Power transmission industry mired in slump
By Staff -- Industrial Distribution, 12/1/1998
There's no doubt that the power transmission industry experienced a slowdown during the second half of 1998. While year-to-date sales among American PTDA members were still up 5.2 percent according to the Power Transmission Distributor Assn.'s September Market Outlook Report, that figure is down substantially from the nine percent growth members reported following the first quarter.In fact, monthly sales dropped for three months in a row, and for five of the last six months. After a stellar June (up 12.5 percent), respondents to the survey recorded negative sales in every month for the third quarter -- a 6.2 percent drop in July, two percent in August, and 5.4 percent in September.
Canadian distributors reversed a two-month decline by posting an impressive 14.3 percent gain in September. Canadian members saw a 16.2 percent gain in February, but their year-to-date sales growth of 5.3 percent mirrors that of their U.S. counterparts.
"The third quarter was really not a good one for distributors in the U.S. anyway," says Mary Sue Lyon, executive vice president of the PTDA. "Actually, most of the year hasn't been good in Canada, although September looked good. And if you look at confidence figures, nobody is expecting things to get dramatically better in the near term future. I don't think anybody is expecting fourth quarter sales to be stellar."
Not after posting the first negative quarter in recent memory. Although PTDA just began tracking monthly sales figures this year, with the solid economy of the past few years, it's believed to be the first negative quarter in some time.
"That's very true; I haven't seen a slow quarter in several years," says Patrick Frater, treasurer of the PTDA and president of Eagan, Minn.-based Northwest Power Products Inc. His firm services mostly OEMs, and revenues are down just under 10 percent this year.
Frater goes so far as to say that the PTDA economy is in a recession.
"From midway through the second quarter and the third quarter [business] fell off appreciably," he says. "We're an OEM-oriented distributor, and we see most of the slack coming in the OEM side opposed to the MRO accounts.
"I've talked to other distributors in our area and pretty much all of them have said they saw the year soften up and that it hasn't come back yet. It's been pretty much an industry-wide softening."
Doug Savage, president of Bearing Service Inc. in Livonia, Mich., and current PTDA president, says that lingering effects of the GM strike and the Asian flu have been the major culprits.
"It seems like some of the leaders in our industry are talking about that," he says. "There's just a lack of need around the world for products from the manufacturers that we support."
Savage is confident of an uptick in the fourth quarter, although he gives an interesting twist to why sales may dip slightly in November, at least for his firm and others in Michigan. November is deer hunting season in Michigan, and typically more than a quarter million hunters -- many from the manufacturing sector -- head to the woods for several days.
"We call it the deer hunting phenomenon, and when it starts it definitely effects our business," says Savage.
Given the major hurdles the industry had faced in Asia and with GM and a slowing U.S. economy, many distributors could probably live with such a temporary setback. And although deer season is relatively short, the lingering effects of the Asian crisis may not be.
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