Weak dollar boosts CNY manufacturers

The once-mighty U.S. dollar's decline against the Euro and Japanese.Yen has brightened the prospects of Central New York manufacturers.

"We've seen the weakened dollar as a positive for almost all of our products manufactured in the U.S.," says Robert Shallish, chief financial officer at CONMED Corp. (NASDAQ: CNMD), a Utica-based manufacturer of medical instruments, systems, and products that generates more than $500 million in annual revenue. CONMED exports about 30 percent of its products.

"So far, the lower dollar has made our products a tad less expensive internationally," Shallish says. "It helps us to be a little more competitive in international markets."

Hardinge Inc. (NASDAQ: HDNG), an Elmira-based toolmanufacturing company with annual revenues exceeding $200 million, has benefited from increased export revenues since the fall of the dollar. In the first nine months of 2004, Hardinge registered a 45-percent increase in orders from customers in Asia and a 32-percent gain in orders from Europeanbased clients. That's compared to its 13-percent increase in orders from North America. The company now exports 60 percent of its products.

Hardinge CEO J. Patrick Erwin is pleased by the improved revenues from the company's exporting of turning and grinding machines, but notes it is difficult to determine the actual dollar amount. "In our company, we manufacture different products in different countries, so we don't move products based on currency," he says.

"But the weakened dollar has had an impact by making American products more competitive in Europe. Our exports have picked up, but it's hard to say if it's due to better prices or higher demand."

Hardinge, founded more than 100 years ago, currently has over 800,000 square feet of manufacturing capacity in its plants in the United States, Switzerland, Taiwan, and China. The company designs and manufactures metal-cutting lathes, machining centers, grinding machines, collets, chucks, and indexing fixtures.

Although the increased value of the Euro makes Hardinge's tools from Switzerland more expensive when imported to the U.S., Erwin points out that his company is not alone. "There are no real U.S. grinding companies, so it works out for us. When the Euro goes up, our major competitors raise their prices, and so do we."

Utica-based Divine Brothers Company, a manufacturer of industrial metal-finishing products, exports only from 4 percent to 6 percent of its products, but also has noticed a slight improvement in sales overseas. Exports are a small portion of Divine's total business, says Thomas Dalton, chief operating officer, "although, in the last several years both Divine Brothers [and sister company] Munson Machinery have increased overseas business."

When asked about the effect of the weakening dollar and its correlation to exporting goods and services, Dalton is optimistic. "I have read the experts' opinions and assessments, but it all comes down to Manufacturing 101. Whoever can deliver the best product at a competitive price and at the right time will get business."

However, he feels China's significant penetration into the capital equipment and textile sectors poses the greatest threat to the 113-year old Divine Brothers and 167-year old Munson Machinery.

"Their currency is undervalued and they are mastering Manufacturing 101," says Dalton. "(Nevertheless), we can compete with China by remaining a prime manufacturer, embracing the principles of lean manufacturing, and by being extremely creative and mitigating risk whenever possible."

Randy Wolken, president of the Manufacturers Association of Central New York (MACNY) in Syracuse, confirms that many of his member companies see the weakened dollar as a positive sign.

"Historically, as the dollar weakens, U.S. product (sales) improve," he explains. "For some time, the dollar [had been too high] and ended up subsidizing foreign competition."

As of Feb. 1, it takes about $1.30 to buy 1 Euro. In February 2002, the exchange rate was about 87 cents for a Euro. The dollar has fallen sharply over the last three years.

The Center for Community and Economic Development (CCED) at Mohawk Valley Community College often advises manufacturers on import-export concerns, including currency moves.

"I'm not sure if the weakened dollar is helping yet," says Frank Elias, executive director of CCED. "Most manufacturers have just been passing through the foreign exchanges. Right now, Europe is able to purchase American goods less expensively, but if we want to buy something from Germany, it's going to cost us more. Europeans aren't necessarily raising their prices yet. The Japanese manufacturers are more diversified and likely to have plants all over the world and in the U.S., so are less affected by the weakened dollar."

Elias and MACNY's Wolken share the apprehension of manufacturers like Divine Brothers with the undervalued Chinese Yuan, which the Chinese government insists be pegged below the U.S. dollar. As of Jan. 31, one U.S. dollar equaled 8.27 Yuans. The Yuan rarely changes and has not fluctuated since November.

"The Yuan is 40 percent undervalued," notes Wolken. "I compare it to a foot race in which you give the Chinese a head start."

Hardinge's Erwin also recognizes that China's currency is not properly valued, but it ends up helping U.S. manufacturers who export to Asia. "U.S. products stay the same (price) in China because the Yuan is pegged to the dollar. It gives us a better competitive advantage over European manufacturers. From our point of view, it costs the Europeans more to export to China than it costs U.S. manufacturers to export."

Copyright Central New York Business Journal Feb 04, 2005
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