The fluid power industry, like the general industrial economy, is still in the grip of a major slowdown as we enter the fourth quarter of 2001.

According to the National Fluid Power Assn.'s State of the Fluid Power Industry Manufacturers Survey , the industry is experiencing negative growth. Nearly all of the indices are below the neutral reading.

The survey also indicates current and near-term orders remain discouraging. The outlook for orders in the next quarter and shipments over the next year is not nearly as bad, but there are no signs of substantial recovery in the forecast.

One fluid power distributor that has really felt the impact of the slowdown is Flint, Mich.-based R.M. Wright Co. Inc. Many customers have delayed or cancelled orders, says president Michael K. Hamzey. For many companies, sales are down 25 percent.

"I am confident of the future, but we must get through this slow period," says Hamzey "It is a difficult market at the moment."

One bright spot has been machine tool builders and special tool makers, which are getting some orders and projects, adds Hamzey. Though there have been a few good months in 2001, he sees no real improvement in the industry before the first or second quarter of 2002.

With the bleak outlook in the Midwest, it may be surprising that the auto industry is doing well in the territory of Louisville, Ky.-based Mosier Fluid Power of Kentucky, Inc.

"The Japanese manufacturers are increasing investments in their facilities," says president Dan McFarland. "The region's economy is also different from the Midwest."

There is also a strong chemical industry in this region and McFarland says it's doing well.

"[This] is a very confusing market," says president Mike Rowlett of Dallas, Texas-based Womack Machine Supply Co. "But we are seeing good times in the energy business."

Even though the region is doing well, Rowlett characterized the market as challenging. One of the challenges has been consolidation and the resultant narrowing of the supply base. Rowlett says fluid power distributors are vulnerable to customers entering integrated supply or purchasing practices that focus on lowest price rather than highest value.

"Although, in many of these cases, customers eventually see a need for local, value-added support," he adds. "Then local distributors can find a common ground with the customer."

Springfield, Mo.-based Hyspeco, Inc. president Tom Ralls agrees that consolidation is one of the largest challenges facing the industry. Ralls also sees opportunities in the future.

"The aerospace industry remains relatively strong," says Ralls. "There is also an increasing need for complementary products like motion control and electrical controls."

"There are some areas which present real opportunities for growth," says Applied Industrial Technologies fluid power marketing director Duane Hampton.

Hampton also indicates the materials handling industry presents opportunities even though many other mobile hydraulics markets are down.

"The challenge is the ever increasing need for electronic controls," he says. "This means customers will require increased support."

As manufactures continue to develop higher technology systems, distributors will need to have electrical engineers on staff, adds Hampton.

"The issue is whether distribution will be able to supply the needed resources and whether the industry can support the cost of these services," cautioned Hampton.