May 2009 - Modern Distribution Management

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May 2009

GM’s Bankruptcy Filing Preceded by a Period of Long Decline

The speculation is now over: GM has officially followed Chrysler into bankruptcy.
 
There are few differences in the story this time around: Jobs will be lost, cuts will be made, uncertainty in the market will continue. A key difference, however, is the focus of the news. More agencies are paying attention to the impact the move will have on suppliers to the industry. GM accelerated payments to some suppliers, with the hope of softening the blow, and the White House released a statement promising continued support from the Treasury Department's Supplier Support Program during the process.
 
Even with these measures, the impact will ripple through the supply chain and have potentially devastating effects. All we can do as a Tier 2 supplier is manage the ...

Canadian Price Indexes Decline In April

The Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI) were both down 0.5% in April compared with March, halting their upward movements since the start of the year according to Statistics Canada.
 
The decline in the IPPI was led by lower prices for motor vehicles and other transport equipment (-2.2%) and pulp and paper products (-2.3%). These two product groups are more affected by fluctuations in the exchange rate.
 
The Canadian dollar rose 3.3% in April in relation to its US counterpart. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have risen 0.3% instead of declining 0.5%.
 
12-month change
Year over year, the IPPI fell 2.2% in April following ...

New Orders for Durable Goods Up 1.9% in April: Advanced Report

New orders for manufactured durable goods in April increased $3.0 billion or 1.9 percent to $161.5 billion, the U.S. Census Bureau announced. This was the second increase in the last three months and followed a 2.1 percent March decrease. Excluding transportation, new orders increased 0.8 percent. Excluding defense, new orders also increased 1.0 percent.
 
Transportation equipment, up three consecutive months, had the largest increase, $2.1 billion or 5.4 percent to $40.5 billion.
 
Shipments of manufactured durable goods in April, down nine consecutive months, decreased $0.3 billion or 0.2 percent to $174.2 billion. This was the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 1.9 percent ...

Rexnord Core Sales Contract 10% In 4Q

Milwuakee, WI-based Rexnord LLC, a diversified industrial company focused on power transmission and water management products, reported fourth quarter sales of $432 million, down 14% from the prior year. The company recorded a quarterly loss of $7.8 million. Core sales contracted 10%.
 
Fourth quarter power transmission sales declined 16% to $312 million.Core sales were down 11%.
 
Water Management fourth quarter sales declined $9 million, or 7%, compared with the prior year fourth quarter to $120 million. Core sales contracted 9% from the prior year quarter.
 
For fiscal year 2009 - ended March 31, sales were $1.88 billion, an increase of 2% over the prior year. The loss recorded for the year was $207 million. Core sales contracted 1%. Power ...

Manufacturing Contracts in May

The manufacturing sector failed to grow in May, according to the latest Manufacturing ISM Report On Business.
 
The Institute for Supply Management reported: "While employment and inventories continue to decline at a rapid rate and the sector continued to contract during the month, there are signs of improvement. May is the first month of growth in the New Orders Index since November 2007, with nine of 18 industries reporting growth. New orders are considered a leading indicator, and the index has risen rapidly after bottoming at 23.1 percent in December 2008.
 
"Also, the Customers' Inventories Index remained below 50 percent for the second consecutive month, offering encouragement that supply chains ...

RBC Bearings Sales Up 7.,6% For FY2009

RBC Bearings Inc., Oxford, CT, a manufacturer of highly-engineered precision plain, roller and ball bearings for the industrial, defense and aerospace industries, reported sales for fiscal year 2009, ended March 28, 2009, were $355.8 million, up 7.6% over fiscal year 2008 results. Profit declined 14.3% to $34.5 million.
 
For the fourth quarter of fiscal year 2009, sales were $83.8 million, down 9% from fourth quarter of fiscal year 2008. Profit decreased 46.2% to $6.5 million. ...

Wolseley Profit Off 80% In First 9 Months

UK-based building materials distributor Wolseley plc reported sales for the nine months ended April 30, 2009, were £12 billion (US$19.2 billion), up 0.2% year-over-year. Excluding the impact of foreign currency, sales were down 15%. Pre-tax profit fell 80% - 88% in constant dollars - to £72 million (US$115 million).
 
Continued weakness across most markets, led by the commercial and industrial sectors in the U.S., and significant declines in the UK and Ireland and Nordic region, have led to continued cost reduction measures being implemented. These measures include further headcount reductions. In the nine month reporting period, Wolseley has reduced headcount by 13,746 worldwide - including the elimination of 5,317 positions through the exit from ...

Money Flow Begins Under Stimulus Package

Wayne, PA-based Moro Corp. sent out a press release today announcing its first sales order it says is being financed by the economic stimulus plan. Its Construction Products Division received a contract to provide reinforcing steel to parts of the I-295 Pavement Rehabilitation and Bridge Deck Replacement in two New Jersey counties.
 
Adam Fein, in his Distribution Trends blog, looks at the scheduled outlays under the stimulus plan. Click here to read his latest update on the economic stimulus package. ...

Chicago Fed Midwest Manufacturing Index Falls 1.1% In April

The Chicago Fed Midwest Manufacturing Index (CFMMI) declined 1.1% in April to a seasonally adjusted level of 81.0 (2002 = 100). Revised data show the index decreased 2.9% in March to 81.8.
 
The Federal Reserve Board's industrial production index for manufacturing (IPMFG) edged down 0.2% in April. Regional output in April was down 22.7% from a year earlier - lower than the 14.3% decrease in national output.
 
The region's steel sector output declined 3.4% in April after dropping 6.1% in March. The nation's steel output was down 1.8%. Regional steel output dropped 36.0% from its April 2008 level, and national steel output fell 25.3%.
 
Regional auto sector production moved down 2.0% in April after decreasing 0.8% in March. The ...

Are There Opportunities for Distributors in Alternative Energy Markets?

There's a lot of debate out there today about the role alternative energies will play in the marketplace. Will it be the next big thing, or will it falter and only crack a small percentage of the overall market? Regardless of what some think about the potential in alternative energy markets, a handful of distributors and manufacturers are finding opportunity in the field right now.
 
According to Green Chip Stocks, the global solar industry more than doubled from 2007 to 2008, at $37.1 billion in 2008. Spain's market for this kind of technology, for example, grew by 285%.
 
Rexel credited strong growth in solar markets for keeping its first-quarter sales in Belgium stronger than what it saw in the rest of Europe.
 
3M expanded its investment ...

Time to Look Up and Ahead

Based on first quarter results of public distributors and anecdotal evidence more recently, we are in the bottom of the trough in the North American industrial economy. The optimism of a month ago that there was some traction for a turnaround has backed off. Consumer confidence has not been solid enough to trigger production levels again. I'm not expecting Q2 to show a lot of improvement.
That said, the past week has delivered more evidence on the consumer side that confidence is turning around. The Conference ...

MAPI Report: No ‘Quick Fixes’ To Economic Woes

U.S. manufacturing production continued to plummet in the first quarter of 2009 and global contagion continues, but a confluence of factors portend a modest rebound in 2010, according to the Manufacturers Alliance/MAPI U.S. Industrial Outlook: The Great Recession, a quarterly report that analyzes 27 major industries.
 
On an annual basis, MAPI forecasts manufacturing production to fall 12% in 2009 and grow 2% in 2010.  Manufacturing industrial production, measured on a quarter-to-quarter basis, declined at a 22% annual rate in first quarter 2009 after falling at an 18% annual rate in fourth quarter 2008.
 
Production in non-high-tech manufacturing dropped by a precipitous 22% annual rate in the first quarter of 2009.  Non-high-tech ...

Survey: Recession to End Soon,” But Economic Recovery Will Be Slow”

The National Association for Business Economics reports in its latest survey that its panel of business economists expects the recession will end soon, but that the economic recovery will be "considerably more moderate" than those typically experienced after steep declines.
 
And despite "encouraging signs seen in the last several weeks," the NABE panel said downside risks for the next several quarters remain - and include large job losses, no improvement in credit conditions, and sharp declines in home values. As a result, consumers remain cautious.
 
Forecasts from the survey:

  • Real GDP forecast to rise at a 1.2% rate in the second half of 2009, resulting in a 1.2% decline at year-end.
    ...

WESCO Announces Succession Plan

The Board of Directors of WESCO International, Inc., a distributor of electrical MRO products, construction materials and advanced integrated supply procurement outsourcing services, will name John J. Engel, president and CEO, effective September 1.  He will succeed Roy W. Haley, CEO since 1994. Haley will continue with WESCO as executive chairman until his term expires in 2011.
 
In addition, Stephen A. Van Oss will assume the responsibilities of COO on September 1, while continuing to serve as Senior Vice President. Van Oss currently serves as senior vice president of finance and administration and CFO. Richard P. Heyse will join WESCO as Vice President and Chief Financial Officer on June 15, 2009.
 
For the past several years the Board of Directors and ...

Stock: A Casualty of the Housing Crisis

Stock Building Supply's Ch. 11 bankruptcy protection filing was a picture of what many in its sector have gone through since the housing market has fallen from its peak nearly four years ago.
 
Stock Building Supply's filing in support of bankruptcy protection outlines UK-based Wolseley's decision to exit the struggling Raleigh, NC-based building materials distributor. In its fiscal year ended July 31, 2008, Stock recorded a $744 million loss. It had $3.5 billion in sales. The distributor filed for Ch. 11 bankruptcy protection May 6, 2009.
 
James Major, vice president, finance and strategic planning, wrote that single-family housing starts had dropped by more than 80 percent since their peak in 2005. In addition, declining lumber and panel ...

MDM Interview: Now Is the Time for Sales Discipline

With sales low across the industry, many companies are fighting just to break-even. However, there may be more opportunities for improving your sales than you expect. Jim Ambrose, president of BranchManagerCEO.com and founder of Jim Ambrose's Workshop, says now is a great time to retrain and reenergize your sales force to find new ways to gain market share. 
 
MDM: Today's economy has created many challenges for businesses. What impact has it had on the sales process?
 
Jim Ambrose: Most, if not all, of my clients tell me that one of their big issues is that their salespeople tend to get comfortable in their account packages. And the problem with getting comfortable today is that your accounts aren't very busy. If the ...

Commentary: Rethink Who Uses the Internet and How

If you still think the Web is mainly for kid games, sports scores and ordering the cheapest possible airline tickets, watch out! According to a multi-year tracking survey by the Pew Internet & American Life Project (www.pewinternet.org), the Web continues to be populated by younger generations - over half the adult internet population in the U.S. is between 18 and 44 years old. But today 72 percent of Americans age 50-64 use the Internet; 82 percent of those between 30-49 years old do.
 
Those older than 44 are using the Internet more and doing more activities online, the survey says. Not surprisingly, older generations use the Internet less for socializing and entertainment, and more as a tool for information searches, emailing and buying ...

How to Manage Talent for the Upswing

Many distributors and suppliers have had to trim their work force due to a dramatic decline in demand over the past half-year. But when the economy starts to turn around, distributors will face another challenge: building back up. This article features expert opinion on what to keep in mind.
 
One of the biggest mistakes companies make in adjusting their work force during down times is cutting too deeply and not being able to recover when the economy rebounds. They are very much focused on the short-run, says Peter Capelli, director of the Center for Human Resources at The Wharton School of the University of Pennsylvania.
 
This can cost companies in the long-run. In addition to the costs associated with layoffs - severance pay or ...

ORCO Construction Supply’s Deal with HD Supply

HD Supply White Cap, Costa Mesa, CA, has agreed to purchase OCRO Construction Supply Inc. for $17 million. Headquartered in Livermore, CA, ORCO operates 11 distribution centers and two rebar facilities in California, Arizona and Nevada. The sale is expected to close on June 1, 2009.
 
HD Supply White Cap has great depth in the western markets where we currently operate and will continue to offer ORCO's customers high-quality services and a broad assortment of products, which they have come to count on, said Peter Alexander, ORCO's CEO and president.
 
ORCO Construction Supply will be integrated into the HD Supply White Cap business and will begin operating under the HD Supply White Cap brand following the closing of the transaction. ORCO ...

MDM News Digest 3910


Kennametal Inc., Latrobe, PA, has agreed to sell its high speed steel drills, related product lines and assets to Chinese manufacturer Top-Eastern Drill Co., Ltd, a manufacturer of high speed steel drills and taps. The transaction includes four facilities in Evans, Georgia; Clemson, South Carolina; Mexico City, Mexico; and Mississauga, Ontario. More
Anixter International Inc., Glenview, IL, a global distributor of communication products, electrical and electronic wire & cable, fasteners and other small parts, reported sales for the first quarter ended April 3 were $1.27 billion, down 14 percent from the year ago quarter. Profit declined 54 percent to $25.7 million. ...

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