Fourth-Quarter Maintenance a Shadow of Former Self in U.S. Industrial Manufacturing Industry

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Researched by Industrial Info Resources (Sugar Land, Texas)--In the U.S Industrial Manufacturing Industry, it is no secret that 2009 has been a rough spending year. With the exception of the transportation sector, which includes light, commuter and freight rail, as well as ports, every sector that makes up the sprawling industry has felt the effects of the recession, the collapse of Wall Street, and the housing market crash. Of all the sectors that make up the Industrial Manufacturing Industry, the automotive sector has probably suffered the most. As a result, maintenance activity during the traditionally maintenance-rich fourth quarter will be a shadow of its former self this year, with the lingering effects potentially curtailing activity next July.

Click image at right for a regional breakdown of planned maintenance projects in the U.S. Industrial Manufacturing Industry in 4Q09.

At the end of 2008, just before the automotive sector totally collapsed, maintenance activity was still rich within the industry. Industrial Info tracked almost 140 maintenance projects worth $231 million that began construction and were completed during the fourth quarter of 2008. However, in 2009, due to the many uncertainties affecting businesses within the U.S., maintenance activity has fallen off dramatically during the coming quarter. Currently, Industrial Info is tracking only 47 maintenance projects, worth an estimated $81 million, that are scheduled to begin construction activity during the quarter.

Much of this decline can be attributed to the automotive sector. With the industry's much publicized woes, especially the bankruptcy of both General Motors Corporation (Detroit, Michigan) and The Chrysler Group LLC (Auburn Hills, Michigan) and the resulting closures, bankruptcies and consolidations among the automakers' tier supply network, maintenance was expected to be reduced.

Typically, within most of the sectors that the Industrial Manufacturing Industry covers, maintenance is performed both during the summer, usually July, and the winter, usually during December, each year. During the traditional July shutdown period this year, many facilities were closed for extended periods of time, sometimes several additional weeks. In addition, production was cut at many plants. If a plant operated three shifts, this was often reduced to two, and if a plant operated two shifts, many went down to a single shift. This allowed companies to use the additional free time to perform many of the smaller, more mundane maintenance tasks on an almost weekly basis rather than waiting for a specific maintenance shutdown. More often than not, this was done to save jobs, as companies could keep employees busy in this manner.

While some maintenance projects will be occurring in the coming quarter, the number is significantly reduced. Many of the companies that kept plants closed for longer periods have opted not to perform a winter shutdown, simply because these companies do not have enough maintenance needs to justify a multiple-day or, in some cases, week-long shutdown. Having had the opportunity to take care of much of the semi-annual maintenance needs during slack times has provided the opportunity to skip a complete shutdown.

As the nation recovers from the past year's manufacturing problems, the real question becomes, "Will plants begin hiring again, boosting production that will lead to a return to multiple shutdowns next year, or will 2010 be like 2009?" We will have to see how things go through the first quarter of 2010. Already the automakers are bringing workers back to increase shifts at a number of facilities to meet anticipated production increases as sales are expected to return to pre-recession norms. For additional information see September 24, 2009, article - GM Boosting Production, Adding Shifts to Handle Anticipated Demand. But at the same time, the automakers have closed a number of plants to reduce their overhead while surviving 2009, causing the number of plants that will require maintenance work will be reduced.

The number of companies that have been forced either into bankruptcy, consolidation or sale will reduce the amount of facilities available for maintenance work in the coming months. Even as the country begins recovering, it is probably going to be slim pickings for maintenance projects during the summer of 2010. Companies have been forced to take a more strategic look at operations, and will not be as willing to spend money on complete maintenance shutdowns when the work can be handled in other ways.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.