SHOP: What are your members expecting for 2023 in terms of business conditions?
KLOTZ: What we’ve been hearing from members is that things are going to stay pretty much the same next year. The year 2023 will be quite similar to what 2022 has been with no improvement or decline. There are still going to be huge issues with logistics and getting materials and parts. That will affect their releases to the OEMs. Focusing on automotive, it’s going to get a little bit better but not much better. Steel prices have gone down but they’re still high. Availability is better too but still not where it used to be and so our members are still going to have to be passing on higher steel pricing to their customers. They will be making more revenue wise but profitability wise it will probably be the same as before the pandemic.
SHOP: Have interest rates on both sides of the border risen to a level where they are having an impact on equipment purchasing?
KLOTZ: From what we are seeing, the answer is no. Machine manufacturers and suppliers I have talked to are all swamped and busy. They’ve got backlogs out to May and June of next year and can’t find the staff to build the equipment any faster so they’re quoting long lead times. We don’t see a slowing down in equipment purchasing. High interest may eventually affect it, but right now the outlook for capital equipment purchasing in early 2023 is still looking very strong. Members who are supplying housing-market related industries could see a slowdown, but they have been going like gangbusters since before Covid. But also, reshoring will lead to new plants and buildings in North America. Take a look too at what’s going on with the auto industry. We still have quite a ways to go to get to the 17-18 million vehicles sold per year and the rental car companies have held off purchases since the pandemic. So the auto industry still has a lot of room to grow.
SHOP: For those who are looking to purchase new equipment, our research shows a significant increase in plans to invest in automation and robotics in 2023. Are you seeing that as well and what do you think is causing this?
KLOTZ: I have one member who had zero robots five years ago and now they’ve got 45. And another who had none three years ago and now they have 15 or more. Automation is happening. One, because they can’t find people. If they need to run a second shift they can’t find people for it even if paying an overtime premium. Whereas before the pandemic when you offered overtime people would be on it and taking advantage of the extra pay, now they’re not interested in more money. It’s interesting times right now. After the pandemic people are working the minimum 40 hours. I am not sure why this is happening.
SHOP: How long do you see the supply chain issues lasting?
KLOTZ: It’s going to continue to be an issue all through next year because of how fast they can build the equipment and also because of shortages on the parts required for the equipment. There was one component manufacturer I saw recently with a lead time on a component that was almost 300 days. This is affecting the equipment and component manufacturers and transportation from one location to another is still an issue. Just like there is a shortage of manufacturing talent there is a shortage of truck drivers and distribution personnel.
SHOP: Could the talent shortages faced by metal manufacturers on both sides of the border take a sizeable chunk out of the potential growth of the industry?
KLOTZ: Definitely, but there is also reshoring going on with companies coming back from Asia to North America. They prefer to put money into operations in the U.S. and Canada. They are looking at Mexico too but the difference in wages is not as significant as it was before. I think reshoring is happening, but the problem is we don’t have enough people to fill the jobs we have here now. Reshoring will make the situation even more challenging. But the more marketing we can do about the skilled trades and the livelihood that can be had working in these jobs the better.
SHOP: What role can automation play in helping solve the talent shortage?
KLOTZ: I think efficiency through automation is going to continue to increase and that will help be part of the solution.
SHOP: Your advice for company owners planning for 2023?
KLOTZ: Your competition is going to be moving ahead. If they decide they don’t want to invest because of a concern of a recession happening, what they need to do is look at their customer base and figure out which customers are profitable for them and stay with those companies. But those customers which are not profitable for them have to be looked at. They may need to make a decision on how to move forward with them. Your customer list and revenues can go down a bit, but your profitability can increase by focusing on the right customers. Some of our members are already looking at that. I think what happens is that everyone gets so busy it’s hard to say no to customers, but you have to look at what’s the right thing to do for your business and which customers are the right ones to grow with.