SHOP: What are you expecting in terms of business conditions in 2024?
KLOTZ: Right now, some manufacturers are doing really well and some are slow. It’s the same with suppliers to the industry, some are busy and some are soft. It’s a mixed bag and going into 2024 I see it being similar. We have a partnership with ITR Economics, and they see a slight recession coming. Not like the deep recession we saw in 2008, but still a small recession. I think the higher interest rates are really starting to have an effect on people that are considering borrowing to finance an expansion or a capital equipment purchase. The office real estate market is also going to be hit hard by interest rates in the next six months. And the U.S. election coming up next year adds to the uncertainty. I think a small recession is going to happen and so I think 2024 is going be slower than 2023 or about the same. We will be in a holding pattern, and I don’t think there will be a lot of big purchases made. Also, what happens with UAW labour negotiations could affect things into 2024. We have a lot of members who supply the auto industry, and a strike could really hurt Tier 1 to Tier 4 suppliers. Since COVID the demand for automobiles has been there but the volumes aren’t yet back to where we were in 2019 and this would be another setback. From what I am hearing there is a good chance Stellantis goes on strike and the others may follow, maybe not at the same time, but in a staggered approach.
SHOP: Economics aside, manufacturing has faced a host of issues in 2023. Heading into 2024 how would you describe the state of the industry?
KLOTZ: I think even though it may be a slow year for the economy, you will still see investment in automation. The workforce may open up a bit more, but manufacturers know they have to invest in automation to stay competitive with other countries. Investment in equipment, however, will be slower because of interest rates, as mentioned. There might be investment on a smaller scale instead of multi-million-dollar equipment investments. Some manufacturers will be reluctant to go after new business, preferring to hold on tight to the business they already have. Companies entering their third or fourth generation of ownership may also be facing uncertainty and may want to hold back on their investments for a while.
SHOP: What is the most important issue that still needs to be addressed?
KLOTZ: Here in the United States, it’s the issue of R&D expensing. It’s a big issue we are fighting in DC right now. The law put in place a couple of years ago requires amortization of expenses and we want that to go away. It’s going to cause companies not to want to invest in R&D as much. The people in DC who understand manufacturing understand this needs to be reversed, so that companies can fully expense their R&D activities and not have to pay the added tax.
SHOP: What’s your advice to our readers as they prepare for 2024?
KLOTZ: It’s still an employee market out there. They can easily find work elsewhere. So make sure you have a strong culture in your organization. The organizations with great culture have a sense of pride from the office all the way to the shop floor. Companies with great culture are set up for success and those without it will need to make sure they correct that within their organizations.