Grassroot Industrial Manufacturing Projects Continue Recovery in 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--Throughout the recession, spending in the Industrial Manufacturing Industry in the United States has slowed greatly. The sectors that make up the industry arguably felt the recession and its effects more harshly than any other industry. The bulk of the jobs lost in the past two years have come from the companies within the Industrial Manufacturing Industry, as companies closed plants, laid off workers and consolidated operations in order to survive the economic downturn. As a result, grassroot project activity slowed, as companies decided to make do with operating plants, rather than building new ones. However, looking at how spending is shaping up for 2010, we can see grassroot project activity, while not returning to pre-recession levels, is showing signs of recovery.

Click on image at left for a regional breakdown of grassroot projects scheduled to begin in 2010 in the U.S. Industrial Manufacturing Industry.

Industrial Info is currently tracking just under 50 grassroot projects worth an estimated $5.7 billion in the U.S. Industrial Manufacturing Industry that have begun construction or are scheduled to begin construction in 2010. While this number is not extremely large, it is a good sign that companies are at least considering constructing new plants. During 2009, only 55 grassroot industrial manufacturing projects, worth a combined $10 billion, began construction in the U.S. In 2008, this number was 85 projects, worth $4.7 billion. In 2006 and 2007, before the recession began, project numbers were much greater. In 2006, 166 grassroot projects worth $11.6 billion began construction, and in 2007, 191 projects worth $6.7 billion began construction.

The 49 grassroot projects that are expected to begin construction during 2010 should increase as the year progresses and the economic situation in the country improves. Companies are, once again, beginning to hire workers and are looking at expansion opportunities that they would not have even considered a year ago. There is a good possibility that before the end of the year, we could see the total number of grassroot projects that begin construction activities double, and the total value of these projects could once again top $10 billion.

The key to this occurring will be what happens within the automotive and heavy manufacturing sectors. These are the sectors that employ the largest number of workers and are home to the largest number of plants. During the recession, consolidation and closure was the tune to which these sectors danced. However, now they are beginning to look at getting back in expansion mode, albeit moreso in the heavy manufacturing sector than the automotive sector at this time. The automotive sector still has a ways to go before it returns to pre-recession stability. General Motors Corporation (Detroit, Michigan) is still struggling to make its way back to profitability. The Chrysler Group LLC (Auburn Hills, Michigan) continues to be a mess, and the Toyota Motor Corporation (NYSE:TM) (Toyota City, Japan) is still reeling from its brake scandal.

However, there are still a number of other automakers that can make up the difference as the year progresses. Some activity is taking place, but it is still slow to develop. Also, the heavy manufacturers are seeing an increase in the demand of products for export, a good indication that they will need to increase their spending habits once again. More activity is being seen in this sector than any other at this time. While much of the activity currently revolves around updating or expanding existing plants, there has been some increase in new-plant activity.

Lithium-ion battery plants, solar-panel plants and wind tower and turbine parts manufacturing operations are all hot right now. Lithium-ion batteries are gaining ground because of the increased interest in electric vehicles and the pressure coming out of Washington to make electric cars a reality sooner rather than later. Solar panel and wind tower and turbine parts plants are also becoming more popular, thanks to governmental pressure to decrease the reliance on fossil fuels nationwide. In addition, there has been a resurgence in distribution center construction. The push for more distribution space had slowed down in recent years, thanks to a saturation of the market, but this appears to have reversed itself this year, as we are seeing more of these types of grassroot projects.

Overall, while the initial numbers for grassroot project activity is low, there are signs pointing to an increase later this year. The recession is certainly not over, but companies are beginning to spend as they try and get the jump on their competitors. Two years of consolidation has enabled companies to run leaner, with a smaller workforce and less plants, but it is time to expand once again. This time around, hopefully, they will be a little more judicious about how much they expand, so they do not have to cut back again in the foreseeable future.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.