The Europeans are Coming! The Europeans are Coming!

The economic numbers these days indicate a relatively weak first quarter of business in the U.S. The indicators I see in the machine tool business verify this, except automotive still seems strong.

The strength of the American dollar and the weakness in oil and gas account for much of the slack in manufacturing. At the recent Precision Machining Technology Show (PMTS) in Columbus, Ohio, I talked with several European machining firms who are searching for business here. Their reasoning is that the shift in the dollar over the last several months gives them the opening they have been waiting for to land business here.

Noah and I had a long talk with Matthew McBride and Arnaud Clerc, two representatives of a French firm, Bouverat Pernat, located in the Haute-Savoie region near Geneva, Switzerland, where the tradition of watch manufacturing has spawned generations of super skilled machinists and machining companies.

What I found fascinating in talking to these folks and other people from companies in Germany, Spain and Italy, who are also searching for work in America, is their confidence that they can compete successfully in the U.S., despite the impediments of distance, language, and high labor costs. They really view the American market as a goldmine if they can just find the “secret sauce” that allows them into America’s “machining club.”

We have discussed the barriers to entry in the U.S. with several machinery buying Graff-Pinkert customers. Like many clients they really want to discuss their equipment and skills. What we stress to them is that their prowess is a given. We know they are impressive machinists to survive and prosper despite high labor and ancillary costs in the expensive European manufacturing world.

American buyers are interested in price, reliability, and consistent follow-up. Being close to the buyer is helpful, because the supply chain is still imperfect. The long dock strike in California is a constant reminder to buyers who believe in a  “just in time” world, despite all of the impediments that the real world drops in their path.

Recently, we have been asked by several foreign firms to introduce them to big American turned parts buyers, as if we had a magical key to their purchasing departments, but there is no magic, no secret sauce. You work the phones, the Internet, knock on doors, build your network piece by recalcitrant piece.

The Chinese had a 15-year window to build market share here with killer pricing and slow-reacting American companies. Those days are definitely over. It feels like everybody is pretty even on pricing after the big washout of manufacturing firms. So when you have a sudden shift in the value of the euro and yen as we’ve had in the last six months, it feels like the gyroscope of business has shifted mightily.

I think the weak numbers of the first quarter reflect much more than the awful winter in the Midwest and East coast. The oil components folks have hibernated, pushing metals prices into the toilet. Oil and gas is not a huge piece of the machining world, but when it goes from hot to cold almost overnight it is significant. Agriculture pricing is soft, so the tractor makers are in the barn. Add in the aggressive and capable survivors in Europe and Japan who smell blood with the strong dollar and have connections with European and Japanese OEMs entrenched here already, and you have a more challenging environment on the ground in America.

The euro has strengthened a bit in the last two weeks, but we do not know if it will stick.

Meanwhile, do not be shocked if somebody contacts your company on behalf of a European client who is interested in buying a shortcut into the American market.

Question: Has business in the first quarter been good for your company?

Lloyd Graff is owner of Graff-Pinkert a used machinery dealership specializing in screw machines, Hydromats and CNCs, as well as the owner and chief space filler of Today’s Machining World.