Polyurethane product manufacturers and suppliers are resilient.
When the crashing economy caused massive problems across virtually all markets, most urethane processors were able to hunker down, continue to fill their customers' needs, keep the lines of communication open for new business opportunities and wait out the storm.
They could do it because it's a diversified industry—serving mining, medical, marine, aerospace and numerous other industries—and U.S. urethane companies generally are quite innovative when it comes to product development, according to Michael Katz, president of Port Washington, Wis.-headquartered Molded Dimensions Inc. and current president of the Polyurethane Manufacturers Association.
That's not to say they weren't impacted, he cautioned. Like every other industry, U.S. urethane product manufacturers and suppliers faced their share of significant obstacles.
However, he said, “because of our diversity in general as an industry we were able to absorb the downturn better than some other industries that might have been tied to one sector or another.”
The same also held true in Canada, said Scott Woodworth, president and general manager of Calgary, Alberta-based Duraprene Industries Ltd. and president of the Canadian Urethane Manufacturers Association.
“Like the rest of the world, manufacturing, including the polyurethane industry in Canada, felt the brunt of the economic downturn,” he said. “Talking to processors and suppliers alike, average sales and production were down between 20 and 40 percent over the last 18 months.”
So far, 2010 has been better, but both officials are cautious about the pros¼pects for the remainder of the year. Each, however, said there should be some improvement over 2009.
“This too shall pass—everybody's scrounging but because most (urethane companies) have no debt, they'll survive,” Katz said. “I think the industry in general is looking to be slightly up from the previous year.”
Woodworth said there is scattered optimism within the Canadian sector that the recession is subsiding “and that production and supply will resume, albeit at a very slow to moderate rate.”
Debt is key factor
As a group, most polyurethane companies—many of which are small- to mid-sized and privately held—have little or no debt, which served them well in 2009, Katz said. That is a major plus when a business is trying to deal with a poor economy.
“One thing that most of us have in common is that we have very little leverage—that is, in general, we have low debt as an industry group—so when there are opportunities to compete with other materials like rubber, plastic or metal, we can do it because we can invest in the project,” he said. “This certainly helped all of us weather the storm.”
Woodworth said smaller companies have an advantage because that allows a firm to develop a closer, interpersonal relationship with customers and suppliers. “This provides better communication through all channels and a faster response to processor or customer requirements.”
Another factor that played a role in Canada was the country's banking system. Financing in the country slowed but didn't stall as it did in other parts of the world, he said. Duraprene, for instance, faced no disruption in its financial services “and we were able to borrow money for some equipment at the peak of the financial crisis.”
However, manufacturers in Canada have been struggling with the fluctuating Canadian dollar, Woodworth said. Canadian firms have a distinct advantage when the Canadian dollar is low compared to the U.S. dollar and they export goods, he said, but it loses that advantage when the country's dollar is near or on par with the U.S. dollar, “and we typically don't see the same reflected price change on imported product.”
Very few polyurethane product makers in the U.S. went out of business or left the industry because of the 2009 economy, according to Katz, but the number of processors in Canada has declined in the last 18 months, Woodworth said.
“This is not necessarily a bad thing. à I would call it more of an 'industry correction' that has been weeding out some of the mom-and-pop shops that long term are bad for our industry,” he said.
Woodworth said very few markets would be considered strong last year for processors or suppliers, especially on the Canadian side of the border.
In western Canada, production is based on natural resources, with gas and oil, mining and forestry all taking a beating, he said, adding that in eastern Canada production is aimed at the automotive and manufacturing segments, “and we all know what happened there.”
While 2009 may have been a difficult year for many businesses to boost sales, it also was a year of unprecedented opportunities to add talent in sales and engineering, as well as a chance to capitalize on new equipment at discounts, according to Hank LeMeur Jr., president and CEO of Superior Tire & Rubber Corp.
The Warren, Pa.-based industrial tire maker had to make some work force cutbacks in March 2009, but was able to spend a good deal of time and money on training the underutilized employees that remained. “In Superior's language, we wanted to continue efforts at offering our employees a 'path to growth' regardless of the external economy,” he said.
Superior—which designs and manufactures solid polyurethane and rubber industrial wear products—has since brought back a number of workers it laid off and added higher level technical and sales posts as it overcame the severe economic conditions.
LeMeur said the material handling equipment, infrastructure and road building equipment markets came to life in the first quarter of 2010 with bookings increasing by 30 to 50 percent.
“We are seeing this in both OEM build schedules as well as the aftermarket,” he said. “Fortunately, we are extremely diversified. While the markets mentioned have been strong, some of our other markets have not rebounded as dramatically; but no markets are continuing to drop.
“The Class III industrial truck market (motorized pallet trucks) performed relatively stronger than the other industrial truck classes due to its heavy presence in food distribution. On the other hand, general purpose counter-balance trucks (Class I) and counter-balance reach trucks (Class II) used in big box retailers dropped precipitously and have been slower to come back. These are the major markets for urethane tires.”
Superior, which is a member of the PMA, relies heavily on its innovation, and because it has a strong technical department in place, it introduced several products during the downturn, including its XL-AC tire line and height adjustable shock absorbing caster line, both targeted for use in large warehouses and distribution centers.
As the industry moves forward in 2010, Katz, LeMeur and Woodworth, along with several suppliers, figure innovation will continue to play a key role throughout the remainder of 2010 and beyond. That and superior product performance give urethane companies an edge now and in the future, Katz said.