized computer professionals are going to India, China and other lower- cost economies, there is another backlash.


Congress critter's ambivalence to the plight of the economy:

"There is going to be movement of information, people and goods across international borders in a global economy," said Rep. Zoe Lofgren, D-San Jose. "The question is, is it a natural economic flow or dramatic amounts of outsourcing to lower salaries?"

"Even if we said, 'This is something we don't want to see,' it's not clear that it is controllable," Lofgren added.

Interesting articles Barry. Sure enough, the tune has changed today...

June 5, 2003
Factory Orders Fall Sharply
By REUTERS

WASHINGTON - New orders for U.S. factory goods posted their largest drop in 17 months in April, the government said on Thursday in a report showing declines in many sectors and painting a far worse than expected picture of manufacturing.

Orders sank 2.9 percent in April, the biggest fall since November 2001, the Commerce Department said, after rising 2.1 percent in March. Analysts were expecting a drop of just 1.5 percent.

The report showed sharp falls in demand for machinery, transportation and electrical equipment.

Orders for computers and electronic products rose a modest 0.3 percent, but that followed a much faster 2.4 percent increase the previous month.

Don,
Looks like the automobile business is on a downturn also.The Federal Reserve has lately been trying to boost manufacturing by weaking the value of the dollar to increase our exports since they have lowered the interest rate for banks about as low as it can be without free lending which would probally have a bad psychological effect on the economy.

http://www.ibilling.org/news/BUSINESS1.htm


Chrysler Stuns Market
2:58 am PST, 5 June 2003

The country's number three automaker has warned of a loss as large as $1.2 billion during its April to June quarter.

Chrysler's parent company, German-based DaimlerChrysler, has also warned it might miss its target for a full-year operating profit of $7 billion euros. Instead it is predicting a profit of just $5.8 billion.

Although the world's fifth largest car maker has been making big cost cuts at its U.S. unit, stiff competition and the marketing cost of boosting sluggish demand are hitting profit expectations.

Nearly all U.S. car makers have resorted to offering interest-free credit, cash rebates and extra accessories to lure buyers. The ploy has lifted overall sales, but profits are close to non-existent.

DaimlerChrysler's warning sent its shares down 11% yesterday.

However, it was not the only carmaker with bad news.

General Motors and Ford both said on Tuesday they would be cutting production because incentive schemes had failed to lift sales.

Ford's sales for May fell almost 6% against last year's figures and the group signalled further weakness ahead as it cut production targets by 15% for the next three months.

General Motors, the world's biggest carmaker, said its May sales were up 4% on last year. But it said it cut North American production by 12% and was planning a further 6% cut in output for the coming three months.