Dollar's decline a boon for U.S. manufacturers
Wednesday, December 23, 2009
The weak dollar has made it easier for U.S. manufacturers of parts for appliances, automobiles and other equipment to compete globally on price and is helping them win back business lost to overseas competitors, a shift that economists say should help the country's economic recovery.
Last year, as the financial crisis hit a crescendo, investors poured money into U.S. Treasury securities, long considered one of the safest places to invest. That caused the dollar's value to skyrocket, putting U.S. companies with heavy export businesses at a pricing disadvantage compared with competitors abroad.
More recently, as the global economy has shown signs of a turnaround, investors have been spreading their risks and putting money into stocks and bonds around the world. That strategy has pushed the value of the dollar back down and has helped U.S. manufacturers compete with producers in Asia and Europe. The dollar rose 25 percent between April 2008 and March 2009 relative to a basket of other major currencies, then started its steady slide. The dollar's value has rallied again during the past three weeks, but on Tuesday it still traded 12 percent below that March high.
The lingering weakness "helps the poor, beleaguered exporter whose goods are becoming more competitively priced in the global market," said Cliff Waldman, an economist at the Manufacturers Alliance/MAPI.
The greenback's slide is part of the reason that U.S. exports were 12 percent higher in October than in April, and is a factor in the nation's industrial output having risen steadily for five straight months.
In a recent nationwide survey of major manufacturers that buy tools and parts from smaller suppliers, 47 percent said they were doing more business in the United States as a direct result of the dollar's decline, according to Mfg.com, a Web site that links suppliers and manufacturers.
Made in the U.S.A.
Gretchen Zierick has seen business at Zierick Manufacturing in Mount Kisco, N.Y., get a boost as some of its European customers look for cheaper prices. Her 90-year-old company makes electronic connectors for products ranging from thermostats and hot water heaters in houses to air bag sensors and brake-control systems in cars.
Zierick recently won three deals to make connectors that go onto a circuit board, work that previously had been done by hand in China. The deals in total could be worth up to $250,000 a year and are sorely needed -- the company's sales tumbled 35 percent over the past year, forcing her to lay off 25 percent of her workforce.
"It is now cheaper for them to have us make the connector here even though we manufacture in an expensive labor market," she said. "A few years ago we were told we were too expensive because the dollar wasn't competitive. Now the dollar is helping make us competitive again."
At Cleveland-based Die-Matic, a company that makes automotive parts, garage door openers and sink faucets, sales are down 30 percent from a year ago. But company president Jerry Zeitler says he's hearing from his customers that they want to buy more parts made in the United States.
Zeitler says some customers would rather buy from U.S. makers because they allow payment 45 days after a product is shipped, whereas Asian suppliers often require half of the payment up front, which ties up customers' already limited cash. For other customers, the logistics of shipping from overseas can make it harder to replenish inventories quickly. And the "all-mighty dollar," as Zeitler calls it, favors making parts for less money these days in the United States.
"They're starting to look at the value of the dollar and the cost in the supply chain and logistics involved with freight costs and quality issues," Zeitler said. "They're finding that the margins aren't there to justify doing it overseas. It is starting to make some sense to make it local."