Manufacturing Outlook September 2023

MANUFACTURING TALK RADIO VIDEO PODCAST

We’ll be recording LIVE October 18th BOOTH #3435

Sponsored by All Metals & Forge Group

MANUFACTURING TALK RADIO

The Manufacturing Talk Radio Video Podcast is a weekly podcast for manufacturers of all sizes across the globe. Show host, Lew Weiss, and co-host, Tim Grady, present breaking manufacturing news and tackle business trends and economic forecasts in manufacturing for small, medium and large manufacturers across the globe.

Established in November of 2013, we have published over 800 episodes. Every Tuesday, podcast hosts and guests do a deep dive into subjects including the content behind the monthly ISM Purchasing Manager’s Index number, putting the “cool” back in manufacturing, hiring challenges in the industry, financing and funding options for small and mid-size manufacturers, B2B marketing, developing web site content for search engine optimization, reshoring in America, and economic trends important to manufacturers across the globe.

Visit jacketmediaco.com for new episodes of all 6 podcasts: Manufacturing Talk Radio, Women And Manufacturing, Hazard Girls, Moser On Manufacturing, Manufacturing ThinkTank and The Flagship Reports.

By Christine Casati

More Than $1.39 Trillion in GDP Growth for 2023 Amid Disruptions

When you have an economy as large as the USA, even one percent growth is a huge number. The 2022 GDP for the U.S. was $25.46 trillion. According to Statista macroeconomic indicators, the forecast for 2023 is $26.85 trillion*. If this figure is reached, the U.S. GDP will have grown $1.39 trillion over 2022 GDP. $1.39 trillion is a big number.

Real GDP can be calculated by taking the difference between the most recent year’s real GDP and the prior year’s real GDP. Then, divide this difference by the prior year’s real GDP. So, $1.39 trillion divided by $25.46 trillion equals 5.4% real GDP growth. Wait – what?!? 5.4 percent real growth? What happened to 1% or 2% or recession gloom-and-doom, and all that stuff?

Well, that’s the point. Too often, we get figures in our heads that don’t figure. The government has all kinds of ways it does math, known some years ago as fuzzy math. It’s still fuzzy. But, let’s focus on $1.39 trillion in growth – that’s real money, whether it is 1-something percent growth or 5.4% growth. Obviously, it is not a recession, which is good news. Statista also predicts annual GDP growth every year through 2028*.

As with any good news, it only goes so far. Some manufacturing sectors are doing well. Other sectors are really struggling. The supply chain disruptions of the Pandemic period still ripple through domestic manufacturing. Reshoring is in the works, but reshoring a factory isn’t as simple as letting everyone go over there and hiring new people over here. All the infrastructure of a manufacturing plant needs to be built, which we can most visibly see in the semiconductor industry. Other factories here are expanding to absorb the added work and current demand, albeit factories in the U.S. are struggling to find skilled labor for their added production needs.

Unfortunately, one of the supply chain links that continues to remain broken is the skilled labor supply chain from K-12 and beyond. The job skills needed for 2020-2030 manufacturing were not being developed by the K-12 or trade schools supply chain. Those careers had fallen out of favor more than 40 years ago, and the U.S. educational system has been out of sync ever since. Only in the last 10 years or so have some high schools recreated their trade school classes.

What about the immigration supply chain? That, too, failed to be developed. What we have is a flood of unskilled people entering the U.S. It will be at least a generation before their children will be geared up for modern manufacturing. That means by about the end of the 2030s. Between now and then, unskilled jobs will continue to be converted to automation and robotics, which leaves the current generation of unskilled immigrants with fewer job or career opportunities. Neither the federal nor state governments have the means to upskill millions of unskilled immigrants. Honestly, I wouldn’t want to be in their shoes. To say it will be difficult for them is an understatement – it will be tragic for them, with housing, the cost of living, and the American dream they came for being well beyond their reach.

As Winston Churchill said on a different topic, “It’s a riddle wrapped in a mystery inside an enigma…”. But, the U.S. has always been the land of promise and hope. The people of this country have a wonderful way of solving the unsolvable – if the government would get out of the way. After all, according to the government’s figures, GDP from 2022 to 2023 will have grown around 1.5%. Now you know that real GDP may grow at 5.4%, and for manufacturing, that’s a great growth rate. That kind of growth generates profits, which fuels innovation, and supports new hiring. We just have to fix the human resources part of the supply chain. n *https://www.statista.com/outlook/co/macroeconomic-indicators/united-states

Lewis A. Weiss, Publisher

Contact laweiss@mfgtalkradio.com for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast or any of our podcasts.

GLOBAL MANUFACTURING OUTLOOK

GLOBAL MANUFACTURING NOT DOING WELL, WITH EUROPE DETERIORATING. INDIA STILL DOING VERY WELL. GLOBAL PMI UNCHANGED AT 48.7

By Royce Lowe

The Global manufacturing scene continues to be the victim of falling demand in most of the major economies. The U.S. saw a softening in decline in July and a quickening in employment growth. India is still way out front, with Germany and Austria still the last two. There is no encouraging news at the moment to suggest an upturn in the situation, even though Germany has been known to turn around similar situations quickly. Both Japan and China slipped back into contraction. India’s July PMI was virtually unchanged from that

of June. The July PMIs for the U.S. and Canada were both below the 50 mark, but both showed improvement.

ASIS [https://asisintelligence.com/ current-asis-report/] is looking to a year-on-year industrial production manufacturing increase of some 2% for this year, followed by a downturn for the last three quarters of 2024. Primary metals will show a slight year-over-year decrease for 2023 and a more significant one for 2024. Fabricated metals will show slight year-over-year increases through

2023 and 2024.

Aerospace, computers and electronics, electrical equipment, and appliances and components show strength through 2023 and resilience through 2024. Motor vehicles and parts show strength through 2023, with a downturn through 2024. Machinery swings down through 2023 and shows recovery in 2024.

Global steel users are seeing an easing in the rate of production increase but a renewed fall in new order

growth. Production in the steel-using sector rose for the fourth consecutive month in July. The rate of growth eased from that seen in June and was the joint-slowest in the current sequence. Growth was recorded in both the U.S. and Asia, with the former seeing the sharpest rise for ten months. On the other hand, Europe-based firms signaled a sustained yet softer decline in production levels. Employment increased at the most robust pace since February. Selling prices were up due to cost burdens. And Cleveland Cliffs failed in its (first?) attempt to take over U.S.Steel.

Aluminum users saw renewed reductions in production and new orders and the most substantial rise in employment since April. Things were better in Asia and the U.S., with Europe showing a softer but still steep deterioration.

Copper users saw the strongest deterioration in the global copper-using industry for six months. In fact, production growth in Asia eased to a six-month low, while there was an expansion in output in the U.S. for the third time in four months.

In spite of what may be termed a sub-standard performance by most of the world’s manufacturing nations, one aspect that has not suffered too much is employment. This points to optimism that tells us things might

get better in the not-too-distant future. A definite lack of demand persists, and for the moment, this shows no real signs of going away. Attempts by North American mills to increase flat-rolled steel prices of late have been mostly unsuccessful. Non-ferrous metal prices show no signs of moving up either, and recent prices, compared with those of six months ago, are: Aluminum $1.00 per lb ($1.28); Copper $3.74 per lb ($4.20); Nickel $9.00 per lb ($12.00) and Zinc 1.08 per lb ($1.50.)

The Outlook: The U.S. shows the best performance with Real GDP hitting 5.4% year-to-date. If Canada and Mexico weaken, with China and Europe already soft, the U.S. may see economic retrenchment in early 2024, but for now, growth retains its resilience.

We encourage our readers to subscribe to the ASIS Report from Armada Corporate Intelligence, one of the most accurate resources for sector-specific information: [https:// asisintelligence.com/current-asis-report/]

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n

The Outlook for Industrial Manufacturing Company Boards of Directors

By Ed Marsh

These are heady days for manufacturing in the US. Recent supply chain gridlock is driving a surge in reshoring as companies build reliable domestic supply bases.

Yet there are lurking strategic challenges. Economic uncertainty, domestic and global political turmoil, protectionism, talent shortages, cyber threats, and rapidly changing market expectations jeopardize the conditions

on which many manufacturing businesses are built.

A strong board of directors can provide important analytical depth and expertise and is a powerful asset for companies facing strategic uncertainty.

Traditional Manufacturing Boards

Many manufacturing firms have boards to either accommodate family participation in decisions and/or

check the governance box for annual meetings and reports.

Key “board” functions of corporate governance, succession planning, strategy, risk management, corporate transactions, compensation, board nomination, and individual director performance are skipped or handled on an ad hoc basis by the senior executive (who’s also often the company founder.)

with brief qualifying stints in outside organizations) can’t bring the required expertise to bear on emerging external issues, and consultants don’t have “skin in the game.”

How to Build an Effective Board

There are two keys to building a strong board. First is a proper Nomination/Governance function. The Nom/Gov committee will establish guidelines for effective board function and lead the effort to construct a strategic board.

That’s natural

and

comfortable. Founders may

chafe at oversight, being determined, intelligent folks who naturally figure things out themselves. Their approach has worked for years, and the idea of relinquishing control to a group with divergent interests, including outsiders (independent directors,) feels like a dangerous loss of control.

Further, a full board consumes resources, meeting time and prep, director compensation, board counsel, etc., so many elect to maintain the status quo, aware of the downsides and unconvinced of the value.

The Importance of an Effective Board in Uncertain and Dynamic Times

The board’s role is to oversee the management of the business on behalf of the owners. That includes hiring and managing the CEO. So when a founder is the CEO and sole owner, they may wonder why they need a board.

The answer is that an effective board is an aggregate of various individuals with complementary perspectives. A combination of executive and owner/ family board members is a good start. For a lifestyle business focused on preservation, that may be enough.

But what happens when the market/ society/world is “breaking” around the business? Then, the premise of simply overseeing more of the same becomes problematic.

Here’s where a board can really deliver value by bringing the CEO executive-level insights into topic areas outside of the company’s traditional core strengths.

Owners should demand a board consistently consider important strategic opportunities and anticipate potential threats. A typical family-owned industrial manufacturer should be considering the following topics, among others specific to their situation

A board of only those who have grown up within the business (perhaps

The second is a board skills matrix. The matrix identifies areas of strategic and operational importance to the company. This includes horizontal competencies of marketing and sales, finance, legal, talent management, technology, cybersecurity, and M&A, and also domain-specific areas. A manufacturer selling primarily into the food industry, for instance, may want nutrition, food science, regulatory, and ingredients experience.

The board size will depend on the size of the company, and the matrix will identify current and future needs and gaps in the current team and then guide the networking or recruiting search for new members to fill the gaps.

Barriers and Solutions

Common barriers to building a strong board include:

• Underestimating the value of a strong board

• Fear of relinquishing enterprise control and of operational meddling

• Cost (directors’ fees, meeting stipends, expenses, and likely equity interest)

• Disregard for board recommendations

Because these are common challenges, there are firms with experience in helping companies structure boards, agreements, and expectations.

Finally, if the prospect of a controlling board is a bridge too far, an Advisory Board is another option for companies.

A Resource for Strategically Challenging Times

When markets are stable and growing, it’s reasonable for a company to keep doing what it’s been doing but when markets are tumultuous, a broad range of scenarios and approaches should be considered.

The directors’ mantra of “Nose in, fingers out” requires discipline from both directors and management to manage but solves many challenges. At the same time, owners must be clear with the board about the relationship. If the board’s guidance is consistently refused, directors will soon tire and leave.

The small, traditional boards of closely held private manufacturers often lack the range of skills to guide a company through rapidly changing times. A carefully constructed and well-run Board of Directors or Advisory Board can provide huge value for owners, executives, and the enterprise.

Ed Marsh is a business management consultant who has founded and operated several businesses. Today, as principal of Consilium Global Business Advisors, he assists lower middle market industrial manufacturers with strategy and revenue growth. He’s also currently the CRO of IntentData. io, Inc., a data firm that works primarily with Series B & C funded SaaS companies. He is the former Export Advisor to American Express and was awarded the Presidential “E” award by President Obama. Ed is a graduate of Johns Hopkins University, a former Ranger-qualified Army paratrooper, a service-disabled veteran, and is NACD Directorship® Certified. He lives in Ipswich, MA. n

The cost is obviously an investment - a strong board should create considerable value.

ISO9001:2015 SINCE 1994 AND AS9100D SINCE 1998

NIST SP 800-171 (COMPLIANCE UNDER DEVELOPMENT)

Message From AGMA President, Matthew E. Croson

By Matthew E. Croson

As AGMA closes on its 107th year as a trade association, I wanted to share four things our member-focused organization is focusing on.

First – the industry continues to be impacted by the increased number of mergers and acquisitions. In 2022 and so far in 2023 alone, AGMA experienced 20 mergers from its ex-

isting members. In 2020, the AGMA predicted that there would be 40 mergers within the next ten years; we are already 50% to that goal and it’s only been three years. Our membership is now bifurcated between smaller, privately held companies, and much larger, multinational companies. There really isn’t much of a middle ground anymore.

What’s the impact? These two types of membership require different needs, and the AGMA is looking at how we can best support them both. Each side needs education and training, and we will have more than 30 classes in 2024 to help. Larger companies tend to need access to customers, data and market intelligence, as well as insight into emerg-

ing technologies. Smaller companies are looking for best practices for management, easy to apply standards and information sheets, as well as a strong network on both the supply and gear side.

AGMA is positioned to continue to grow value for both memberships. Second – emerging technology is moving to applied technology. For the past six years, AGMA has focused on alerting members to emerging technologies that could impact our industry. Trends in robotics, IIoT, additive manufacturing and EV are areas of opportunity and challenges for members. Our game plan has been to bring speakers, white papers and connections to industry.

In 2024, we will begin to bring direct impact on these areas with short courses, EV training materials, online learning modules and direct B2B connections. Members will

be able to collaborate directly with supply chain partners that can create value internally for their businesses. We are moving from awareness and communications, to business-oriented connections.

AGMA is positioned to grow emerging technology offerings for members looking to stay relevant for customers.

Third – we are bridging the organization and our members into new age social media connectivity. In 2024, we will unveil a new website, the AGMA APP, video services, social media communications and other tools that are built to connect members to members. One of the strongest values of a trade association is the relationships that can be formed. We want to put the online tools available directly in the hands of members looking for solutions. In 2024, leveraging our proprietary database, with

social media tools, members will be able to communicate with each other in new ways, and enhance the business relationships they have formed in face-to-face environments.

AGMA is positioned to support members looking to connect with other members, online, on their phones, 24/7.

Finally, we are looking to create strong face-to-face connections. In 2024, AGMA will start looking for a site in Chicagoland that will bring the industry together. We envision a location that allows for technical committees to focus on standards projects, a place where business committees can discuss AGMA business trends, where education classes can be held, and where the Board can meet. We also envision a place where hands-on training will occur, with machines that are relevant to the industry.

AGMA is positioned to bring the industry together for events and discussions that matter.

No organization can stay relevant for 107 years without change. And trade associations must have strong leadership from its members in order to understand what issues are facing the industry, and how AGMA can respond.

AGMA is positioned to continue to do this, and the next 15 years look bright. Join us and be a part of greatness.

Author profile: Matt Croson became the president of the American Gear Manufacturers Association in 2016. Croson has more than two decades of leadership and communications experience in manufacturing trade associations. Prior to joining the AGMA, he was president and CEO of the Adhesive and Sealant Council. n

How Manufacturers Can Successfully Adopt and Integrate IIoT Solutions

By Roger Sands

IIoT solutions promise to enhance operational efficiency and improve revenue for manufacturers. They are often recommended for easing problems with productivity, supply chains, staffing, and resources.

They aren’t a one-size-fits-all solution, though. Here’s how manufacturers can successfully adopt and

integrate the IIoT technologies that are right for their business.

Why You Want IIoT

IIoT, or Industrial Internet of Things, devices make almost everything in a manufacturing environment a source of actionable data. This data, once analyzed, gives measurable insight

into the behavior and performance of machines, applications, robots - the day-to-day devices depended upon to keep operations running smoothly alongside irreplaceable human employees.

With these insights, it’s possible to drill down into particulars and determine the cause and effect of

any performance issues, as well as decide how to best improve efficiency, predictability, and productivity. IIoT solutions can be used to automate factories, track deliveries, manage inventory, monitor machine and equipment performance, predict supply chain disruptions, and more.

Choosing IIoT solutions

How do you choose the right IIoT solutions for your business?

First, identify a specific issue with or lack of visibility into your operations. Here are a few suggestions to start. You might want to:

• Track utility consumption

• Analyze production cycles

• Track deliveries in more detail

• Receive alerts for battery statuses

• Receive proactive alerts for potential machine/equipment breakdowns

• Automatically track all machine/ equipment repairs

• Automate work order management

• Use AI tools to forecast supply and demand

• Automatically schedule equipment modernization or replacement

• Automatically identify bottlenecks

• Improve inventory tracking

• Receive detailed maintenance recommendations

• Remotely monitor machines/ equipment

You might be interested in all of these capabilities, only some of them, or in others not mentioned

here. Take the time to identify exactly what you want and why you want it.

Now, make a list of what data and analytics you need to resolve this problem. This is also how you will identify the measurable analytics you need - i.e., how you will know if whatever technology you select actually delivers improvement. Start gathering those analytics now as best you can. You’ll need this data later.

Research the many available IIoT technologies and select one that seems to meet your needs. You’ll want to work with a solution for 1-3 months, gathering analytics the entire time. At the end of this trial period, review your performance and behavior data from before you

started using the device with the data from after you started using it.

You should see improvement. The specific improvements will depend on what IIoT technology you’ve decided to use, but broadly speaking, you should expect to see at least one of the following:

• Improved productivity

• Streamlined operations

• More operational accuracy

• Shorter time to market with better market and issue predictions

• Fewer errors in business, finance, and manufacturing departments

• More reliable performance thanks to predictive maintenance

• Improved physical safety

• Improved cybersecurity

• Reduced costs

• Boosted profits

If you aren’t seeing any improvement, there’s an issue. It might mean that your IIoT solutions aren’t working and you need help from the

vendor, or it might mean the device isn’t the best fit for your business.

It also could mean there’s an issue with your WiFi network.

Why You Need Reliable WiFi

Manufacturing is a WiFi-dependent business. Every department depends on the network, and that dependency is only growing as we turn more and more to technology to resolve our problems — case in point: the rise of IIoT.

These technologies cannot work if they cannot connect to a wireless network. If your network is unreliable, the technology is unreliable. You won’t get uninterrupted analytics and insights if the network has intermittent problems - and the truth is, all networks have intermittent problems.

To significantly reduce WiFi issues and unreliability, you need the ability to analyze all management data from the network in real time. This

means analyzing tens of thousands of data packets from infrastructure, connected devices, and possible sources of interference like hotspots, microwaves, and Bluetooth.

This is a monumental task that requires automated AI-support from a WiFi automation or WiFi assurance solution.

• Automated: The analysis needs to occur 24/7 in real-time. IT teams don’t have the numbers to analyze every single connected device’s every action or to constantly run manual analytics. Automated support ensures that the analytics are constant and that network visibility is complete.

• AI: With AI capabilities, automated tools can learn to recognize each network. This allows them to not only “mindlessly” capture data but to understand it. The end result is technologies that can identify issues in WiFi networks, suggest resolutions,

Guiding Manufacturers

Economic Turmoil

proactively predict problems, and identify long-term behavior and performance trends.

Additionally, whatever AI-powered WiFi assurance solution is selected to optimize and safeguard the WiFi network should provide remote, automated troubleshooting. This allows IT to quickly resolve all issues that the technology identifies. The goal is a network that experiences no downtime, no spotty connections, and no mysterious, can’t-beidentified-or-resolved issues.

In that regard, these assurance solutions do double duty:

1. They provide optimization insights to keep the WiFi reliable and future-proofed.

2. They provide vendor-agnostic analysis for all connected devices - including IIoT devices. If your business isn’t seeing expected improvements after adopting IIoT, your WiFi assurance solution can help identify if the issue is with the device, with the network, or with something else related to the WiFi ecosystem.

Change is Always Coming

WiFi networks are dynamic and constantly changing, and the technologies we depend on are no dif-

ferent. While we know technology will remain business-critical, we don’t know exactly what the future holds. Use these tips to adopt the IIoT and WiFi automation solutions that you need to help you predict and respond to current and future needs better than ever before.

Roger Sands is a co-Founder and CEO of Wyebot, Inc. Roger has 17 years of executive management positions in successful networking startups and Fortune 500 companies. Prior to Wyebot, Roger was the Business Line Manager for Hewlett-Packard’s WW WLAN business, growing it from #6 to #2 market share. Roger joined HP via the acquisition of Colubris Networks, a wireless startup where he held a number of executive positions, including co-CEO, and was instrumental in the HP acquisition. Prior to Colubris, he was a GM at Accton Technology, founding the enterprise wireless business and building it to #3 market share via 6 strategic partnerships. Roger also held senior management positions at 3com, USRobotics, and Bytex Corporation. Roger holds a Masters and Bachelors in Electrical Engineering from Northeastern University. n

By KENNETH CARTER, Gear

It’s no small testament to be able to say a business has been going strong for more than half a century, but All Metals & Forge Group has been manufacturing and selling open die forgings and seamless rolled rings to a variety of industries for 51 years.

And if Lewis Weiss, the company president and CEO, has anything to say about it, that success will continue for another 50 years.

All Metals & Forge Group is an ISO 9001:2015 and AS9100D manufacturer of custom and standard open die forgings and seamless rolled rings in carbon steel, alloy steel, stainless steel, tool steel, nickel alloys, cobalt, aluminum, copper, and titanium. Forged shapes include large flat and hex bars, blocks, gear blanks, all flange shapes, flanged shafts, step shafts, discs, hubs, rings, cylinders, and sleeves. Industries that use the company’s services include aircraft, aerospace, automotive, chemical, construction, defense, energy, engine and turbine, food processing, hydro, metalworking, mining, oil and gas, petroleum and power generation, pulp and paper, and shipbuilding.

SERVING GEAR-RELATED BUSINESSES

To that end, about 60 percent of All Metals & Forge Group’s business is gear related, according to Weiss.

“Seamless rolled rings is a primary product and is used in the gear industry for manufacturers to produce gears,” he said. “We can make rings up to a 200-inch diameter and down to about a 4- inch diameter. We do some things that other forge shops don’t do. We always supply rough machines parts with an RMS finish — sometimes designated by the customer. But typically, we do a 250 RMS or 125 RMS. Sometimes, if a customer wants 64 RMS, we’ll do that. We drill holes; we can do contour forgings.”

When it comes to the gear industry, those businesses typically want a clean finish, according to Weiss.

“Some of the forge shops don’t do this; they’ll give them a raw unmachined part,” he said. “We give them a rough machine part. It saves them time, and it saves them wear and tear on their equipment because we’ve already taken off the first rough cut of the ring. Allinclusive in our pricing is that we will do ultrasonic testing, which obviously is checking the parts internally for cracks, pits, voids, and so on. We do that as a matter of course. If somebody buys 1,000 rings from us, every part gets ultrasonically tested, and we don’t charge extra for it. It’s in the price, but our price is so competitive that we can give them a machine-ultrason-

ically-tested part for less money than a raw forged ring.”

UNIQUE CUSTOMER APPROACH

That extra mile of service has made All Metals & Forge Group quite competitive in the industry, according to Weiss.

But the company offers an even more unique approach with its customers. With every new customer, Weiss and his team sends them a sample, but it’s not just any sample. It is a physical, hands-on example that is able to demonstrate a variety of All Metals & Forge Group’s skills.

“We send this out to a new customer who knows nothing about us and maybe doesn’t understand or can’t appreciate what we supply,” he said. “This is clearly rough machined with drill holes and with every one of the corners, the chamfer is all different.”

The chamfered edge examples serve to show how fine that can be. The sample is also engraved with heat numbers (and the company’s name and phone number, obviously). It also includes several RMS finish examples — 250 RMS on one side and 125 RMS on another, according to Weiss.

“The customer gets a real good idea of what they’re going to get,” he said. “This has been a very successful tool for us to send out to our clients. I like doing things that are different.”

For more than 50 years, All Metals & Forge Group has produced custom and standard open die forgings and seamless rolled rings in a host of different alloys for a wide range of industries.

Solutions editor

All Metals & Forge Group open die forgings and seamless rolled rings can be manufactured with carbon steel, alloy steel, stainless steel, tool steel, nickel alloys, cobalt, aluminum, copper, or titanium. (Courtesy: All Metals & Forge Group)

MORE THAN JUST CUSTOMERS

All Metals & Forge Group takes a vested interest in its customers, so much so that Weiss said he sees them as more than just customers.

“We like to partner with our customers; I don’t just want a client; I want a partner,” he said. “I want to help them get an order so that we can get an order; 80 percent of our business is legacy business.”

And as the company’s business continues to grow, that means that the 20 percent of those new customers end up being legacy accounts as well, according to Weiss.

“That’s been our philosophy, and it’s worked extremely well for us,” he said.

All Metals & Forge Group has been registered as an ISO company since 1994, which includes an ISO 9000 rating. Since 1998, the company has achieved its AS 9100 rating, which is the aerospace version of ISO.

RENEWABLES SECTOR

Another growing industry that All Metals & Forge Group supplies products to is the wind- energy industry, according to Weiss.

“We are also involved with wind, and with wind, there are turbines, and inside the turbines are gears that are forged,” he said. “We supply those parts for wind energy as well.”

Weiss is quick to point out that his company has always been an early adopter in a variety of ventures, which makes renewable energy customers a foregone conclusion.

“For example, All Metals and Forge Group was the first metals company in the United States that had its ISO registration in 1994,” he said. “I got a lot of pushback from employees, but the day that we got our certificate in the mail, one of the salesmen got a phone call

from a company in Wisconsin, and they said, ‘I have an inquiry. I need to buy this product; however, my customer has required that I only buy it from an ISO-registered company, and I can’t find anybody.’ And that was the first order — the first day that we got the registration. Once that one salesman got it, we got a $60,000 order. And I never got pushback after that. Everybody got it.”

So what started out as a marketing tool became an integral part of the company’s essential offerings as industries eventually made ISO certifications standard operating procedures, according to Weiss. That’s just one example of how Weiss and his team have tried to stay ahead and competitive throughout its long history.

‘MANUFACTURING TALK RADIO’

All Metals & Forge Group’s recent history has pushed the company into the popular podcast space.

“I come from, as my age indicates, the radio era, and I constantly listen to radio; I love radio,” said Weiss, who recently turned 80. “In 2013, I came up with an idea about getting more of a message out to the manufacturing sector about manufacturing. So, we created a podcast called ‘Manufacturing Talk Radio.’”

Since its inception, “Manufacturing Talk Radio” has done more than 750 shows, and at the beginning of the year, Weiss said they started syndicating AM and FM radio stations throughout the country.

“We are on one radio station in upstate New York, and the numbers are amazing of the people that we are reaching, as well as the messages that we are getting out to the audience — the audience mainly being manufacturing, including a lot of students, universities, research labs, and publications such as yourself,” he said.

All Metals & Forge Group’s podcast is just one way Weiss said the

Forgings are a custom-made product with specific ultrasonic and machining requirements and made of different alloys. (Courtesy: All Metals & Forge Group)

All Metals & Forge Group has been registered as an ISO company since 1994. (Courtesy: All Metals & Forge Group)

“We’re a supplier of parts forgings involved in these various industries as well as supplying to other companies and manufacturers about how to improve, how to run your business, how to deal with the skills gap, how to deal with new technology, and software.”

company is embracing technology and staying at the forefront of the latest innovations.

“AI is the big thing now — machine learning,” he said. “We’re involved in all of these things, and from two aspects: We’re a supplier of parts forgings involved in these various industries as well as supplying to other companies and manufacturers about how to improve, how to run your business, how to deal with the skills gap, how to deal with new technology, and software.”

MANUFACTURING OUTLOOK E-ZINE

In addition to “Manufacturing Talk Radio,” All Metals & Forge Group has been publishing a monthly e-zine for the past several years to replace its email newsletter established in 1988.

Manufacturing Outlook is a publication educating, informing, and alerting its subscriber base about the “outlook” for all thing manufacturing in a looking forward approach, according to Weiss.

CHALLENGING WORK

Even with all the company offers, Weiss said every job is still a challenge — one that he welcomes.

“Forgings are a custom-made product: They have specifications; they have ultrasonic requirements; they have machining requirements; they’re different alloys,” he said. “The past three years have been particularly a challenge with regards to COVID disruption in the supply chain. Now we have issues with inflation, which has really gotten out of hand but seems to be improving a bit. And there are other issues that don’t necessarily directly involve the customer, but we do have geopolitical issues, China issues, Russia issues, and all of these things in one way or another do affect us. And not only us at All Metals & Forge Group, but us as in our manufacturing sector in

this country. So, to that extent, we do work with, talk to, and engage with our customers.”

With all its offerings, both physical and virtual, All Metals & Forge Group has been able to carve out quite a significant niche within the forging industry and the manufacturing sectors that need its products, according to Weiss. And that success always comes back to keeping an eye on the future.

“We sometimes have our customers on our show,” he said. “It’s a video podcast, and it can be seen on YouTube, Spotify, and all the rest of the platforms, and the numbers that we’re seeing are of people who are interested in manufacturing, including kids. The college thing is getting to be old school almost; 40 percent of college kids don’t graduate, but they still wind up with a $200,000 debt. But with manufacturing, three years ago, four years ago, you never heard about manufacturing in the news media — never heard of it. Now you hear about it pretty regular.”

To be sure, Weiss’ tenacity also plays a large part in his company’s success, as well at what comes next.

“As an early adopter, I’ll be there; I’ll be 90, but I’ll be there,” he said. “I love dealing with people in the manufacturing sector, and I’ve been doing it for over 50 years. It’s extremely educational. The people are really terrific. They’re hard workers, particularly the people who own businesses. They appreciate things like (our podcast), which is educational to them.”

Kenneth Carter is the editor of Gear Solutions. He can be reached at 800-366-2185 ext. 204.

by CASS INFORMATION SYSTEMS, INC.

Cass Transportation Index Report

Cass Freight Index - Shipments

The shipments component of the Cass Freight Index® rose 1.9% m/m in August, or 0.8% m/m seasonally adjusted (SA).

On a y/y basis, the index was 10.6% lower in August, after an 8.9% decline in July.

The freight market downcycle is now 20 months old, which compares to a range of 21 to 28 months in the past three downcycles.

Part of the large y/y decline is the comparison to the extraordinary time

last summer when destocking was creating freight demand as retailers shipped out stale inventory.

The current downcycle is similar to the peak-to-trough declines in two of the three downcycles in the past dozen years. The third ended with the pandemic.

The U.S. economy is accelerating, with the Atlanta Fed’s GDPNow tracking at 4.9% q/q GDP growth for Q3, driven by consumption.

Though the resumption of student loan payments will likely trim this

growth, real retail sales declines are moderating, and destocking seems to be mostly running its course.

With this backdrop, how are for-hire freight volumes declining so much?

Private fleet growth is evident as Class 8 tractor retail sales are on pace to set a record this year, yet for-hire fleets are by and large demonstrating capital discipline. Thus, we think a substantial part of the decline in shipments is due to private fleets insourcing freight from the for-hire market.

With normal seasonality, this index continued

would be flattish m/m in September and decline about 8% y/y, with still extraordinary comparisons, if less so.

Freight Expenditures

The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, rose 1.1% m/m and fell 25.0% y/y in August.

With shipments up 1.9% m/m in August, we infer rates were down 0.8% m/m (see our inferred rates data series below).

On an SA basis, the index rose 1.8% m/m, with shipments up 0.8% and rates up 1.0%.

This index includes changes in fuel, modal mix, intramodal mix, and accessorial charges, so is a bit more volatile than the cleaner Cass Truckload Linehaul Index®.

The expenditures component of the Cass Freight Index rose 23% in 2022, after a record 38% increase in 2021, but is set to decline about 18% in 2023 and 11% in 1H’24, assuming normal seasonal patterns from here.

Both freight volume and rates remain under pressure at this point in the cycle, but fuel price increases could limit the savings for shippers.

Inferred Freight Rates

The rates embedded in the two components of the Cass Freight Index declined 16% y/y in August, after falling 17% in July.

Cass Inferred Freight Rates rose 1.0% m/m SA after a 0.8% decline in July. While downward pressure on contract rates is starting to ease, the increase was more likely due to higher fuel surcharges.

Based on the normal seasonal pattern, this index would rise m/m in September, but the y/y decline would widen to 18%.

We estimate lower fuel prices are knocking about 3% off freight rates y/y.

Cass Inferred Freight Rates are a simple calculation of the Cass Freight Index data—expenditures divided by shipments—producing a data set that explains the overall movement in cost per shipment. The data set is diversified among all modes, with truckload (TL) representing more than half of the dollars, followed by less-than-truckload (LTL), rail, parcel, and so on.

Truckload Linehaul Index

The Cass Truckload Linehaul Index® fell 0.5% m/m in August to 141.3, after a 0.2% m/m decline in July.

The slower decline in the past three months, averaging 0.3% m/m, is a markedly slower decline than the 1.4% m/m average m/m decline in the preceding year. This likely reflects a combination of stabilizing spot rates and smaller declines in contract rates. We’ve recently heard anecdotes of fleets addressing unacceptable rates, with some success remediating sharp rate declines. While not likely widespread, this suggests rates are nearing their lows.

On a y/y basis, the Cass Truckload Linehaul Index fell 11.5% y/y in August, after a 12.7% y/y decline in July.

From here, even modest sequential declines would be accompanied by slowing y/y declines.

As a broad truckload market indicator, this index includes both spot and contract freight. With spot rates stabilizing in recent months, the larger contract market is likely to continue adjusting down.

Freight Expectations

Though significant progress has been made in rebalancing, we think it’s unlikely that industry capacity will broadly tighten until pressure from private fleet growth eases, which seems possible in the next few months.

Though the freight market is still near the bottom of the cycle, the first step in getting out of a hole is to stop digging. In our view, new truck orders in the next few months will be pivotal to setting the market tone for 2024.

The capacity contraction in the forhire sector is beginning to coil the proverbial spring for better market conditions, but this improving outlook could be spoiled if fleet expansion continues ahead of industry need.

We expect industry financial trends to dictate greater capital discipline next year, but further overexpansion is possible as fleets plan for significant emissions regulations looming in the future.

For example, the Notice of Proposed Rulemaking (NPRM) for the EPA’s upcoming greenhouse gas (GHG) regulation includes the targets for adoption rates of zero-emissions vehicles (ZEVs). This could have major implications for industry capacity. n

THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON BUSINESS®

Economic activity in the manufacturing sector contracted in August for the 10th consecutive month following a 28-month period of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®

The August Manufacturing PMI® registered 47.6 percent. Regarding the overall economy, this figure indicates a ninth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 46.8 percent, 0.5 percentage point lower than the figure of 47.3 percent recorded in July. The Production Index reading of 50 percent is a 1.7-percentage point increase compared to July’s figure of 48.3 percent. The Prices Index registered 48.4 percent, up 5.8 percentage points compared to the July figure of 42.6 percent. The Backlog of Orders Index registered 44.1 percent, 1.3 percentage points higher than the July reading of 42.8 percent. The Employment Index registered 48.5 percent, up 4.1 percentage points from July’s reading of 44.4 percent.

Of the five subindexes that directly factor into the Manufacturing PMI®, none are in growth territory.

Of the six biggest manufacturing industries, three (Transportation Equipment; Food, Beverage & Tobacco Products; and Petroleum & Coal Products) registered growth in August.

The five manufacturing industries that reported growth in August are: Printing & Related Support Activities; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Miscellaneous Manufacturing‡ ISM

Analysis by Timothy R. Fiore, CPSM, C.P.M. Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

PMI® at 47.6% MANUFACTURING

The U.S. manufacturing sector contracted in August, as the Manufacturing PMI® registered 47.6 percent, 1.2 percentage points higher than the reading of 46.4 percent recorded in July. This is the 10th month of contraction and continuation of a downward trend that began in June 2022. That trend is reflected in the Manufacturing PMI®’s 12-month average falling to 47.8 percent.

Manufacturing at a Glance

Commodities Reported

Commodities Up in Price: Bearings; Crude Oil; Diesel Fuel; Electrical Components (10); Natural Gas* (2); Steel* (2); and Steel Products* (2).

Commodities Down in Price: Aluminum (3); Aluminum Products; Caustic Soda (2); Corrugate Boxes; Natural Gas (2)*; Paper (4); Plastic Resins (15); Polypropylene (4); Steel* (5); Steel — Hot Rolled (4); Steel — Scrap; Steel — Stainless (2); Steel Plates; and Steel Products* (3).

Commodities in Short Supply: Automation Equipment; Electrical Components (35); Electrical Transmission Products; Electronic Components (33); Hydraulic Components (3); Rolling Stock; Semiconductors (33); and Valves.

ISM® Report On Business®

August 2023

by Timothy R. Fiore, CPSM, C.P.M. , Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

ISM’s New Orders Index registered 46.8 percent. The four manufacturing industries that reported growth in new orders in August are: Nonmetallic Mineral Products; Textile Mills; Paper Products; and Transportation Equipment.

The Production Index registered 50 percent (“unchanged”) in August. The five industries reporting growth in production during the month of August are: Printing & Related Support Activities; Transportation Equipment; Machinery; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing‡

ISM’s Employment Index registered 48.5 percent. Of 18 manufacturing industries, two reported employment growth in August: Machinery; and Transportation Equipment.

The Supplier Deliveries Index registered 48.6 percent. The seven manufacturing industries reporting slower supplier deliveries in August — in the following order — are: Textile Mills; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Primary Metals; Transportation Equipment; and Paper Products.

Inventories

The Inventories Index registered 44 percent. Of 18 manufacturing industries, the three reporting higher inventories in August are: Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing‡

Analysis

ISM® Report On Business®

Customers’ Inventories

Analysis by Timothy R. Fiore, CPSM, C.P.M. , Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

ISM’s Customers’ Inventories Index registered 48.7 percent. The seven industries reporting customers’ inventories as too high in August are, in order: Plastics & Rubber Products; Furniture & Related Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; and Primar y Metals.

The ISM Prices Index registered 48.4 percent. In August, the five industries that reported paying increased prices for raw materials: Nonmetallic Mineral Products; Petroleum & Coal Products; Plastics & Rubber Products; Computer & Electronic Products; and Miscellaneous Manufacturing‡

Backlog of Orders

ISM’s Backlog of Orders Index registered 44.1 percent. The four industries reporting growth in order backlogs in August are: Printing & Related Support Activities; Textile Mills; Paper Products; and Chemical Products.

New Export Orders

ISM’s New Export Orders Index registered 46.5 percent. Two industries reported growth in new export orders in August: Paper Products; and Transportation Equipment.

Imports

ISM’s Imports Index registered 48 percent. The three industries reporting an increase in import volumes in August are: Primary Metals; Transportation Equipment; and Machinery.

‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

SEPTEMBER 2023

NORTH AMERICA OUTLOOK

By Dr. Chris Kuehl

I shall let you all know one of the favorite tricks of the economist’s trade. It is a very clever use of scenarios. This starts with the wellknown fact that the best definition of an economist is someone who explains tomorrow why the predictions they made yesterday didn’t happen today. If one is aware that a given forecast may not be as accurate as would be desired, there is an incentive to provide oneself with some predictive cover. Thus, the use of scenarios. Several potential outcomes can be provided with explanations regarding what makes one more or less likely than the other. With this as a preface, here are three scenarios to explain what is likely to happen in the next few months of 2023 and the beginning of 2024. There is the positive scenario, the negative scenario, and the one that splits the difference.

The positive scenario holds that the economic activity that has been driving 2023 thus far is likely to

continue. At the start of this year, the assertion was that the U.S., Canada, and Mexico would succumb to recession as early as the first quarter and certainly by the second. The forecasts for GDP growth were anemic at best, and several asserted that growth would plunge. Instead, there was 2.1% growth in both the first and second quarters. This is certainly not rocket speed, but given that predictions were as low as negative 1.0%, these are respectable as the twenty-year average for the U.S. economy is 2.5%.

Canada came in at 3.1% in the first quarter, and that was far better than expected, but Q2 slipped dramatically to 0.2%. Mexico registered Q1 growth of 1.0% in Q1 and 0.9% in Q2. Not as impressive as its neighbors but a far cry from the negative readings noted last year. The optimistic scenario asserts that the factors driving this growth will be maintained through the rest of this year and into 2024.

There has been some variation as far as the three nations. The U.S. has seen growth due to expanded demand for U.S. exports of sophisticated manufacturing as well as food. The U.S. industrial sector specializes in expensive machines (everything from airplanes to railroad engines and machine tools). But the top ten export sectors include oil drilling and extraction, petroleum refining, pharma manufacturing, natural gas processing, vehicle manufacturing, chemical manufacturing, plastics and resins, navigational equipment, and non-ferrous metal processing. The 9th biggest category is soybeans. There is only one sector here aimed directly at the consumer.

Canada has an export sector that looks a lot like the U.S. when it comes to oil and gas; Mexico as well. The top ten for Canada include gold, oil, auto parts, natural gas, medications, aircraft, turbo-jets, and sawn wood. Mexico’s top ten include vehicles, machinery, electrical

equipment, oil, medical equipment, plastics, furniture, beverages, iron/ steel, and fruits/nuts. Generally speaking, the demand for these exports has been stable – much more so than consumer durables (the majority of which comes from Asian producers). The sense is that demand for these exports will remain stable. A second motivation for optimism in all three nations is also a reason for concern. The low levels of unemployment in the three create wage demands that can be a burden to producers but also equip consumers with more money to spend.

The current jobless rate in Mexico is officially 2.88 percent, but this is likely not all that accurate as millions of people are not actually counted as part of the system. There is no system of unemployment, so people do not generally engage with the government. Unofficially, the rate is closer to 20%. The U.S. rate is 3.8% at the U-3 level but 7.1% at the U-6 level, which is the reading that picks up the discouraged worker no longer in the formal system. Canada has a rate of 5.5%, but they also have a slightly higher rate that picks up some of the long-term unemployed (8.2%). These are still low rates and far higher than would be the case with a recession. The positive scenario is based on the continued demand for exports and continued spending by consumers who still have their jobs, many of whom are enjoying higher wages.

The negative scenario assumes that these factors reverse. If the demand for the region’s exports starts to fade, all three economies will feel the loss. This means all three nations closely watch the economic situation facing Europe as well as Asia. Europe has

managed to avoid recession as well, but not by much. The growth has been anemic – generally around 1.0%. This is very fragile, and even a small reversal could set the region back. It is also important to note the impact of Ireland on this data. The bulk of manufacturing growth is taking place in Ireland – technically. This is because these large pharma and tech firms are headquartered in Ireland, but the actual production takes place in China, South Korea, Vietnam, and elsewhere in Asia.

Europe is really not seeing the manufacturing expansion one would assume. Speaking of Asia, China is hitting a lot of economic turbulence and is very likely to miss its growth target of 5.0%. If these regions falter, they take a lot of demand away from North America. If this demand shrinkage causes U.S. producers to start laying people off in larger numbers, there goes the consumer driver. Wages will stop rising, and consumption will falter. This is not going to happen overnight, but a few months of this reversal would drag 2024 down.

That leaves the middle scenario, and as is usually the case, this is probably the most likely. The growth that was seen at the start of the year has already faded in Canada and Mexico, and it is a good bet that it will show some retreat in the U.S. as well – probably not until later in Q4. The U.S. consumer still has job security and money to spend (at least the upper third does). But there have been layoffs in the tech sector and in finance, and these affect that upper third. The U.S. is still expected to see growth near 2.0% in Q3 and Q4, but the confidence level is reduced

in the retail community. They see the impact of higher inflation daily, and they can clearly see it has affected buying patterns. It is unlikely the U.S. will sink into recession territory, but Canada could see it. The reduction in commodity demand will hit quickly, and that will affect Mexico as well. Mexico is dependent on manufactured exports – especially in the vehicle sector. Vehicle sales have been very strong in the U.S. but prices are very high, and these are big ticket purchases. The bottom third of income earners are already out of the market, and all eyes are now on the middle third.

The Outlook: All three nations will manage to avoid recession, but all three will see sector recessions. These will be industries hurt more by higher prices and reluctant consumers. This would likely include housing as well as some parts of overall commercial construction. Parts of North America will be affected – especially those with higher cost of living expenses. There is already a palpable exodus from these high-cost states and provinces.

Author profile: Dr. Christopher Kuehl (Ph.D.) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999. He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division – Finance, Credit and International Business.

SEPTEMBER 2023

SOUTH AMERICA OUTLOOK

By Royce Lowe

Where is Venezuela Going?

Venezuela’s in a mess. From a country that was the world’s largest petroleum exporter from the late 40s to 1970, and a producer of metals, machinery, and numerous other goods, it has descended, through fluctuations in oil prices and recessions, into a country that has seen a quarter of its population leave, and its economy shrink by 75% since 2013, or the year that Nicolas Maduro, the country’s authoritarian president, took office.

In its time, Venezuela manufactured and exported steel, aluminum, transport equipment, textiles, apparel, beverages, and foodstuffs. It produced cement, tires, paper, and fertilizer, and assembled cars both for domestic and export markets.

The country is ripe for change, and there will be elections next year. But in the meantime, there will be primaries this October to choose, from 15 candidates, someone to put

themselves up against Maduro. This is not an easy task, the ousting of an incumbent who thinks he was sent to save the very country that he has effectively ruined. Who could do this?

Enter Maria Corina Machado, a 55-year-old former congresswoman who recently threw her hat into the ring to become the opposition’s candidate to take out Maduro in next year’s election. She wants to privatize

the huge - some say decrepit - state oil company PDVSA. She wants open markets, the rule of law, and the return of Venezuela to what she calls the energy hub of the Americas. She’s

on the right of the opposition’s political spectrum. She names Margaret Thatcher as the politician she most admires.

Taking PDVSA private is the heart of Ms. Machado’s policy, unlike her rivals. The state oil company was once the world’s major oil company, but it has suffered from corruption and mismanagement under Maduro and his predecessor, Hugo Chavez. Her rivals in the primaries don’t agree with her policy.

Ms. Machado is a feisty fighter, and if she wins through against her 14 rivals in the primary- 57% of likely

voters back her - she will be the frontrunner to defeat the president who has brought disaster to the country. But of course, we’ve seen enough wanna-be presidents lose elections without wanting to leave, and that is what Venezuela is likely to go through next year. There’s unlikely to be a fair election.

The country has suffered enormously high inflation and is burdened by inefficient management, corruption, and a terrible lack of skilled personnel. For its own sake, Venezuela deserves Ms. Machado.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n

AFRICA OUTLOOK

By Royce Lowe

Energy for Africa

With Europe cutting its energy imports from Russia and climate change leading to a shift from fossil fuels, oil then gas, Africa may be in a position to help with the gas problem and the carbon footprint. The continent holds 13% of global gas reserves and 7% of the world’s oil.

Eni, an Italian oil giant, and other international energy firms are looking to produce Liquefied Natural Gas (LNG) by restarting two projects that had been shelved. There are other

projects in Tanzania and Mozambique. Africa’s participation in the world’s energy markets has dwindled in importance over the last few decades. It once provided a fifth of the world’s traded LNG but now has half that share. Its shares of global oil and coal production have also fallen as investors in oil, in particular, have been put off by deteriorating security in Nigeria, usually the continent’s biggest producer. So why start up again? Higher prices, increased European demand as the EU grows away from Russia, and the switch from coal to gas. Mozambique shipped its first LNG last

November and is looking to ship much more. France’s TotalEnergies could restart building a giant LNG plant in Mozambique it halted in 2021 because of a jihadist insurgency. This should be producing by 2028. An even larger LNG plant is planned by ExxonMobil, Eni, and China National Petroleum Corporation, and there are projects in Tanzania. A project in Senegal and Mauritania is expected to start production this year. Nigeria, Africa’s biggest LNG exporter, should see its production capacity increase by 35% by 2026.

In all, new gas projects in sub-Saharan Africa could add some 90 billion cubic meters (bcm) in annual LNG capacity by 2030. Only about 20% of this capacity is already under construction, and some projects could yet fail.

There are numerous LNG projects on the proverbial drawing board. The world’s major oil companies are involved, and the figures projected suggest that if they go ahead, Africa’s current output would raise its share of global gas production to 8.5% from today’s 6%. The number of rigs in Africa is at its highest since 2019, and Africa’s share of global capital expenditure on gas has more than doubled since 2014. TotalEnergies is spending big in Namibia, where there is an estimated 11 billion barrels.

Through all this, of course, is green energy, renewables, and green hydrogen, all part of the global mix. Strong solar and wind potential make

Africa a likely place to produce renewable energy. But in spite of its sun and wind and fast-flowing rivers, it has missed out, with just 1% of the world’s installed solar and wind capacity and 4% of its hydropower. This is changing, but slowly. There are hydrogen projects in Mauritania and Morocco, but Africa needs to hurry to stay on the world stage. Oil and gas are gradually on their way out, though no one knows when. This means that the market for oil and gas will shrink with time, but only if the renewables are there to fill the gap.

Africa has energy potential, but to realize this, it has to do away with sloth. On natural gas, competition from Qatar and America is moving quickly to expand production. If Africa falls behind, its chance to supply Europe will fade away, particularly as demand shifts to greener energy sources. The International Energy Agency sees the EU using 20% less gas by 2030 than it did in 2021.

In Africa itself, demand for gas will grow as it moves to produce electricity for the 600 million Africans who don’t currently have it. Some of this new supply will come from renewable sources, but gas could also contribute to electricity generation and be needed to light up the furnaces of heavy industry.

Africa has a brief moment of opportunity to make up for its recent poor performance in global energy markets. As such, Africa’s governments will need to learn from the mistakes made in previous commodity booms, where investors were scared away and revenues were squandered. This could be a boom time for Africa, and this is really mostly up to Africa.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n

GLOBAL OUTLOOK

EUROZONE OUTLOOK

By Chris Anderson

The last PMI figure available for the month of July for the Eurozone was 42.7, a 38-month low. Ireland, France, and Germany were at 38-month lows, and Austria at 39. Selling prices for Eurozone goods decreased at their quickest rate since 2009 due to falling costs and plummeting demand.

There are those who say that this is a temporary phenomenon, no cause for panic. Europe, particularly Germany, will come back; it’s done it before. There are those, too, who turn to what has recently happened in Germany, and look at it as an ongoing state of affairs that signals difficult times for Germany. The country is renowned for its auto industry, chemicals, and machinery. It is renowned for its Mittelstand, that agglomeration of thousands of middle-sized companies

that are, effectively, the backbone of Germany’s manufacturing and exporting base.

High energy prices, tighter financing conditions, and weaker global demand represent a material drag on industrial activity, which might persist well into 2024. So what’s going on in Germany? There are sources that point to firms leaving Germany and setting up in Asia or other parts of Europe, what the US called offshoring when it happened to them several decades ago. And it’s true, this is happening to Germany, the way it has happened, and is happening, to most countries in the West. They’re referring to the deindustrialization of Germany. The construction sector is hurting due to monetary tightening at the

European Central Bank. Machine tools, something nobody reputedly makes like the Germans, are suffering from reduced demand.

When something like this happens, no matter where, the media has a field day. Everybody picks it up, stirs it up, and makes it seem worse than reality. Germany’s been there before, and Europe’s been there before. The world is going through a lack of demand, except perhaps in India. So will Germany come through in a relatively short period of time? Possibly not. The question is when will it. Nobody knows. What is certain is the general air of pessimism that goes along with such situations. n

Continuing Recession in 2023

ASIA OUTLOOK

By Christine Casati

Is China Really In Crisis?

All eyes are on China. Will there ever be another China boom? China is facing crises on multiple fronts. Some are more manageable than others. Most are domestic or geopolitical crises of its own making. Inflation is not one of them. China is facing a reversal of fortunes, including deflation, lower exports and imports, currency depreciation, and over 22% youth unemployment, which could be worse as they have stopped reporting these figures. Not to mention the ominous developments in the property sector.

Many crises were self-induced by poor policymaking prior to and during the three-year pandemic lockdowns when the government refused to make cash injections to help suffering households and small businesses. Thus, after smothering giant technology titans and sprawling property conglomerates with regulations curtailing their further growth and profits, it smothered consumption, too. And even though the Chinese typically have huge household savings rates compared to Americans, they now have become bargain hunters like us. Beware luxury brands! And yet gambling in Macao has picked up

and recovered its former position as the top gambling den in the world. This may be partially due to the fact that moving wealth out of China has become more difficult.

LOCAL GOVERNMENT SHADOW BANK BORROWING WEIGHS ON ECONOMY

President Xi Jinping forced local governments to spend billions enforcing his nationwide zero-Covid policies and electronically tracing people’s whereabouts, saddling many Tier-2 and Tier-3 cities with crippling debt after maxing out their land sale allocontinued

cations. Economic progress is sure to be slower with such a “debt overhang.” The central government refuses to go on another infrastructure spending spree to spur growth and keep people employed, as they did a decade ago. That created an environment of fiscal and fiduciary lack of discipline with so much money floating around.

Currently, as a result of central tightening, some provinces, such as Yunnan, are spending millions to construct giant pandemic detention centers to put people to work, preparing for the next pandemic (are we missing something here?) while the government has dispatched teams of financial experts from various ministries in Beijing to help local governments solve their debt problems themselves, without sovereign cash injections. President Xi is promoting a “do-it-yourself” approach, similar to Chairman Mao’s focus on “self-reliance.” But the true reason is more complex.

PROTECTING BANKS

The central government is now more focused on maintaining nationwide financial stability and protecting bank profits in the face of an imploding real estate sector where Evergrande declared bankruptcy in New York in August, Country Gardens Holdings has missed two major debt payments, and Zhongzhi Enterprise Group, one of China’s major asset managers (1

trillion RMB/137 billion USD) has stopped all payments to investors in all investment products (mainly in the shadow banking sector which exceeds $3 trillion), calling for debt restructuring. Their exposure to the real estate debacle is very real. Zhongrong, its trust subsidiary, has missed payments, triggering fears of contagion.

Getting people to borrow and getting banks to lend is another challenge putting the government under pressure. Lower lending rates would decrease bank revenue, so they are treading very slowly, with very small interest rate cuts to the 1-year and 5-year prime rates in mid-August. Investors are not encouraged, triggering continuous declines in China’s stock exchanges. Mortgage rates have remained stable at 4.2% in August. But the government may have to move with more urgency to shore up confidence and growth as borrowing slumps and the economy weakens. On August 21, the central government approved a debt financing sale by local governments of $206 billion in financing debt.

BUT IS THAT THE WHOLE STORY?

China’s output is still growing and expected to expand by at least 4.5% but not reach China’s own target of 5% in 2023. Although consumer prices have fallen 0.3 percent through July this year, they actually rose by 0.2 percent in July alone. Core inflation has also risen slightly, from 0.4 percent in June to 0.8 in July. Deflationary pressure in August may be temporary. Falling prices as inflation eases in major economies such as the U.S. and Brazil may lower the cost of imports, which may help (but not dramatically!). It’s very hard to predict whether China can continue to sustain this level of growth year-on-year in the face of such an unexpectedly soft and uneven consumer recovery, contracting exports, and 2-year-old (and growing!) distress in its property sector, which used to contribute over 30% of GDP.

Let’s not forget that China rules the world in clean tech, dominating the clean tech supply chain and expanding job creation in that huge sector. They have also become the world’s largest producer of EVs and are expanding in Europe (see Automotive Outlook in July’s issue). And they are rapidly moving to counteract U.S. policies to restrict exports to China of the most advanced chips and processing technology by buying up lower-end chip manufacturing equipment to expand that segment of the market. At the same time, Japan and Korea are reshoring their more advanced chip operations in China to expand their markets in advanced chips. More on these developments next month.

OUTLOOK: China will eventually recover; it’s just too big to fail. China’s slowing demand will hurt U.S. companies in the short term, but new opportunities will emerge. Investors who are spooked by China will continue to unload their stakes in Chinese equities, especially if Communist party leaders do not live up to their promises of more state support. Those looking for new value-centered investment opportunities in non-sensitive technologies with a readymade workforce are likely to take a second look toward year-end. All eyes will be on whether China’s current deflationary environment is temporary or becomes entrenched. It all depends on how well China manages what Martin Sandbu of the Financial Times calls “Debt overhang economics with Chinese characteristics.” (8/17/23)

Author profile: Christine is co-founder and President of China Human Resources Group, Inc, a management consulting firm based in Princeton NJ. She has provided U.S. companies with strategic development and project implementation services for projects in China since 1986 n

SEPTEMBER 2023

AEROSPACE OUTLOOK

By Royce Lowe

Bits and Pieces

Did you ever wonder, sitting there in your A350 or your 787, just thinking about your day, through the rumble of the trolley bringing your meal or your cocktail down the aisle, just where all the small and larger parts of the plane you’re sitting in come from? Maybe you’re staring at, even concentrating on, the screen where your choice of movie or TV show is playing, or you’re adjusting the earphones to better appreciate your choice of music. In days of yore, you might even

have been smoking, so you’d need an ashtray. Plus, the occasional trip to the toilet.

These are the little but essential parts of an aircraft and are doubtless supplied to Airbus and Boeing suppliers via sub-contractors. Recent data suggests that each of the two aircraft giants has some 10,000 to 11,000 Tier-1 suppliers who are approved to satisfy the manufacturers’ requirements. Pratt and Whitney, an aircraft engine manufacturer and a division of RTX Corporation, may have some 70%

of the parts that go to make up an engine supplied by sub-contractors. Imagine the logistics of keeping tabs on all the parts, making sure they meet quality requirements. How many bits and pieces might there be in that engine? Imagine the fuel systems, and how critical they are, same thing with reference to quality. And the landing gear.

Suppliers to the big two aircraft manufacturers are found around the world. From the U.S. through the whole of Europe, most of Asiacontinued

including Japan, China, and India. India, which just ordered around 1,000 aircraft, is looking to become a more serious supplier.

Then there’s the fuselage. Aluminum, aircraft aluminum, strength, corrosion resistance, strength-to-weight ratio, and resistance to UV damage. Then there are composites, which we talked about last month.

A huge commercial passenger jet is a beast to behold. A complicated beast. In coming issues, we’ll take a look at some of the more important aspects of who supplies what to whom to make them.

The Aircraft Market

Viva Aerobus, a low-cost Mexican airline, recently signed a memo of understanding for a multi-billion dollar order for 90 more Airbus A321neo narrow-body jets, bringing its total orders to 170 aircraft. Viva currently has a fleet of 74 narrow-body A320 series.

Wizz Air, a low-cost European airline, is a division of Phoenix-based Indigo Partners. It is headquartered in Budapest and serves some 200 destinations in Europe, the Middle East, and North Africa. It has over 180 A320s in service and has a long-standing relationship with Airbus. It is the largest A321 neo

operator in Europe. Wizz Air recently placed an order for 75 A321neo jets that could be worth up to $4.35 billion. This will bring its total of A321 neos to 434.

Boeing, meanwhile, plans to increase its production rate for the 737 MAX from 31 per month to 38 per month and has recommitted to deliver 400 of this aircraft next year, as the company continues to record high demand for the narrow-body aircraft from airlines who are expanding or updating their fleets. Boeing saw Q2 revenue of $19.8 billion, attributed to increased deliveries of commercial aircraft, with 136 deliveries of all jet types during the quarter.

Since the 737 MAX was announced in 2011, Boeing has taken 5,500 orders for all its variants and has a backlog of over 4,900 aircraft. In addition to the 400 737 MAX forecast to be delivered this year, Boeing is looking to deliver 70 787 long-range aircraft.

Lockheed Goes Nuclear

The federal Defense Advanced Research Projects Agency (DARPA) placed a contract with Lockheed Martin to develop and demonstrate a nuclear-powered spacecraft. The craft will serve for both space exploration and defense. The contract, whose value was not announced, calls for Lockheed to conduct an in-space flight demonstration of a nuclear-thermal rocket engine vehicle by 2027. The project is named Demonstration Rocket for Agile Cislunar Operations (DRACO.) It was initially announced in January as a partnership of DARPA and NASA’s Space Technology Mission Directorate.

Nuclear thermal propulsion (NTP) engines give thrust as high as conventional chemical propulsion with

two to five times the efficiency. This means the spacecraft can travel faster and farther, using significantly less propellant. They also enable abort scenarios on journeys to Mars that are not possible with chemical propulsion systems. In such an NTP system, a nuclear reactor quickly heats a hydrogen propellant and delivers the gas through the engine nozzle to create thrust. Lockheed’s partner in this is BWX Technologies, and the two are developing a fission-based reactor using a special “high-assay low-enriched uranium (HALEU)” to convert cryogenic hydrogen into an extremely hot pressurized gas.

The reactor will not be turned on until the spacecraft has reached “a nuclear safe orbit,” Lockheed emphasized, so that an NTP system remains a safe propulsion technology.

“These more powerful and efficient nuclear thermal propulsion systems can provide faster transit times between destinations. Reducing transit time is vital for human missions to Mars to limit a crew’s exposure to radiation,” said Kirk Shireman, vice President of Lunar Exploration Campaigns at Lockheed Martin Space. “This is a prime technology that can be used to transport humans and materials to the Moon. A safe, reusable nuclear tug spacecraft would revolutionize cislunar (between the earth and the moon) operations. With more speed, agility, and maneuverability, nuclear thermal propulsion also has many national security applications for cislunar space.”

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n

SEPTEMBER 2023

ENERGY OUTLOOK

Britain’s Windy City

By Royce Lowe

We’ve been talking about wind turbines and their ability to generate astounding amounts of power for some time now. And they just keep getting bigger, heavier, more able to generate more power, viz one revolution of a certain turbine can power a house for 29 hours, etc. But how big is big, who is making them, and where are they being installed?

CBS’s long-running and excellent program ‘60 Minutes’ paid a visit last year to a town named Grimsby on England’s northeast coast, some 200 miles north of London. From the 1950s through the 1970s, Grimsby had the world’s largest fishing fleet. Then Iceland decided to impose fishing restrictions in their waters, and that dealt a massive blow to the

town, effectively killing its primary industry. The town was effectively depressed until around 2010, when Denmark’s Orsted company, doubtless helped along by government grants, made plans to start what came to be known as the Hornsea Project.

Wind farms, starting with Hornsea One, situated around 75 miles offshore, saw construction start

in January 2018. Then, the first monopile foundation was installed. Over 8,000 people were inducted to work offshore at the Hornsea One site, which covers a little under 160 square miles. There are 174 wind turbines, each 190 meters tall, with 75m long blades. Hornsea One became commercially operational in 2020 and was followed by Hornsea

Two in August 2022. At that date, it surpassed Hornsea One as the world’s biggest offshore wind farm, powering over 1.4 million UK homes.

Last October, CBS took its cameras and its interviewer, Sharyn Alfonsi, to see what is still the world’s largest wind farm, now up to 335 square miles, with over 300 turbines, 600 feet tall - over half the height of the Eiffel Tower - and fiberglass blades that weigh 30 tons. These blades need to be assembled out at sea in all kinds of weather, a testament to the ultimate required accuracy of the manufacturing process. But why choose Grimsby, apart from its dire need for something to happen? Good port, water depth, and wind precisely what was needed, and relative ease of connection to the national grid.

Connection involves a hook-up from the turbine at a depth of 300 feet to a cable, to an on-shore substation, and the national grid. The CBS program is highly recommended, as are the sub-titles that go along with it.

And Grimsby has seen a new lease of life blow through its streets, accompanied by waves of optimism. Orsted has so far invested $18 billion in this project and created some 600 jobs. It plans another $17 billion of investment over the next eight years. Projects three and four are coming. The more turbines, the cheaper the electricity they produce. The supply and demand situation can be monitored and predicted.

Meanwhile, on this side of the Atlantic, a project called Vineyard Wind is underway, some 13 nautical miles south of Martha’s Vineyard. Construction began in November 2021 on the development of an offshore wind farm. They announced they would be using the turbine manufacturer GE to produce the power, meaning the GE Haliade-X, the turbine with a massive 13 MW capacity, which is more than double that of other turbines installed off the U.S. coast.

Vineyard Wind 1 will be developed off the coast of Martha’s Vineyard, Massachusetts, and should produce enough power for 400,000 homes as well as businesses in the area. Information on this project is sparse, with no starting date for electricity generation yet announced. The project is owned by Avangrid and its Danish partner, Copenhagen Infrastructure Partners. Avangrid was formed through a merger between Iberdrola USA Inc. and UIL Holdings Corporation in 2015. Iberdrola S.A. (Madrid), a worldwide leader in the energy industry, owns 81.5% of Avangrid. Avangrid is in a joint venture with Hydro-Québec, named New England Clean Energy Connect, with H-Q supplying the hydro and Avangrid building the transmission line carrying the power from the Canadian border to Lewiston, Maine, where it will feed into the regional power grid - and eventually help to light up New York City. This project ran into referendums, which halted its progress for a time. Permission has been given to resume, during which time the project has taken on a $500 million supplement.

There are a number of offshore wind farms under construction or planned in the U.S. Those under construction are scheduled for completion between 2024 and 2028. Two are operating, in Rhode Island and Virginia, with a total of seven turbines. The vast majority of these projects are led by the Danes, some by the French. If it is serious about wind energy, the U.S. has a lot of catching up to do.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook n

SEPTEMBER 2023

MATERIALS OUTLOOK

Warfare Improvisation

By Royce Lowe

In the past 18 months or so, we’ve heard many accounts of the war in Ukraine, blow-for-blow, missile attacks, and anti-missile attacks. We’ve also heard of drone attacks, failed assaults, and hundreds of thousands of dead and wounded. What we haven’t heard too much about is an ongoing shortage of factory-built munitions, particularly on the Ukrainian side of things.

The Economist recently released an article - picked up by the world’s media - telling a tale that confirms the old adage that man can use that inborn ingenuity to come back from the brink of possible defeat. And it all starts with a hand grenade, that weapon of war featured in just about every war movie made in the past

six or seven decades. Hand grenades are not very heavy, as witnessed by the relative ease with which they are thrown at the enemy. But how much damage do they do, at about 300 grams with the pin removed? A man nicknamed “Lyosha,” an amateur weapons maker based in Kyiv, Ukraine’s capital, refers to them as short on “killing power.” And they certainly don’t make much of an impression when dropped from a drone.

Some three or four months ago, Lyosha and some of his friends decided to take things into their own hands. Working from home, they designed an 800-gram antipersonnel bomb called the “Zaychyk” or “Rabbit.” They use 3D printing

to produce the bomb’s plastic casing before it is filled with C4, an explosive, and pieces of steel shrapnel. Tests show, says Lyosha, that the shrapnel “cuts into wooden planks like butter.”

The Zaychyk is only one example of the innovation and improvisation that have come out of this yearand-a-half of war. Stocks of many factory-built munitions have run down with continuing fighting, but raw explosives remain in plentiful supply. From this has come an amateur arms industry devoted to supplying Ukraine’s fighting men with improvised weapons.

Necessity is the mother of invention, and the Zaychyk is but one example

of the sorts of lethal innovation that have sprung up in Ukraine in the 17 months since Russia’s invasion. Stocks of many factory-built munitions have shrunk as the fighting has worn on. But raw explosives remain plentiful. That has helped create an amateur arms industry devoted to supplying soldiers at the front with improvised weapons to use against Russian troops. These improvised explosive devices have come to be known as “candy bombs,” and Lyosha’s team prints the plastic shells of around 1,000 of them weekly. Not enough for the Ukrainian officer who acts as the team’s military contact; he wants 1,500 a day. The Druk (“Print”) Army has churned out more than 30,000 candy bombs in the past four or five months. “Swat,” their leader, says that the production rate is growing. And still more come from beyond Ukraine’s borders. Janis Ozols is the founder of the Latvia chapter of the Wild Bees, a group of volunteer weaponsmiths from outside Ukraine. He figures at least 65,000 bomb shells have been shipped from Europe since November 2022. (Ukrainian customs officials have turned a blind eye, classing such shipments as children’s toys or candle-holders.)

Improvised munitions are not a direct replacement for the factory-made sort, but they are cheap. Emanuel Zmudzinski, a Wild Bees volunteer in Lodz, Poland, makes the components,

a nose cone, body, and tail fin, for a 27cm-tall model called the Big Egg for less than €3.50 ($3.85), not including the explosive contents, on a 3D printer that cost around $1,200. With 3D printing, candy bombs can be readily produced in different sizes, helping drone operators make the best use of a given model’s payload capacity.

Clever innovations have rendered the bombs surprisingly effective. Those designed to kill infantry incorporate a central cylinder into which explosives are packed. The space around it is filled with metal fragments, which will be hurled outward when the bomb detonates. In the early days, many bombs used nails as shrapnel. But tests (which involved blasting the shrapnel into sheets of wood) revealed a shortcoming: the heat from the blast was partially vaporizing the nails. Bigger pieces of scrap are not vaporized and so cause more grievous wounds. But irregular chunks of metal have unpredictable aerodynamics. Many were being flung either upwards, away from the target, or down into the ground. Ball bearings are now preferred— though they are not cheap and are in short supply. “Diuk,” a Ukrainian serviceman in Donetsk, a region partially occupied by Russian forces, says 5kg candy bombs are now killing exposed infantry 20 meters from where the bombs land.

It is hoped to extend the kill radius still further. Some “candy shops” use software to model the killing potential of different shrapnel types and mounting angles relative to the charge, according to a soldier in Kyiv.

Some candy bombs can even be used against armored vehicles. Copper and aluminum are pressed inside these bombs into a specially designed cone shape. When the explosives detonate, the metals are transformed into a thin jet of superheated plasma that can bore its way through armor. The same technique is used by many commercially made anti-tank weapons. Ukrainian drone operators claim to be able to destroy Russian tanks by dropping these bombs, which weigh around half a kilo, onto the vehicle’s roof, where the armor is thinner.

Diuk, the Ukrainian soldier in Donestk, reckons that his country’s military drones now drop around 200 different types and sizes of candy bombs. That is a testament to their makers’ creative enthusiasm. But it also complicates supply lines, with components coming from several different workshops. An effort is therefore underway to reduce the variety of bombs and to standardize their production, says Mr Ozols, the Wild Bees organizer.

Nobody, obviously, knows when this war will end, but the type of innovative resistance that is going on in Ukraine and becoming more professional by the day may, in the end, help to tip the balance.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. n

AUTOMOTIVE OUTLOOK

By Lawrence Makagon

More EV’s Out East

We all know by now who’s winning the EV race and who’s making the most in terms of numbers and models. It’s China, of course, with about 60% of the EVs turned out there. They’re also the biggest battery producer. But they’re not the only country out there interested in pushing ahead in the EV business. There’s Southeast Asia’s Thailand, for example, which has long been a magnet for giants like Ford and Toyota, in acquiring the nickname the Detroit of Asia. And it’s determined to forge ahead in the EV business.

Already, the Chinese are in Thailand, led by BYD, Great Wall, and SAIC. Changan Auto and GAC Aion are set to finalize their investment plans, and Chery Auto is also in talks. Investment to date in the industry amounts to 75 billion baht ($2.2 billion.) Most of Thailand’s auto production goes to export (WTO data values vehicle exports at $22 billion a year), but the government is also keen to encourage a domestic EV market, offering subsidies of up to 150,000 baht to help drivers make the switch

from gasoline-powered cars. From nothing in 2017 and next to nothing in 2021, Thailand will put 30,000 EVs on its roads this year.

Next, there’ll be a push to lure battery manufacturers to Thailand, and there is, of course, competition from the U.S. and Europe here. Thailand’s target is for 30% of its car production to be clean vehicles by 2030. This will require annual domestic production of 40 gigawatt hours of batteries, enough to power 725,000 vehicles.

EVs will be top of the agenda for Thailand’s new government, and their target is to be number one in Southeast Asia and the world’s top ten in the EV industry. The country has a strong automotive supply chain, and they will be looking very closely at attracting investment from BYD and CATL (the world’s biggest battery maker.) Thailand will involve itself in all aspects of the EV market, from batteries through major parts to software applications. It will go for all areas of the industry, including BEV, plug-in hybrids, and fuel-cell vehicles, together with every type of two-, three-, and four-wheeled vehicles, motorcycles, and electric bicycles. There is little doubt that Thailand will need to stay very close to China in its quest for progress in the EV business. For its part, China seems ready to carry on a significant business relationship with Thailand.

Over in Indonesia, President Joko Widowo - affectionately known as

Jokowi - is looking to lead his country on a similar path of electric vehicle production. Being Southeast Asia’s biggest economy and the world’s largest nickel producer has made it an attractive investment target. But Makoto Tsuchiya of Oxford Economics recently wrote that there is room for further improvement to firmly establish the country in the global EV supply chain. Indonesia needs more skilled labor (only one-fifth of Indonesians 25 to 34 years old have attained tertiary education), deeper industrial infrastructure, and more low-carbon energy supplies if it wants to produce batteries or electric vehicles in high volumes. Tsuchiya further notes that the country will also need to offer a more stable business and regulatory environment than it has in the past. Indonesia’s economy relies heavily on coal, and the carbon footprint of its nickel production is way above the global average. This is not good for EV makers who may want to avoid possible trade tariffs that penalize goods based on their carbon footprint.

Indonesia doesn’t have a very good track record when it comes to export policies - particularly nickel and copper - and lots of red tape. Jokowi’s presidency is scheduled to end next Spring. He has made a downstream strategy, which has seen a broad political consensus, an important aspect of his presidency. He says as many as 10 million jobs could result from downstreaming, which he suggests could make Indonesia a high-income country by 2045. It is to be hoped that those who follow Jokowi can stay up to date with his policies, but in any event, they’ll be looking at a tough row to hoe.

Whatever happens in the EV business in Thailand and Indonesia will not happen tomorrow, particularly in Indonesia, where the lack of infrastructure and skilled labor, plus the carbon footprint, contribute to a negative scenario. n

Lawrence Makagon, Staff Writer

THE FLAGSHIP REPORTS

The Flagship Reports with Dr. Chris Kuehl is both an “Officer of the Watch” briefing of economic conditions and an Executive Briefing on specific situations impacting those conditions. Written and presented by the officers of Armada Corporate Intelligence, Dr. Kuehl lightens up the mood of sometimes distressful geoeconomic news with a bit of humor. This monthly podcast includes information from the Flagship Reports issued 3 times and week, and AISI, the Armada Strategic Intelligence System, a tool for durable goods manufacturers that dives deep into the sector each month to provide more than 95% accurate near-term forecasts.

SEPTEMBER 2023

CYBER SECURITY OUTLOOK

Navigating the common pitfalls of cyber security

By Ken Fanger, MBA, CMMC-RP, President, On Technology Partners

Cyber security can be annoying, but it’s also vital. Once you get used to doing it, you no longer think about it. I might be dating myself here, but do you remember when we had to get used to seatbelts? For the younger readers: yes, there was a time when seatbelts were just optional, if you can imagine that. We fought it hard, saying that it was just a pain, and a violation of our rights. Now, we put our seatbelts on without even thinking. It’s amazing what we can get used to if we just give it time.

But once we’ve accepted cyber security for its benefits, how can we be sure we’re going about it the right way? Just as a lack of seatbelts was normalized,

how have we normalized harmful tactics in cyber security? How do we encourage habits that are not only for the best, but comfortable and simple to use? Just as safety requirements like seatbelts have been reviewed and changed over time, so must we reevaluate how we approach security.

As I’ve navigated my Humanizing Security initiative, where the priority is on humans over technology in our cyber security efforts, I have encountered a few common flaws in traditional cyber security approaches. Recognizing how we have gone wrong and how we can do better is ultimately how we build optimal security, safety, and trust.

I am a fan of the way Julie Haney of the National Institute of Standards and Technology (NIST) describes these “pitfalls” in “Users are not stupid: Six cyber security pitfalls overturned”:

1. Assuming Users Are Stupid

2. Not Tailoring Communications to The Audience

3. Unintentionally Creating Insider Threats Due to Poor Usability

4. Having Too Much Security

5. Depending On Punitive Measures or Negative Messaging to Get Users to Comply

6. Not Considering User-Centric Measures of Effectiveness

While Julie Haney elaborates in more detail on each of these in her article (which I highly recommend giving a read!), I’ll share with you my main takeaway in light of my own reflections and hers: we are not considering or valuing the experience of users enough. Employees are the ones who must follow protocols, so when cyber security features, procedures, and protocols are not crafted with them in mind, we run into a whole host of issues.

I have heard many times in my career sayings like “You can’t patch stupid,” or “employees are your greatest weakness,” and I may even have been victim to agreeing with these statements in the past, but the fact is, this mentality is not keeping our data safer. In fact, employees are your greatest defense, so we need to be mindful of that in all aspects of handling cyber security.

I’m sure we all have groaned when having to memorize our 80th hyper-complex password, or wiped the drool from our mouths after a particularly boring training lecture. These frustrations don’t serve us when they happen, and they don’t serve us in the grand scheme of cyber security. So, I encourage organizations to make considerations about how they’re weighing the usability of their cyber security for the user at all stages of planning. If it hasn’t been a focus before, make it one going forward.

When designing security protocols, creating cyber security trainings, and implementing security features, we should be actively avoiding the mistakes we’ve made in the past. The key is to empower users to handle security issues with ease and confidence, to engage them in the process, and to lift the many burdens that complicated security has imposed upon them thus far.

Author profile:

Ken Fanger, MBA has 30 years of industry experience in the fields of technology and cyber security, and is a sought-after CMMC Registered Professional, helping manufacturers and contractors to meet DoD requirements for CMMC compliance. He is passionate about technology deployment, and his MBA in Operations & Logistics has helped him to be an asset in the designing and deployment of networks to enhance the manufacturing experience. Over the past 5 years, he has focused on compliance and security, including working on the SCADA control system for the Cleveland Power Grid. Mr. Fanger works with each client to identify their unique needs, and develops a customized approach to meeting those needs in the most efficient and cost-effective ways, ensuring client success. n