Manufacturing industry utilization drops significantly, Harbour Results says
The coronavirus crisis has caused deep impacts for small- and medium-sized manufacturers engaged in production and mold making, according to recent study conducted by Harbour Results. The study, conducted in April, reflects more than 320 responses. Fifty-percent of them came from tool and die markers; molders, die casters and stampers supplied the rest.
Nearly two-thirds of the shops surveyed are operating at some level of reduced capacity or are closed. Of the closed shops, approximately 70 percent expect to remain closed for more than one month.
The automotive and home appliance industries are experiencing the greatest impact. They have the lowest operating levels of 28 percent and 57 percent respectively and, on average, automotive shops have laid off 41 percent of their workforce. Across all manufacturing processes, companies indicated that utilization has dropped by as little as 18 percentage points to as much as 35 percentage points.
“The manufacturing industry is facing serious headwinds as restrictions on public life remain in effect and will continue for some time,” said Laurie Harbour, president and CEO, Harbour Results. “In fact, although some manufacturing is starting to ramp up in May, the marketplace will not return to normal until a COVID-19 vaccine is in place, which could take as long as 18 months. The industry has experienced a significant impact, causing ripples throughout the supply chain. And, if a business went into 2020 in a weakened state, it’s really going to show on the backside of this year.”
The study also suggests that shops may be underestimating how long recovery will take, with most respondents saying they will recover in less than two weeks. “This is overly optimistic,” Harbour said. “The effects of this crisis have, in some cases, not even shown up for manufacturers and will last through 2020 and into 2021."
Maintaining operating cash during this crisis has been challenging. All the shops surveyed are experiencing some level of reduction in accounts receivable payments; nearly half have less than six weeks of cash on hand.
“We have not experienced a recession or marketplace like this ever,” Harbour said. “Companies with strong leadership who have reacted quickly to cut costs and manage cash flow will likely have a better chance to survive this crisis.”
The Harbour Results COVID-19 Impact Study will be conducted on a monthly basis. Results will be shared with companies participating in the study and with industry organizations to help influence the federal government to continue to support the manufacturing industry.
Bruce Adams, senior staff reporter
