Local manufacturers ride wave of weak dollar
But how long can the good times last?
Central Massachusetts manufacturers say the advantages of exporting their products when the U.S. dollar is as weak as it is now can only be counted on, and should only be welcome, for a short time.
After a long slide, the dollar hit a three-month high May 16. At that time $1 equaled 1.35 euro, 1.97 British pound, 120.75 yen, and 1.22 francs.
Jack Healy, CEO of the Manufacturing Advancement Center in Worcester, said the manufacturers with the greatest advantage in the current weak-dollar market are those that export to Europe, because "the euro and the pound have appreciated so much compared to the dollar."
Joel Liberto, president of Hudson Lock in Hudson, said his company only exports about five percent of its product.
But Liberto just got back from Germany and Italy, where he found potential customers willing to pay what are now bargain prices for the locks and keys Hudson makes.
"It has definitely made a difference," Liberto said of the weak dollar. "I remember when it was (worth) $0.82 (in Germany).
But the dollar’s current relative weakness compared to the euro "has made the European market a target interest for us. It’s so volatile, but at least now when we’re talking price, we’re going to get their attention," Liberto said.
Jack Bergan, vice president and treasurer of Morgan Construction in Worcester, said, "We sell in U.S. dollars around the world, so it helps us. It makes us a low-cost provider," and allows the company to sell more products.
The other side of that equation is when Morgan buys products and materials in other currencies. "So, that hurts," Bergan said.
If the dollar remains weak, or gets weaker, companies that manufacture and export goods made of raw materials they import could "see our inexpensive sources of goods" become expensive.
Future troubles
"In the long run, it could be difficult for us," Bergan said. He said manufacturers could reap the benefits of a weak dollar for a few more years, but "things should even out over the long run, or the world will be in trouble."
According to Healy, about 23 percent of U.S. manufactured goods are exported.
A dollar that’s worth less overseas "makes the goods more competitive," he said. "However, we import about 20 percent of the raw materials and sub-assemblies."
"We’re going to see more of a pull because of the option for lower prices," Healy said, especially for Massachusetts manufacturers that make capital goods like aircraft engines or medical instruments, goods with a lag of months between the purchase and delivery.
"They’re going to start to sell more products," Healy said. "We’re going to see a bump in capital goods and medical instruments, but if (manufacturers) are buying things offshore, they’re going to see the costs of things increase."
"When you have a deteriorating dollar, as we’ve had, it tends to help manufacturers in the beginning, but if someone’s buying materials from offshore, they’re going to pay a price," he added.
But Healy warned, as Bergan did, "this is for the short term."
"Since we buy so much of our consumables (from overseas), it will start to catch up," he said.
Kristen Rupert of the Massachusetts Alliance for International Business at the Associated Industries of Massachusetts, said the dollar’s condition is "not something I hear about. I almost never get any questions related to finance. Companies doing global business have a bank able to help them with international finance."
Rupert said she does hear about the increased cost of raw materials, but said manufacturers are becoming savvy about how their companies operate.
A combined model
Companies can insulate themselves from the vagaries of international finance by becoming their own supply chain, Rupert said.
"In some ways, the common model is a little bit of importing, and exporting as well," she said. "To compete in the global economy, you have to be in the global economy. I might make my product here, or I might make my product there, or I might make it in several different locations around the world," Rupert said.
One company may ship its own raw materials to its own factories that make components that are shipped to its own assembly plants that make the final product.
"It’s not just shipping finished products," Rupert said, "it’s shipping components." And companies are increasingly "playing different roles in their own supply chain."
As such, Oxford’s IPG Photonics Corp. is unaffected by the dollar’s current position, said Bill Shiner, the company’s vice president of industrial markets.
Most of IPG’s customers are in Germany, so the company, which makes fiber lasers, does most of its manufacturing there.
IPG does do some manufacturing in Oxford, however.
"If we just manufactured here, it would make us the low cost," Shiner said. "But we manufacture in Germany, and we pay German wages."
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