USMCA- Updated NAFTA Finally Signed!

December 11, 2019

“While we expect some changes in the automotive supply chain, some to the benefit of the U.S. and some to the benefit of Mexico, overall this is a positive outcome for manufacturers.”

On December 10, 2019, the U.S., Mexico, and Canada formally signed an updated NAFTA following months of negotiations between the White House and Democrats in the U.S. House of Representatives led by Speaker Nancy Pelosi. This marks a major victory for President Trump, Congressional Democrats, and most importantly, manufacturers who have sought some stability after several years of uncertainty over trade with Canada and Mexico. PMPA is part of several coalitions who have pushed for an update to the 25 year old NAFTA and believes the new agreement will expedite commerce across all borders. While we expect some changes in the automotive supply chain, some to the benefit of the U.S. and some to the benefit of Mexico, overall this is a positive outcome for manufacturers.

The changes agreed to by Speaker Pelosi, labor leaders, the White House, and Mexico do not significantly alter provisions impacting autos on Regional or Labor Value content levels except one last minute provision requested by the White House that all steel for autos be “melted and poured” in North America (delayed for seven years, Mexico refused the same terms for aluminum).

Sources in Washington indicate the U.S. House of Representatives could vote to approve the new NAFTA on December 19, one day prior to departing for the Christmas break, and one day after voting to impeach President Trump. Senate Majority Leader McConnell indicated he will not schedule a vote until after the Senate concludes the impeachment trial, which many believe could begin around January 7, 2020 and last at least two weeks (President Bill Clinton’s Senate impeachment trial began on January 7, 1999…). This puts Entry Into Force (when the new agreement officially takes effect) still a few months away.

Major changes in the White House-U.S. House Democrats-Labor-Mexico update include:

  • Creating rules of evidence for labor and environmental enforcement;
  • New labor enforcement applies to all goods and services in Mexico and can apply penalties on goods with labor violations;
  • A party cannot block dispute settlement panel from being formed;
  • Creates an interagency committee to monitory Mexico’s labor practices;
  • Unions may have attaches on the ground in Mexico but unclear if U.S. official or American labor representative may inspect Mexican facilities;
  • Adds Multilateral Environmental Agreement language for all parties;
  • New Customs verification system for fauna, flora coming from
  • Mexico to ensure properly harvested;
  • Removes requirement to provide at least 10 years of patent exclusivity for biologics;
  • Content liability protections for internet companies maintained;
  • Requires steel to be “melted and poured” in North America to meet standards for use in auto production (delayed seven years).

 

Photo credit


C-1200 Series Steels- Not Recommended for Applications Requiring Mechanical Properties

December 10, 2019

Question: Why don’t the Certs for C12L14 and C1215 cold drawn steel bars have mechanical properties routinely reported?

Answer: Because these steels ARE NOT recommended for applications requiring mechanical properties, alternating stress applications, cold metal movement and can also be notch sensitive.

Don't do it!

Don’t use these steels for critical applications!

Here are some details from the application notes provided to me when I started as Plant Metallurgist at Bliss & Laughlin Steel in 1985:

  • The 1200 series steels (1215 and 12L14) are not generally sold for applications requiring high standards of strength, hardness, or other related properties
  • These steels are particularly adapted to automatic screw machine production of small repetitive parts. The ideal application is one where bulk and shape, as dictated by the design, are the chief requirements.
  • They may be used for parts which require only nominal strength values providing the factor of safety as in accordance with established practice. This is especially true where the stresses involved are static tension, compression, or shear. Vibratory, torsional, or alternating stress applications approaching the static limits are not recommended; thus these steels should not be used for line shafting.
  • When cold drawn, the C-1200 steels are notch sensitive and while polished fatigue specimens will show expected endurance limit values, poor finish and processing of parts, or faulty design may cause low or erratic results for finished parts under dynamic or alternating stresses of relatively small intensity.
  • These steels are not recommended for applications involving cold metal movement, such as crimping, forming or bending. Operations such as knurling and character rolling can be done satisfactorily.
  • Because of the smaller amount of hot work in rolling, the large size cold drawn C-1200 bars increase in relative brittleness.  The large sizes may also be expected to reveal stringer sulfide inclusions on polished surfaces. Further removal will likely reveal more inclusions as they are distributed throughout the bar cross-section.
  • A cold drawn surface will not plate to the highest quality finish; a turned or ground surface may prove necessary for critical applications

Your customer wants inexpensive parts, and machining them from 12L14 and 1215 minimizes the cost of machining to the desired geometry. But if the parts are not likely to fulfill the properties expected, that is false economy at best.

Don’t do it Image

Little Charlie and the Night Cats If you Dig It, Don’t Do it.


November ISM PMI, Consistent with Seasonal Expectations

December 3, 2019

“Economic activity in the manufacturing sector contracted in November, and the overall economy grew for the 127th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The decrease in the ISM PMI index of 0.2 percentage point from the October reading of 48.3 percent is modest and not unexpected for this time of year- it dropped 0.5 point in 2017, and three of the last five November ISM PMI’s were negative (2017, 2015, 2014.)

Considering ongoing issues with production at Boeing (737 MAX) and residual slack as a result of the just settled UAW strike against GM, and this 0.2 percent decline is modest.

Is manufacturing in a recession? If we use the definition of “a period of temporary economic decline during which industrial activity is reduced, for two successive quarters,” the answer is not yet. four consecutive months of contraction have been logged, but following 35 straight months of growth in the manufacturing sector, we are not yet ready to throw in the towel.

What are we watching?

We are beginning to pay attention to automobile loan delinquencies which have climbed to 4.7% of the total automotive loans and leases. This is just 0.56% off from the peak of auto loan delinquencies back in 2010 (5.27%). Automotive is our industry’s single largest market served, and if automotive loans continue to go south, our shops may be in for diminished production for a longer period than anyone is expecting.

Link to  November 2019 ISM PMI Report. 

Link to Calculated Risk November 2019 ISM PMI Chart


Standing on the Shoulders of Giants- Veterans Day 2019

November 11, 2019

My family has a story. I’ll bet yours does too.

 

 

 

My grandfather and namesake, Miles Sr., joined the army cavalry back in WWI. Sounds dashing, but the assignment to cavalry in those days, for farm boys from Ohio,  was all about the barn, not about the riding.My father, Miles Jr., was first in his graduating class of 1942 to enlist in the Army. He got some great training at the New England Aircraft School and as ground crew chief was responsible for the maintenance of a number of B-17’s over Europe.

I am humbled by what he and his generation did in their late ‘teens and early twenties. Not so impressed with how I muddled through those same years in my life.

Thanks Dad.

My daughter, Emma, and her husband, have been deployed in Europe, Asia, and the Middle East with the U.S. Army. Today they call West Point home.

I’ll bet your family has some stories like this too. I hope you share them this weekend. They are important ways to share your family’s values.

I got a pass.  I got a university deferment. then I got a high draft number. No crazy Asian war for me.

So, when they bring up the flag at the parade today, I’ll be the first to jump up (or try to be) to salute, not the flag that goes by, but the sacrifices and love gifts of all who have worn the uniform of  a U.S. Armed Service, who stepped forward and chose   “Duty, Honor, Country” instead of “What’s in it for me?”

Isaac Newton is famously credited with saying “If I have seen further than most, it is because I have stood on the shoulders of Giants.”

Today, I echo his sentiment with gratitude for the service and sacrifice of the veterans. Thank you for your service. Thank you for your sacrifice.

You are all giants in my book.


 


September ISM PMI Declines- GDP Growth Likely 1.7%

October 1, 2019

“The past relationship between the PMI® and the overall economy indicates that the PMI® for September (47.8 percent) corresponds to a 1.5-percent increase in real gross domestic product (GDP) on an annualized basis,”– Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee

We know that all of the other media will be pointing out the fact that the “ISM PMI for September 2019 did decrease 1.3 percentage points from the August reading of 49.1 percent,” making two consecutive months below 50 and thus contraction in manufacturing. As Abraham Maslow’s often mis- attributed quote states “when all you have is a hammer, everything looks like a nail.” The negative bias in the media these days gives cause for alarm.

The negative bias in the press is extensive these days…

While we acknowledge that the actual ISM PMI for September is 47.8 percent- we remind everyone that this level corresponds to continued GDP growth in the broad economy, not a recession. With the UAW strike and softening Automotive sales, we believe that we have an “assignable cause” and thus lower the weight that this decrease actually has on our thinking.

PMI is down, real US GDP continues to grow

PMPA’s own Business Trends Report shows that shipments of our shops grew 1.5% over July, up 3.8% over this year’s lowest month (June) and are in fact up 4% over the five year average for the month of August. Our August value of 134, would have been the fourth highest month ever for our index, had it occurred prior to 2018.

Softening is not exactly unexpected.

The final quarter of the year is traditionally low for sales and deliveries for precision machining, so we do not anticipate a reversal of the sales trends in the remainder of the year.

Over all, we believe that the bitter taste of the bad news of the 47.8 percent PMI is far worse than the actual reality which is that the economy (real GDP) is continuing to grow.

September 2019 ISM PMI

Calculated Risk Blog- Thanks for the Graph. 

Hammer Lightning


Dealing with Broken Links- A Process

September 24, 2019

Actually I am amazed at how few broken links I encounter in all of my online research.

But occasionally, we do encounter  the challenge of broken links.

A broken link- but what can we do to get the material that was supposed to be there?

I use the following process to meet the challenge of a broken link:

Deconstruct the broken link into a “likely domain” and the “deliverable Sought.” (In this case a .pdf file.)

So in this case the likely domain was “Nuclear Regulatory Commission,” and the deliverable sought was “BR0470 .pdf”

I searched for “Nuclear Regulatory Commission BR0470.pdf “

      1. And Google gave me this :

That top link looks like it!

So I followed the top result that Google provided.

    1. Which took me to the page that has a link to the file that I wanted:

This is the page that the google search found. the link we want is the third bullet (look for the pdf icon)

I then selected the pdf link  on that page which was in fact the deliverable that I was seeking.

    1. Which then delivered this:

NRC Primer on Lean Six Sigma .pdf

 

Which is the deliverable that I was seeking, and a very good reference on Lean Six Sigma!

That’s my process for dealing with the challenge of broken links keeping me from the information that I want.

What’s yours?

 


August ISM PMI -After 35 Months, a No-Grow Month for Manufacturing

September 3, 2019

 

After 35 consecutive months of growth, the Institute for Supply Management’s Purchasing Manager’s Index (PMI) contracted in August 2019, coming in at 49.1% (Readings above 50% indicate growth or expansion in the sector.) Last month, it was at 51.2

 

After 35 consecutive months of expansion, manufacturing has a no- growth month.

According to the ISM report: 

Comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI® expansion that spanned 35 months, with steady expansion softening over the last four months. Demand contracted, with the New Orders Index contracting, the Customers’ Inventories Index recovering slightly from prior months and the Backlog of Orders Index contracting for the fourth straight month. The New Export Orders Index contracted strongly and experienced the biggest loss among the subindexes.”

“Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders. Respondents continued to note supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month declined and reached its lowest level in 2019,” says The Institute’s Timothy R. Fiore.

 

PMPA analysis

This was below expectations which still had the index above 51%. While proclamations of “recession” are unavoidable in the media these days, we would urge caution about this single data point being a trend. IT HAS BEEN 35 MONTHS SINCE WE HAVE HAD A POINT BELOW 50!

Our latest PMPA Business Trends Report for July  showed a slowing of growth in shipments by our shops (3MMA fell below the 12MMA) but the index itself recovered higher and all forward looking three month sentiment indicators turned strongly positive.

Mixed Signals

Industries reporting contraction to ISM  include several of our markets most heavily served : Fabricated Metal Products; Transportation Equipment; Primary Metals;  and Electrical Equipment, Appliances & Components.

Here you go.

Our bottom line: The shock should be that we have enjoyed 35 consecutive months of growth, not that we finally had one month of no-growth out of 36!

What do you think?

Chart courtesy of Calculated Risk blog