Determination and technical ingenuity enabled Haas Automation to find a respected place in US manufacturing. In this exclusive article, the company's founder, Gene Haas, responds to questions from Manufacturing Engineering on the business
and technology of machine tools.
Manufacturing Engineering: What future do you see for North American manufacturers of machine tools? Gene Haas: If you look far into the future, you'll become very depressed over the situation facing American machine tool builders. Over the past 30 years, imports have gained a larger share of the market in the US every year. Currently they control around two-thirds. This is a very scary truth.
But automation can level the playing field. We've become successful by using our own product to reduce our production costs. As a result, we are not as sensitive to the high cost of labor as companies that use less automation. We've demonstrated that it's possible to build an entire machine in the US and be very successful.
We find it disappointing that so many US builders have trouble competing with imports. Some say they only import the iron and add the high-tech controls to it. Some say they only import the control and add the machine iron. But we-and a small number of other companies-have demonstrated that it's still possible to do it all. Unless this attitude spreads throughout manufacturing, the US machine tool builder may disappear.
ME: How much more consolidation do you expect to see in the machine tool industry in the US, Japan, and Europe?
Haas: The US machine tool industry is consolidating because small builders are having trouble surviving and the larger builders are trying to buy market share. This trend will continue as long as the US builders' market share is falling.
It's also true that consolidation is occurring across international boundaries. In the near future, it may be difficult to determine what country a builder is from, just as it's difficult today to tell where your car was built.
Because supply continues to be higher than demand, there will continue to be consolidation in the machine tool industry on all continents. Sustained over-supply is creating price pressures, and many machine tool builders are not profitable today. Even Southeast Asia isn't immune to this phenomenon. Consolidation is usually associated with shrinking. To survive, machine tool companies must become global and increase market share, so they can have the volume they need to make them price-competitive.
ME: Given the number of low-wage manufacturers in the world, how much manufacturing work will continue to be done in high-wage countries like the US?
Haas: The fact that machine builders in the US are in decline is probably closely related to the fact that manufacturing in general is leaving this country. It's a simple fact that it appears to be cheaper today to make most things outside of the US. The problem with this perception is that it's short-sighted.
We can only keep a great deal of manufacturing in this country by getting much smarter about the way we manufacture. As I said before, automation is the key to reducing manufacturing costs and thus keeping manufacturing here. Low wages affect areas where a great deal of labor is required. Replacing labor with automation wherever it's possible to do so reduces overall cost through labor savings, more consistent production, and better quality.
People in the United States must remember what wealth is and where it comes from. Wealth does not come from cooking hamburgers. Wealth does not come from cleaning one another's windows. Wealth consists primarily of "things." If we continue to import "things" we will, by definition, become less wealthy. At the same time, the nations who do manufacture things will become more valuable to our economy.
ME: How will the Internet change the way your company does business?
Haas: The Internet has already changed our business. We have online quote generation today, along with full product line and options information. We also use the Internet for service support. Software updates and automatic parameter checking can be done over the Internet. We fully expect this trend to continue and to involve sales, support, and service more and more. The Internet will become the universal information source. It will give our customers access to the information they need to make purchasing decisions.
ME: How will the role of your distributors change as more and more business is done via the Internet?
Haas: The role of our distributors is already changing. We have spent the last couple of years developing a common approach to the operations of our dealers. They already use the Internet for sales, service, and training. Ultimately, the distributors will become service organizations-not information sources. Because of the Internet, distributors will provide more technical support to their customers and less sales/information type support.
