U. S. CUTTING TOOL CONSUMPTION DOWN 5 PERCENT IN DECEMBER MCCLEAN, VA — December U.S. cutting tool consumption totaled $156.48 million according to the U.S. Cutting Tool Institute and The Association For Manufacturing Technology. This total, as reported by companies participating in the Cutting Tool Market Report collaboration, was up 1.4 percent from November’s $154.27 million and down 15. 4 percent when compared with the total of $185.07 million reported for December 2014. With a year-to-date total of $2,135.07 million, 2015 was down 5 percent when compared with 2014. These numbers and all data in this report are based on the totals actually reported by the companies participating in the CTMR program. The totals here represent the majority of the U.S. market for cutting tools. “The December ‘14 to December ‘15 decrease of 15.4 percent is most reflective of the current environment in the Cutting Tool industry,” said Steve Stokey, president of USCTI. “We started 2015 strong with a significant decline during the second half of the year. The drop in oil prices, which softened the market, along with the strengthening dollar caused a dramatic decrease in demand in the last half of 2015.” Overall, manufacturing in general has had some challenges. According to William A. Strauss, senior economist and economic advisor to the Federal Reserve Bank of Chicago, “The strengthening dollar has been a very strong headwind facing U.S. manufacturers. The real value of the tradeweighted dollar has increased nearly 20 percent in the past year and a half. This has caused U.S. goods to be 20 percent more expensive on average to foreign consumers, and vice versa, imports are now 20 percent less expensive to U.S. consumers. This has led to a substantial increase in the trade deficit over the same time period.” The Cutting Tool Market Report is jointly compiled by AMT and USCTI, two trade associations representing the development, production and distribution of cutting tool technology and products. It provides a monthly statement on U.S. manufacturers’ consumption of the primary consumable in the manufacturing process – the cutting tool. Analysis of cutting tool consumption is a leading indicator of both upturns and downturns in U.S. manufacturing activity, as it is a true measure of actual production levels. Historical data for the Cutting Tool Market Report is available dating back to January 2012. This collaboration of AMT and USCTI is the first step in the two associations working together to promote and support U.S.-based manufacturers of cutting tool technology. STUDY: MANUFACTURERS UNSURE ABOUT CYBERSECURITY PROTECTIONS AND IOT R&D CREDIT OPPORTUNITIES CHICAGO — While roughly twothirds of manufacturers believe that the Internet of Things (IoT) will increase their profitability, they are lagging in two critical areas to maximize their IoT opportunities: cybersecurity and research and development (R&D) credits. Exclusive findings from the MPI Internet of Things Study, sponsored by BDO, uncovered: • Nearly half of manufacturers (49 percent) are unsure or not confident in their ability to prevent a cybersecurity breach at their company. • A vast majority of manufacturers (84 percent) are not planning to take advantage of tax credits and incentives, like the R&D tax credit, available for IoT investments. “Manufacturers agree that IoT is a groundbreaking opportunity for advancement in the manufacturing industry,” said Rick Schreiber, partner and national leader of BDO’s manufacturing and distribution practice. “But they have some catching up to do in order to fully capitalize on IoT’s potential. Shoring up security in the wake of newly connected systems and products and taking advantage of the newly permanent R&D credit are critical steps.” Room for Cybersecurity Readiness Improvements Only 8 percent of manufacturers report that they are very confident in their current cybersecurity protections to prevent an IT breach. Security challenges are becoming more prevalent across all industries, but particularly for manufacturers who are pushing full steam ahead to upgrade their production processes and evolve their products. Last year, the BDO Manufacturing RiskFactor Report found that 86 percent of manufacturers cited risks related to data security in 2015, up from 78 percent in 2014. Despite those risks, nearly half of manufacturers (45 percent) do not have or are unsure if they have an information security policy in place addressing Internet connected devices that are not used as a computing or communications platform. Moreover, 44 percent do not have or are unaware as to whether or not they have the ability to detect and identify unauthorized Internet connected devices. “The ability to detect and manage a data breach is critical for manufacturers in order to protect their IP, as well as their employees’ and customers’ privacy,” said Shahryar Shaghaghi, national practice leader for Technology Advisory. “As manufacturers move to a more connected way of doing business, they need to be mindful that with more access points come more opportunities for hackers to infiltrate the network, making it imperative that companies embed security into IoT products and services from design through distribution. Assessing risks and considering the exploitability of cybersecurity vulnerabilities in all products is vital.” R&D Tax Credits are Underutilized Just 17 percent of manufacturers said they were planning to claim tax credits and incentives for their IoT investments, meaning most manufacturers are missing a critical opportunity. For those manufacturers not planning to claim credits and incentives for IoT investments, concern about the associated costs is identified by only 11 percent of respondents, while nearly half (45 percent) of manufacturers say the reason for not claiming the credits is based on a lack of documentation. “Manufacturers that attempt to develop or improve software or sensors or other IoT components can leverage the R&D tax credit, which can equal more than 15 percent of eligible qualified spending,” says Chris Bard, tax partner and R&D practice leader at BDO. “And although documentation is useful to support these credits, courts have ruled repeatedly that oral testimony can be used to support them as well.” Smaller manufacturers also stand to benefit. For taxable years beginning after 2015, smaller companies may now claim credits against their alternative minimum tax and up to $250,000 of their payroll taxes. “This greatly expands the range of the credit’s benefit,” Bard says. “Now start-up companies and others, who in the past couldn’t use the credit because it could be used only against regular income tax liability, can benefit from it.” The MPI Internet of Things Study, sponsored by BDO evaluated the readiness of U.S. manufacturers to incorporate smart devices and embedded intelligence within their plants and into their companies’ products. The study was conducted by The MPI Group and sponsored by BDO. In August and September 2015, 350 manufacturers participated in the study. For additional study findings, view the executive summary. U. S. MANUFACTURING TECHNOLOGY ORDERS GREW IN DECEMBER, BUT MARKET REMAINS FLAT MCCLEAN, VA — The U.S. Manufacturing Technology Orders report for December 2015 showed order values grew 20. 4 percent compared to the prior month, according to The Association For Manufacturing Technology. For all of 2015, the year’s total orders were down 17.4 percent compared to 2014. While the month-to-month gain seemingly indicates an upturn for the manufacturing technology market, it is important to note that the average November-to-December gain since 2010 has been 22.4 percent—meaning that the end of 2015 came in below average. “The fourth quarter turned out better than anticipated thanks to investment from the aerospace, automotive and consumer electronics industries, but the overall market will remain flat through the first three quarters of this year due to market forces like the strong dollar and low oil prices,” said AMT President Douglas K. Woods. “It’s typical for December orders to rise as many companies invest their year-end profits into new equipment, and technology builders and suppliers try to reduce their inventories with discounted products. This uptick in orders does not change our forecast for the year.” December saw the second-highest monthly order totals in 2015, with the most orders coming in March—a time when companies are looking to lessen their tax liability for the April filing deadline by making investments in new equipment. Equipment purchases for some industries, especially those related to defense, were helped by Congress’s passage of a two-year budget deal that temporarily lifts the automatic spending cuts known as “sequester,” ensuring that federal defense programs remain intact through 2017. More of a surprise was a surge in orders from the consumer electronics industry, which defies the logic that most electronics manufacturing largely happens outside the United States. The overall market for manufacturing technology is likely to remain soft into the third quarter of 2016, but industry forecasts predict that orders for the overall year will finish ahead 3 percent compared to 2015, with much of the activity coming in the fourth quarter. September’s IMTS – The International Manufacturing Technology is anticipated to create a boost in sales later this year. December 2015 manufacturing technology orders valued $401.16 million, compared to $511.10 million in December 2014, a decline of 21.5 percent. The total manufacturing technology order value for all of 2015 was $4,187.83 million, vs. $5,072.50 million in 2014. This data is a reliable leading economic indicator as manufacturing industries invest in capital metalworking equipment to increase capacity and improve productivity. STUDY: INDUSTRIAL MANUFACTURING M&A RECORDS 10-YEAR HIGH IN DEAL VOLUME DESPITE RECENT DECLINES IN VALUE Absent the level of megadeal (transactions worth more than $1 billion) activity recorded in 2014, merger and acquisition value in the industrial manufacturing industry declined significantly in 2015, according to Assembling Value, a quarterly analysis of global deal activity in the industrial manufacturing industry by PwC US. Despite this drop in overall deal value, M&A activity for the year as a whole remains healthy, driven by more, smaller deals, leading to a 10 percent increase in total deal volume. 2015 was a strong year for industrial manufacturing M&A, as deal volume increased 10 percent compared to the prior year and was highest total in the past 10 years. Deal value, however, recorded a more than 30 percent decrease to $87.2 billion during that same time period. Although 2015 experienced a drop in deal value, it was still well above the 10-year historical average of $70 billion. During the fourth quarter of 2015, manufacturing M&A declined in both volume (19 percent) and value (43 percent) when compared to the same quarter in the previous year. The decline in deal value is primarily attributed to the slowdown of megadeals, which led to a 37 percent reduction in the average deal size. While megadeal value declined by 58 percent ($88.6 billion in 2014 to $37.1 billion in 2015), the overall number of deals recorded in 2015 remained robust and above the 10 year historical average of 170. On a regional basis, Asia and Oceania accounted for 70 percent of total deal volume for the year (173 deals) and 55 percent of value ($48.3 billion). The UK and Eurozone ranked second for deal activity and third for deal value. Within Asia and Oceania, China experienced a 75 percent increase in 2015 deal activity compared to the previous year. This is the highest increase of any country over the same period, driven by the slowing economic conditions the country is facing as it shifts from an export manufacturer based economy to a more service based economy. PwC’s industrial manufacturing M&A analysis is a quarterly report of announced global transactions with value greater than $50 million analyzed by PwC using transaction data from Thomson Reuters. For more information on PwC’s Deals practice, visit www.pwc.com/us/deals. BUSINESS NEWS TALAN PRODUCTS will receive a 2016 Evolution of Manufacturing award, recognizing the company as a regional leader in manufacturing practices and innovation. Talan was among 11 area companies recognized at the annual Evolution of Manufacturing awards program Feb. 18 in Cleveland. CEO Steve Peplin said the award is a reflection of all the hard work his team has done to remain a Northeast Ohio leader in manufacturing practices. “We’ve invested in technology, and that has played a very important role in staying on top,” Peplin said. “But it’s really about our people. They’re the ones who are committed to delivering great customer service, and they’re the ones who are committed to safety every minute of the day. They’re the reason we’re poised to grow at a 20 to 30 percent clip over the next several years, and the reason we’ve gone more than 1,500 days without a lost-time injury. Our people are the ‘why’ in why we’re receiving this honor.” HEXAGON MANUFACTURING INTELLIGENCE’S (formerly Hexagon Metrology) WLS qFLASH vision measurement system won a distinguished Good Design Award from the Chicago Athenaeum Museum of Architecture and Design. Founded in 1950, Good Design is the oldest, most prestigious international awards program to annually highlight innovative industrial, product and graphic designs created around the world. The WLS qFLASH earned top honors in the industrial design category. All entries for the awards program must be designed for a mass market and in production or manufactured for at least 2 years before the title year. Submissions are judged by a jury of design professionals, leading industry specialists and design press, based on criteria including the highest aesthetics in terms of innovative design, new technologies, form, materials and function. “Hexagon Manufacturing Intelligence is honored to receive a Good Design 2015 award for the groundbreaking WLS qFLASH product and its state-of-theart blue light technology,” said Angus Taylor, president and CEO of Hexagon Manufacturing Intelligence, North America. “There is stiff competition for these awards with Fortune 500 companies and other prominent global manufacturers, so it is quite challenging to rank in a design category. The award acknowledges WLS qFLASH as a whole package – small footprint, lightweight design, affordable price point – which makes it a very dynamic solution for today’s industrial metrology marketplace.” TRESCAL, the international specialist in calibration services, acquired Germanybased Kalibrix. This acquisition will bring 2 M€ additional turnover. Based in Lüdenscheid, North Rhine Westphalia, with a second location in Luckenwalde, Brandenburg, Kalibrix provides one-stop-shop accredited services (Dakks) in dimensional and electrical low frequency and is also specialized in material testing machine calibration, which expands Trescal skill range. Kalibrix employs 25 people. Founder Christian Michel will stay in his current position to accompany the growth of the business in the coming years and ensure a swift and smooth integration of the company in Trescal. Timo Grünewälder, Trescal German country manager, said: “I am very happy about the Kalibrix-Team joining the Trescal network. Kalibrix not only enhances the Trescal footprint in Germany, with two excellent laboratories, but also brings two mobile calibration laboratories into the group and accreditations for material testing as well. Both companies’ customers will benefit from this acquisition.” Kalibrix CEO and founder Christian Michel added: “Being a member of the Trescal Group gives us the strategic opportunity to develop our business. My colleagues and I are pleased to contribute our performance to the ongoing success of Trescal Group.” This deal was completed with the support of Trescal’s majority shareholder, Ardian, the premium independent private investment company. This is the fifteenth build-up following Ardian’s takeover in July 2013. ETQ merged VERSE SOLUTIONS under the EtQ compliance umbrella of compliance management product offerings. With the merger of VERSE Solutions, EtQ has a solution for every segment of the compliance market—enterprise, small to mid-sized business and freemium. VERSE Solutions currently serves four compliance verticals: General Quality, FDA GxP, Food & Beverage and EHS. The merger of VERSE into EtQ’s product offering comes along with the recent announcement of the release of EtQ’s traqpath product, which provides a free, SaaS-based, CAPA and event management application for Web and mobile that enables users to conduct simple compliance tracking and reporting activities. SPECTRONICS CORPORATION acquired H&I MANUFACTURING INC., a precision machine and job shop located in Bohemia, NY. As part of the purchase agreement, H&I became a new division of Spectronics, and its machinery and personnel were moved into the parent company’s 100,000 square foot manufacturing facility in Westbury. Kristian Immoor, the former president and owner of H&I, is now the advanced manufacturing foreman of the new division. H&I specializes in CNC milling, turning and honing, as well as sheet metal fabrication. The company works with titanium, 17-4 PH, 15-5 PH and 440C stainless steel, and many other ferrous and non-ferrous materials, including plastics. In addition, H&I is experienced in working with outside vendors to perform heat treating, magnetic particle inspection, penetrant inspection, anodization and passivation, among other processes. H&I’s present machinery, plus the planned acquisition of additional machinery, will boost Spectronics’ research and development efforts, along with streamlining the output, quality and dependability of its existing products. H&I’s highly advanced machine shop will continue to serve the aerospace, defense, automotive, medical and electronics industries, as it has been doing for over 25 years. With Spectronics’ ISO 9001:2008 quality management certification and AS9100 aerospace certification, which H&I did not previously have, it will be able to further develop and improve upon its services. “The integration of H&I with Spectronics will create a more efficient, smooth-running manufacturing process,” said Jon Cooper, president of Spectronics. “That will allow us to expand our ability to deliver the technologically advanced products that our global customer base has come to expect.” “I am very excited about this partnership and the opportunity to work with the talented and skilled individuals of Spectronics, and I look forward to our mutual success,” said Immoor. PEOPLE NEWS Lowell, Inc. announced that JIM STERTZ was appointed to fill the newly created position of director of metrology and technology. Prior to taking the position, Stertz led the Quality efforts at Lowell for 30 years including the implementation of their ISO 9001:2008 and 13485:2003 Quality Management Systems. He is a senior member of ASQ, Six Sigma Green Belt and has been a featured speaker at the North American Conference of Metrology (NACMA), the HxGN LIVE International Conference and the Manufacturers Alliance. Stertz’s published articles have appeared in a number of leading quality and medical device manufacturing magazines. “I’m looking forward to devoting 100 percent of my time to advancing the metrology and technology expertise here at Lowell,” said Stertz. “We’ve automated our PMM/CMM lab and laser etching department and we are expanding into our production cells with robotic parts tending for lights out operation.” Rick Cullen, senior vice president at Lowell commented that “We are so pleased to call on Jim’s years of experience to lead this expanded effort. Jim’s extensive background in merging automation with metrology will only build on our technology leadership. This is another key move to support our customer’s rapid growth.” CONVENTION NEWS The first METROLOGY SOLUTIONS EXPO, presented by Mahr Federal, Mitutoyo and Starrett, and hosted by MSI-Viking Gage, will take place May 4-5, 2016, at the TD Convention Center in Greenville, S.C. The two-day event will include demonstrations of the latest precision measuring metrology equipment from the world’s leading names in the quality business. “Mahr is proud to be a sponsor of the first ever Metrology Solutions Expo. Mahr’s extensive offerings in dimensional metrology solutions and 154 years of expertise, along with the increasing manufacturing activity in the southeast region, will make this a very powerful event,” said Kurt Braun, vice president, Mahr Federal. This is a jam-packed event full of exhibits, training classes, and more. It will attract executive managers, engineers, technicians and purchasers responsible for quality control in all types of manufacturing applications throughout the Carolinas, Georgia, Tennessee, Virginia, West Virginia, Tennessee and Mississippi. The event is also open to students 18 and over with aspirations in metrology and manufacturing quality technologies. Mitutoyo, Starrett and Mahr Federal are headlining the event and will be joined by other leading metrology exhibitors including Easy-Metric, Heidenhain, Hexagon Metrology, Johnson Gage, MicroRidge, MSI-Viking Gage, Olympus, Palmer-Wahl, Phase II+, Quality Magazine, Renishaw, Setco Precision Solutions, Solartron Metrology, Stor-Loc Modular Systems, ThomasNet, Tohnichi, +Vantage, Vermont Gage and Witte/Alufix. “Starrett has made some great advancements in new and updated product categories. We have a lot of new technology to show and the Metrology Solutions Expo will be the perfect forum,” said Rick Lasure, eastern sales manager, Starrett. This trade show comes at a great time for the southeast with many manufacturing companies coming to the region to open their doors. With a pro-business environment in the region, this activity should only continue to increase. “Mitutoyo is proud to be participating in the Metrology Solutions Expo. This event will be an excellent way to showcase our latest technology in both contact and non-contact technology. With the growing need for dimensional measuring tools in the southeast, this Expo will certainly be impressive,” said Patrick Harkness, national sales manager, Mitutoyo America. The trade show will feature all types of precision measuring tools, gages, fixtures, systems and software used in manufacturing applications. View the latest in quality industry news by visiting our headlines at qualitymag.com—updated daily. 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