June 2008 Vol. 140 No. 6

Newsdesk

Where Are the Smart People?

In many developed economies, birthrates are falling to below the replacement rate and life spans are lengthening due to better healthcare. This can lead to workforces incapable of supporting the economic needs of many countries.

China's current manpower situation is a matter of shortage of the right people. Despite the overall labor surplus, demand for specific skill sets is far higher than what is available. It has been predicted that 75,000 business leaders will be needed in China in the next 10 years. Estimates are that current stock is just 3000–5000. And that assessment could prove optimistic.

Flattening or declining birth rates in the US, Japan, EU, and China mean fewer young people entering and progressing through the labor market's employment lifecycle, which will affect those economies' abilities to sustain growth.

Employers reporting the most difficulty finding the right people to fill jobs are those in Romania (73%), Japan (63%), Hong Kong (61%), Singapore (57%), Australia (52%), and Taiwan (51%). Notably, more than 50% of the employers in five of the eight countries in the Asia Pacific region reported difficulty finding suitable talent for available positions.

Among the most tough-to-fill jobs are: sales representatives, skilled manual trades, technicians, engineers, accountants, general laborers, production operators, drivers, management executives, and machinists.

But these data are clouded by the trend for the average person to change jobs at least seven times in a lifetime.

Many More Mergers

There were 411 deals in the metals sector globally last year worth $145 billion, up 67% from the previous year's total of $86 billion. The shift of deals last year away from Europe to the US was caused by the declining value of the dollar, which is now making the US an attractive region for steelmakers from emerging and industrialized markets alike. It does not appear that steel consumption will taper off any time soon, and, in North America specifically, consumption is likely to outpace production over the next couple of years.

Take Advantage of the Tax Break

This special bonus-depreciation allowance is available to all businesses and applies to most types of tangible personal property and computer software acquired and placed in service in 2008. It allows taxpayers to deduct 50% of the cost of qualifying property in addition to the regular depreciation allowance that is normally available. An IRS description of the business provisions contained in the Economic Stimulus Act of 2008 is available at http://www.irs.gov/pub/irs-pdf/p553.pdf.

Greater Green Spending

The industries with the highest capital expenditures in 2005 were petroleum and coal products ($1.74 billion), and chemical manufacturing ($1.27 billion). The Census Bureau surveyed 20,000 manufacturing plants for these data.

North American Car Production Faltering

The falloff in North America reflects plant closures by the traditional US automakers, in addition to growing assembly capacity in emerging nations. This trend has advanced 15% per year over the past five years as automakers chose to build new plants in markets that offered greater growth potential and lower-cost manufacturing.

Rising car production in emerging nations is particularly troubling for the Canadian auto parts sector, because that industry remains almost exclusively focused on the domestic and US markets. These two markets absorb more than 95% of all Canadian auto parts shipments. But these markets are becoming a smaller piece of the global auto industry.

The study reports that close to 90% of all new capacity over the past five years has been outside of the mature markets of North America, Japan, and Western Europe. North American capacity, meanwhile, peaked at 19.6 million units in 2002, and has fallen by roughly two million units over the same period.

This year, the combined vehicle assembly capacity of Brazil, Russia, India, and China will climb to 20 million units, surpassing the 17.4 million units currently in place in Canada and the US. At the same time, global vehicle purchases continue climbing to record highs, as strength in emerging markets more than offsets weak sales in the US.

US Industries Cut Emissions

Feds Reduce R&D Work

Our government continues to spend more on "development" than on "research." In the research category, federal support has dropped every year since 2004, when accounting for inflation. In 2004, the federal government spent $50 billion on research. By 2007, that investment had fallen by $3.5 billion to $46.6 billion, a drop of 7.2%.

The biggest decline occurred in research at the National Institutes of Health with 5.6% decline to $28.8 billion. At the same time, research funding at most federal agencies also dropped or showed negligible increases between 2004 and 2007, says NSF.

Federal funding for basic research, at $28.3 billion in 2007, has not grown since 2004, after adjusting for inflation, compared to annual increases of between 4–10% between 1998 and 2004. Federal funding for applied research, at $28.8 billion in 2007, declined by an average annual rate of 3.3% when accounting for inflation.

In constant 2000 dollars, federal funding provided for applied research in 2007 ($22.7 billion) is below what it was in 2002 ($23.5 billion). Spending on "development" declined in 2007 to $57.5 billion. The Defense Department accounts for 86% of federal spending on development, at $50 billion in 2007, followed by NASA at $4 billion, and the Energy Department at $2 billion.

Productivity Changes

Online Degrees

This form of "hybrid" classes is growing in popularity and practicality for students and professors. One reason suggested for the change in performance was that students like a content-delivery method that matched their style, and was selfpacing. Therefore, they were better able to comprehend the material. Another plus is that hybrid courses can benefit colleges struggling with space-management issues.

Expansion

Acument Global Technologies Inc. (Rockford, IL) will reenter the highperformance aerospace threaded fastener market with the opening of a production complex. It will be housed in two renovated facilities that will include a materials research and development operation, along with heading and secondary machines organized in cells.

EverPower Renewables Corp. (New York), a developer of utility-grade wind power projects, is building a facility for their Highland Wind Project located on a reclaimed strip-mine. The installation will provide 62.5 MW using 25 Nordex N90 turbines.

Borg Warner (Auburn Hills, MI) is building a production facility in Rzeszów, Poland. Beginning next year, the plant will manufacture 500,000 turbochargers a year for European carmakers. The 5000 m² site is located at the Podkarpackie Science and Technology Park near Krakow. The move was stimulated by increased demand for turbocharged diesel and gasoline engines.

Fisher/Unitech (Troy, MI), an engineering technologies firm, has opened a branch office in Indianapolis, IN. The facility will provide sales, service, and support for the manufacturing industry in Central and Southern Indiana.

Software

CAM Software Consolidation Continues

Bill Gibbs is president and founder of Gibbs and Associates (Moorpark, CA), developer of GibbsCAM software. In early January, Gibbs merged with CAM software developer Cimatron Ltd. (Givat, Israel), which bought Gibbs for $5 million and 1.5 million shares of newly issued stock. At WESTEC in March, Gibbs talked about the changes and the future of the CAM industry

Manufacturing Engineering: CAM consolidation's been going on for a long time. How have things gone since the merger with Cimatron?

Bill Gibbs: At the beginning of the year, we became part of Cimatron, and last month they assigned me the privilege of being president of both their North American subsidiaries, one being Gibbs and the other being Cimatron Technologies Inc. [CTI, Novi, MI], which is their resale subsidiary in Detroit. Technically they're a brother company to Gibbs, because we are both part of the same Cimatron group. CTI is a group of about 20 people whose sole job is to sell CimatronE software throughout North America.

ME: Cimatron has had a relatively low profile in North America. How are things changing for the company?

Gibbs: They really haven't done a lot with North America. I would say the problem is that the North American operation was too successful with the automotive industry in the late '90s, and the early part of this decade. And because they were busy and making money supporting the automotive industry, they didn't work hard at expanding their territories and at growing through North America. They seem pretty heavily focused around Detroit. Now that the Big Three have encountered hard times, many of their customers have problems, and they find themselves with the need to expand outside of the Detroit area, and shift their focus beyond automotive mold and die.

ME: Is there much overlap between GibbsCAM and CimatronE's CAM product focus?

Gibbs: That's a very important question, and the answer depends on what category of answer you're looking for. The best place to start is with the strategic focus of the products, and there's no overlap in the strategic market focus of the products. For example, GibbsCAM focuses on production machining of discrete parts. We make parts, pieces, discrete pieces. Our CAD capabilities are heavily focused on the need of the production manufacturer. We don't design parts—we work with parts that are designed by other people. CimatronE is a hugely different product. CimatronE is focused on the integrated design and manufacturing of mold-and-die assemblies. Now, in Gibbs, you might machine a mold cavity, which is a piece, but in Cimatron, you might design a 3500-piece mold assembly, and that mold assembly is made up of hundreds and hundreds of different components—pins, gates, leaders, guide pins—all sorts of things drawn from all over the place.

ME: Is there a large difference in the strategic focus or the design of the products, as you just described?

Gibbs: Sure. They have a major design component in their product line. Cimatron's CAD software is probably two-thirds of their software operation. Their toolpath creation probably is about a third of their product. With GibbsCAM, our toolpath creation is some 90% of our product. There's a huge difference in focus, and it's this difference in strategic focus, high-production machining of pieces, or design and integrated manufacturing of mold-and-die assemblies, that makes the merger work so well, because we're chasing two different customers, two different markets, and we provide two entirely different sets of solutions.

If you want to get into a very detailed feature level, and if you want to talk specifically about three, four, or five-axis machining, you could also argue that there's tremendous overlap in our toolpath creation, because there isn't a toolpath that you might use on a part that wouldn't also work on the mold for that part. A mold for a part is just the negative of the part. So there's tremendous detailed CAM overlap, but that pales in comparison to the strategic differentiation and the market differentiation. People should be buying CAM products because of their solution applicability for what the customer needs. We only advise the customer to evaluate a CAM product for their purpose, performed by their people, to run their machines. Well, if you're designing complex molds, Gibbs is not going to show as a great tool to help you design complex molds, where CimatronE does well.

ME: Is this in part why you really haven't been in the automotive industry, because of the lack of a tool-and-die solution?

Gibbs: Exactly, and the merger will allow us to re-focus on these differences; re-focus on our specialization, as it were, so that we will not be distracted into the mold-and-die high-end industry, and they will not be distracted into the production, discrete-part-machining industry. We will maintain our focus on mill-turns and MTM machining, as well as five-axis milling, and they will maintain their focus on the mold-and-die industry. They have a complete CAD option strictly for molds, and they have a completely different CAD option for dies; it's so different in mold design from die design that they have two entirely different CAD product options for it.

ME: Do you see a continued trend toward consolidation in CAM software?

Gibbs: The issue very simply is that the CAM market is maturing, in a classical sense, and the description of a maturing market fits the CAM situation we find today very nicely. We see increased competition, and there are more products that can do a good job. The products have increased in their capabilities. Because products all have about 10,000 to 20,000 features, it's harder and harder to tell the products apart by listing the features, so we all look for product differentiation of a higher level, and we have increasing globalization of our markets. It becomes important to be able to compete in all languages, in all nationalities. Gibbs is going to spend close to $300,000–$400,000 in translating software documentation—that's a huge cost. We have to maintain reseller distribution in all these languages, in all these locations. It becomes more and more expensive for a new company to achieve the entry-level requirements of today's CAM market, and it takes a larger and larger company to be able to fund ongoing development of ever-more-sophisticated products, handle the worldwide distribution and marketing, and handle all the language requirements. The bottom line is that bigger companies are inherently more competitive, because they are generating more revenue and have more money to spend on all these necessary costs.

ME: Do you see the consolidation in the industry continuing into the future?

Gibbs: We have several tiers of CAM companies. The top tier of CAM companies are large integrated CAD/CAM companies, like Dassault [CATIA], PTC, and Siemens PLM [Unigraphics]. These three companies sell the most CAM software in the world by dollar, because it doesn't have to stand on its own merit—it's sold along with the CAD software at an enterprise level. For example, when a company commits to Pro/Engineer, it installs and brings in all the Pro/E CAD and all the ancillary applications like Pro/E's CAM, Pro/Manufacturer—millions of dollars of CAM software are sold this way as part of the overall package. These three companies are the biggest players in the CAM market.much larger than the second tier. Now the second tier fill out the top 10, and these are the largest of the CAM companies that are most likely to have the resources to compete and continue growing and being profitable in the continuing maturity of our market. This merger moved Gibbs from 19th place to about a combined 8th place in the overall CAM market. So we go from being a top 20 player, now we're a top 10 player, which makes us feel rather good about our size and ability to play with the big boys.

ME: What new capabilities will be coming in the next release of GibbsCAM?

Gibbs: The GibbsCAM 2008 v9.0 release is coming out this year, and it includes the release of a substantial new suite of three-axis high-speed-machining capabilities that will help people cut parts faster. We need to be able to cut parts faster, and make our customers more competitive. The labor rates in the US are dropping precipitously because of our devalued dollar. We have better infrastructure and manufacturing capability, and now that our labor rates are dropping, compared to any other international standard, it makes us more competitive. We expect a lot of that work to come back from China.

ME: What kinds of programs can help make American manufacturing more competitive?

Gibbs: We're not going to solve the problems of America, but we will continue to sponsor programs that try to introduce American children still in school to manufacturing career paths. We are committing to the return of industrial arts to our education program, and the respect that a manufacturing career deserves today. The Los Angeles city school district in the last 30 years has completely destroyed what was one of the finest industrial arts programs in America, and it's a shame. When I went to high school back in the late 1960s, you could take a metal shop class, you could take an automotive class, you could take all sorts of classes. You could have a non-academic type of high school degree program. When I went to Van Nuys High School, I was the industrial arts student of the year, and the industrial arts program in some ways shaped my life. In general, just about everybody we talk to cannot find qualified and skilled people for jobs in their machine shop.

Siemens, Roy-G-Biv Team Up

XMC is the universal interface enabling customers to use Siemens MCIS software solution on existing production networks. Siemens' MCIS software solution is a system that provides fast, easy integration of production machines into the production network, while ensuring that production planning, scheduling, and execution are problem-free and based on the latest data. With the MCIS-XMC offering, customers will benefit from reduced machine setup times, increased efficiency, reduced machine downtimes, and simplified fault analyses throughout their entire production.

"Our partnership will allow us to deliver unmatched software solutions and value-added services that boost manufacturers' productivity and profitability capabilities," says Wolfgang Rubrecht, general manager, Siemens Energy & Automation, Machine Tool Business (Elk Grove Village, IL). "Customers will now be able to use our MCIS software products more effectively on machines with either Siemens or non-Siemens control hardware, a strategic advantage within the proprietary machine tool industry."

Siemens and Roy-G-Biv are launching the first of several integrated products in 2008. Coupled with a full line of industry-relevant services, MCISXMC offerings will enable customers to realize the full benefits of information-driven manufacturing with factory solutions that more capably interoperate with machines from many vendors.

Acquisitions