[squale]

Just wondering if in general the machine shops have been slow throughout the USA for these past few months? For my business I sell parts to large companies and I have several small machine shops make the parts I sell. All of the machine shops have been complaining that work is really slow right now and has been for the last few months. Even some rare metal supplies that I know have been saying that they have been slower than normal with machine shops not buying as much metal (due to lack of work). Just wondering if this is slowdown is limited to my area (the northeast) or if it's slow all over the country? and does anybody have any idea why manufacturing has been slow? even my customers who are large pharma and cosmetic companies have been slower than normal.

thanks

[Luslugger]

I expect we will find the Nationally incorporated morgage companies are not buying the loans from the banks. The banks are not getting income because they are not originating loans. The smoke from Merrill and Citibank will probably expose some deeper problems.

[squale]

what the heck does that have to do with the machining business?

[Luslugger]

Houses are easy to finance and have been a source of cash for the consumer market which moves the capital market which we use for our machine tools. The credit slow down is about 1 year old, it probably takes another year for an increase, if some other event does not overwhelm the economy. The auto companies are not making money. Expect a slow down unless you see new companies and employees moving into your sales area.

[GaryCorlew]

That has not been my experience, I have been working 16 - 18 hours a day 7 days a week for the past few months, I worked to 1 am this morning. We just ordered two more vmc's to try and keep up and also hired three more people, One is not working out and got told today he has one week left to shape up. He assured us that he had been a manual machinist in the past on mills and lathes. A few days after he started I had him do some lathe work on the manual lathe, he could not even turn it on. I got nervous about him even being near it, I thought he might get hurt so rather that machining the job I was working on I supervised him and basically told him every step involved with turning the part, And it was simply making a bevel on it for welding!!. There are even more horror stories I could tell you about this person.

[squale]

so because the housing market is bad that means big companies aren't buying parts hence the machine shops are slow? I don't see the relation here..

[307startup]

It's economically related. All markets are related. Not just here in America, all over the world. When petroleum prices hit $100 a barrel, like it did last week, it doesn't just affect drivers at the pumps. Petroleum is the basis for all plastics. It's a staple in many fertilizers and chemicals. It affects the price of shipping across oceans, land and air. It even helps drive the prices of OTHER fuels, like Natural Gas, propane and coal. It affects the troops in Afghanistan and Iraq with getting needed supplies & mail. Not just delivery, but because of the way corporations manage their own assets. Very few manufacturers (this is where machine shops come in) have the cash flow needed to purchase all their materials, and in some cases, pay the overhead, so they have to borrow. When vendors have slow times, it's usually because their customers are unable to access the capital needed to produce the product, or they have an abundance of stock, or are updating their inventory at the end of the fiscal year (October generally) before making their plans for usage and supply. Where the housing market enters into this is that mortgages are generally considered a good thing for the banks, because of the way the money is borrowed. Not only do they have the actual house as an asset, they are earning interest on every account open, every line of credit. When the housing market is in the slumps, as it is doing in a lot of markets, this doesn't just affect the annual appreciation of available properties, it affects the purchasing, planning & building of new properties as well. All of which are done through loans. Loans to the developer, loans to the contractors and subcontractors. When the housing market slumps, all of the money invested in properties becomes stagnant, and speculation about what will happen to properties becomes a driving factor in willingness to advance lines of credit to various businesses. When the subprime market started to show problems (people missing payments due to rising rates on a variable rate mortgage, leading to foreclosures, which are often sold below market rates...which also affect the pricing of other houses on the market and future projects in development) those BANKS that loaned the money for those mortgages had to borrow money themselves to shore up their reserves and protect other investments they have made. They borrowed from other banks. Those banks are charging interest on the loans that they made, and the banks that borrowed are having to adjust their holdings or portfolios to control the hemorraghing, lest they go bankrupt and further the worsening economic climate. All in all, without giving a short course on micro-economics and macro-economics, it's the butterfly effect...

[squale]

so basically it boils down to the banks are not very willing (or able) to give large businesses the loans they need to continue to buy new products from the venders. So the businesses have to cut down on their budgets and hence the vendors (us) don't get the same amount of work. I think I got it now.

this could explain why some of our largest customers who never really had budget concerns before are now telling us that they have exceeded their quartly or monthly budgets already and don't have any extra money to buy parts or services. We were concerned that they were getting their work done elsewhere from other vendors but I don't yet know if this is the case.