David Arndt David Arndt
President Emeritus

Metal Forming Industry Quarterly Update

June 21, 2022

Industry-news-dave-arndtMy previous quarterly report on the state of the metal forming industry, issued in January, began by complaining about COVID and continued labor and component shortages. Now things look worse, due to “Black Swan” events that unforeseen in January—the war in Ukraine, worsening inflation, continued poor performance in the labor market, continued parts shortages, and the lockdowns in China. 

Most of my comments here are from Harbour Results Inc. (HRI) and PMA presentations, which will be noted as such; I will detail other sources as appropriate.

While the overall picture for most metal forming suppliers remained positive for May, as highlighted by the PMA monthly Business Conditions Report, there were the first signs of a downturn in sentiment with 21 percent of companies beginning to report lower-than-expected business economic activity.  Only 12 percent of those surveyed by PMA rated shipment activity as down from a year ago, but 21 percent believe that incoming orders will trend downward in the coming months.


From CNBC--April CPC year over year was 8.3 percent and core CPI was 6.2 percent.  The price of gasoline is up 50 percent, used cars and trucks up 37.3 percent, and food up 6.5 percent. Inflation is now regarded as the single biggest threat to a recovery that began early in the COVID pandemic.  Rising prices at the pump and in grocery stores have been one problem, but inflation has spread beyond those two areas into housing, auto sales, and a host of other areas.  The Fed has responded with two interest-rate hikes so far in 2022 and pledges more until inflation drops down to its 2-percent goal.

From FTR Transportation intelligence--The U.S. economy continues to expand at a modest pace, with advances in consumption and employment providing the strength to offset the headwinds caused by higher prices, higher interest rates, supply-chain troubles, and a war in Europe that has boosted inflationary forces.  Spending patterns are changing as consumers shift funds to pay more for food and energy.  The sharply higher mortgage rates, now over 5 percent, are starting to affect housing.  The Federal Reserve has made it clear that higher rates are coming, and that inflation is the number one danger to the U.S. economy.

From ITR--The May ITR Advisor macroeconomic outlook stated, “U.S. industrial production transitioned to a slowing growth trend in April.  ITR expects slowing growth to characterize industrial production through the second half of the year or next year as manufacturers work off heavy backlogs and mining sector expands due to demand for domestic and global needs for oil and gas.”  

ITR still predicts that the U.S. will avoid a recession unless the risk factors (Ukraine, supply chain, and interest-rate hikes) tip the GDP to the mildest of recessions.  If business leaders focus on the downturn, they may miss the opportunity to improve efficiencies, sharpen competitive advantages, and meet the demands of consumers, ITR says.  Its consultants recommend that businesses not fall into that trap and maintain focus on endeavors that will enable them to save on costs or leverage to increase prices.  This may require borrowing, but interest rates still are cheap relative to historical rates.  Look to make investments that help your profitability via cost savings, top-line expansion or both.

The chart shows anticipated growth trends thru 2023, per the ITR Q3 report.









Looking forward, ITR reports that “forward looking indicators unanimously signal cyclical decline in the quarters ahead, and our business cycle theory points to a 2023 cyclical low point for the markets that move in tandem with the U.S. macroeconomy.   The unknowns are significant, but the knowns at this point do not warrant a change to our macroeconomic expectations.  The demand for gas is inelastic and will impact consumer spending, which is the backbone of the U.S. economy.  The Ukraine conflict will result in increased commodity prices and added supply chain disruptions.  ITR advice is to stay calm, lead with confidence, knowing that after the volatility resolves, economic fundamentals will drive the economy.  Try to see past the headlines and keep an eye on the future, investing in efficiency gains, labor savings technology, and competitive advantages.”

From HRI --“The ongoing semiconductor issue has eased slightly but Ford had to shut down two plants (recently) due to chip shortages.  There is a healthy tool-spend forecast for the next 4 years based on new product launches which also will lead to new metal forming opportunities.  Electric vehicles account for 11 of the 59 programs being sourced, with most being all new vehicle launches.  Despite headwinds facing the future of electric vehicles, a huge positive is the push toward localized production of the vehicles.  With so much emphasis on BEVs, there is a great opportunity for local manufacturing to win new business. 

“Over the next 4 years we expect at least $7 billion in automotive tooling each year.  At the same time, the U.S. dollar is reaching parity with the euro and is expected to reach parity this summer.  Based on everything that has happened in the global marketplace, it is not surprising that the euro is losing value and reaching parity with the dollar.  The key implication for the NA manufacturing industry is that OEMs selling to consumers in Europe could be challenged to sell to the European market, due to the cost associated with buying an export from the U.S., since global commodities generally are posted in U.S. dollars, which means a U.S. dollar gaining value could make certain commodities more expensive for companies across the globe.

“The challenges for raw material supply for batteries is becoming a more public-facing issue.  With so many OEMs touting lofty production goals, a huge question mark remains on whether the battery production will be there to support this increasing demand.  The semiconductor shortage has shown the fragility of the supply base for automotive, and the battery shortage looks like the next great crisis looming.”

NAM economic forecast (May 31)--New single-family home sales tumbled 16.6 percent to 591,000 units at the annual rate in April, declining sharply for the fourth straight month and dropping to a post-pandemic low.  At same time, the median sales price for new homes was $450,600 in April, a new record.   

New orders for durable goods rose 0.4 percent to a record $263.5B in April, reflecting resilience in the manufacturing sector despite supply chain bottlenecks, global uncertainties, workforce shortages and soaring costs. 

The S&P global flash U.S. manufacturing PMI declined from 59.2 to 57.5 in May, a three-month low but continuing to expand modestly despite numerous challenges.  Personal spending rose 0.9 percent in April, a solid pace despite slowing from the 1.4 percent gain in March, with 9.2 percent growth year-over-year.  Personal income increased 0.4 percent in April, and manufacturing wages and salaries increased 0.6 percent for the month, or 10.3 percent year-over-year. With spending growth outpacing income, the personal saving rate fell from 5.0 percent to 4.4 percent, the lowest since September 2008.  This suggests Americans are dipping heavily into their savings to finance those purchases.  The index of consumer sentiment fell from 65.2 in April to 58.4 in May, according to the University of Michigan index.

My comments--It will be interesting to hear the economists’ predictions at the end of the second quarter.  It is scary to hear the Biden administration talking about the economy, saying (per the Wall Street Journal) that “with the right policies, the U.S. can transition from recovery to stable, steady growth and bring down inflation without giving up all of these historic gains.  During the transition, growth will look different.  We will likely see fewer record job-creation numbers, but this won’t be cause for concern.  Rather, if average monthly job creation shifts in the next year from current levels of 500,000 to something closer to 150,000, it (indicates) that we are successfully moving into the next phase of recovery.”

My concern would be that with 11 million job openings and 2 million illegal aliens entering the country in 2022 looking for work, something doesn’t work.

On Specific Market Segments


Mike Jackson, OESA executive director, strategy and research, commenting on Russia’s invasion of Ukraine during a talk he gave at the PMA Automotive Parts Supplier Conference (APSC) in April, noted that most OEMs have suspended activities in Russia.  Automotive output in Europe is at risk due to the lack of wiring harnesses.  He also noted that Renault stock shares were crushed by concerns about Russian exposure, causing Renault to consider selling its Russian operations, and that raw material shortages are appearing for steel, palladium, and neon gas.    

Meanwhile, while BEV sales are increasing dramatically, BEVs still only account for 4.6 percent of global vehicle sales, including 3.8 percent of the vehicles sold in NA.  U.S. government policy changes will impact the EV outlook going forward. 

Among factors at play: The U.S. rejoined the Paris climate agreement and aims to be carbon neutral by 2050.  There is an investment piece for battery research in the economic recovery bill.  California is banning ICE sales by 2035 and other states will follow, and the California Air resources Board (CARB) is revising CAFE rules beyond what President Obama initiated during his term.  A Biden goal is to replace 645,000 federal fleet vehicles with BEVs.  GM’s goal is to eliminate pollution from all light duty vehicles by 2035.  By 2028 there will be 96 unique, domestically built BEV nameplates, from seven in 2019.   

Looking at 2022 production, the breakeven point for production has been lowered to 13.75M units with the production goal for 2022 being 15M units.  The average new-car buyer in the U.S. has an income of $124K in 2022.  The average price of a subcompact ICE in 2022 is $23,963, the average hybrid costs $32,085 and the average BEV costs $62,876.              

From Automotive News--At an event in May, Mark Reuss, president of GM, indicated that GM believes that earlier GM entries in EVs struggled in the market because GM was introducing single vehicles, and now believes they will correct that by launching a full portfolio of EVs.  GM aspires to have an all-electric portfolio by 2035.  Similarly confident in the U.S. market, Hyundai, solidly #2 in the NA EV market, announced that it will invest $5.4B into its first dedicated EV factory, to be built in the U.S., and that suppliers will invest another $1B.  At the same event, Nissan announced that it will invest $500M in converting its Mississippi plant into a center for EV manufacturing and that it would soon announce a U.S. battery manufacturer for its next-generation EVs.

From LMC—Also at the PMA APSC, Jeff Schuster, president, Americas operation and global vehicle forecasting at LMC, noted that sales of light vehicles were down 59 percent in Russia, 83 percent in Ukraine, and 8 percent throughout Europe.  His production forecast for 2022: the U.S. will be limited to 14 percent growth over 2021 due to material shortages and the tight labor market.  China will be limited to 1 percent growth over 2021 due to the COVID lockdowns and economic slowdown.  Inventory days’ supply in the U.S. is increasing and is back up to 25 days, a 15 percent increase, but still 49 percent less than March 2021.  

LMC forecasts that global auto sales will increase from 81M vehicles in 2021 to 109M vehicles in 2028.  Globally by 2025 there will be 515 EV nameplates.

Class 8 truck

The class 8 truck build was originally forecasted by FTR to increase from 270K trucks produced in 2021 to 300K in 2022, an 11 percent increase, but the build forecast was decreased to 292K trucks in June.  Looking forward, the build for 2023 was reduced by 30K trucks to 330K due to continuing component and labor shortages.  The forecast for NA trailers also is being reduced in 2022 and 2023.  These drawbacks, even with very high backlogs, are due to shortages of chips, components, and steel and other raw materials, and the accompanying and significant increases in raw material prices and labor costs.  

Due to the pricing increases, truck OEMs have been closely monitoring orders so as to not increase the backlog and have delayed opening their 2023 order books while they grapple with future pricing issues.   Representative price increases as reported at HDMA for April, 2021, to April, 2022, include:  U.S. domestic steel up from $600 to $2100/ton, aluminum up 75 percent from $1700/T to $3000/T, copper up 80 percent from $2.50/lb. to $4.50/lb., electricity costs up 50 percent in Europe and 16 percent in the U.S., and diesel up 100 percent to $5.16/gal. (now $5.50/gal).  The good news is that the forecasting services at FTR and ACT still predict the average class 8 truck build for 2021 to 2026 to be an elevated 305K units.

There is a full-speed-ahead approach to reducing emissions toward zero-emissions goals.   California was the first state to introduce zero emission truck-sales targets, but other states are expected to follow, motivated by President Biden’s federal GHG reduction targets.  Per the Biden Clean Energy plan the electricity grid will be carbon neutral by 2035 and national net zero GHG emissions by 2050.   

New Jersey was the first East Coast state to require phasing in of electric commercial trucks in the “Advance Clean Truck rules which begin mandating sales by 2025.” The New Jersey rule was modeled after the regulations in California and is nearing adoption in several other states.  From HRI’s perspective, “there will be a push by truck OEMs to continue to develop offerings for electric trucks, especially if these policies continue to be adopted in other states.  Large electric trucks do not necessarily help the bottom line for OEMs, so if the cost to produce electric trucks does not reduce, it could become an issue of profitability down the line.”

Mack has introduced its first production-volume electric truck for class 8.  Paccar has seven truck models in class 8 and medium trucks that have launched with BEV drives.  Freightliner has launched its electric version of the class 8 Cascadia; and Volvo released its new generation of electric class 8 truck, the enhanced VNR model, which features up to an additional 85 percent increase in range, faster charging, and even more configurations for heavy-duty transport.  The new models’ enhancements center on improvements made in the battery--technology, design, and package.  Improvements in battery design have resulted in as much as a 40 percent increase in storage capacity.  The VNR also has reduced charging time, providing an 80 percent charge in 90 min.

For long-haul equipment there still is skepticism about the ability of BEVs to adequately fill the requirements of the long-haul market.  Therefore, the push to develop hydrogen fuel cell vehicles continues on both sides of the Atlantic.   There also are reports being issued by research institutes that moving to BEV vehicles will not achieve a true zero emission rating due to the amount of carbon released in the manufacturing process, which relegates the carbon reduction rating versus ICE to 70 percent.  In one report, bio diesel trucks will perform better toward carbon neutrality after production issues are corrected.


Boeing announced Q1 2022 earnings on April 27.   It reported 2022 deliveries including 95 airplanes with 86 planes being 737 aircraft with the expectation for return to increasing production rate to 31/month in 2Q 2211.  Boeing has a backlog of nearly 4200 planes valued at $291B.  The first 777-9 airplane is now targeted for 2025 with added 777 freighter capacity beginning in 2023.  Boeing submitted a 787-recertification plan to the FAA recording $312M of abnormal cost in the quarter and will be producing at a very low rate until deliveries resume, gradually returning to five planes/mo. over time. Boeing reported that the commercial airplane recovery is broadening but regional dynamics continue to evolve driven by COVID 19, with Feb. 2022 cargo traffic 12 percent above 2019 levels.

Boeing continues to expect passenger traffic to return to 2019 levels in 2023 to 2024, with a return to a long-term growth trend a few years later.  The Q1 presentation noted that the war in Ukraine was creating near-term challenges.  Boeing’s report also noted stable demand for defense and space products and that they continue to work to mitigate supply-chain disruption.  

My comment: Digging further into Boeing’s investor-relations presentations, I was struck by the sustainability report for 2021 that consisted of 77 pages addressing ESG in depth.  The sustainability report defines that they monitor greenhouse gas emissions from operations monthly through use of utility metering, with the emissions factors validated at least annually and updated when appropriate under the World Resources Institute GHG Protocol.  PMA has provided two webinars on ESG, and the emphasis of public companies moving forward could soon involve cataloguing of Scope 3 data, which would include metal forming suppliers.


Fast Company released a list of the most innovative companies in the medical-device industry, highlighting those using new technologies to improve overall patient care.  During the past 2 yr., elective medical procedures have mostly been placed on hold as hospitals are experiencing staff shortages and have prioritized COVID patients.  

Medical companies that I watch, including Stryker and Philips, have experienced nominal performance with Stryker’s sales up 8 percent and Philips’ down 4 percent.  Stryker noted in its Q1 2022 report that given the dynamic supply-chain pressures, COVID-19 uncertainty, and strong orders for capital equipment that it expected 2022 sales to come in at the high end of its forecasted 6 to 8 percent growth. 

The downtime over the past 2 years has allowed the medical sector to reinvent itself and improve its technologies.  HRI reported a trend to localize medical-device reshoring in North America as several new facilities are being built and expanded upon throughout the region.  These new facilities provide opportunities for North American manufacturers to enter new markets.

Small gas engines, lawn and garden-tractor business

The small gas-engine market is projected to grow from $2.4B in 2021 to $3.58B in 2028, a CAGR of 5.7 percent, according to Fortune Business insights. CARB states that there are 16.7M small engines in California alone (vs. $13.5M cars), and 77 percent power residential lawn and garden equipment; federally regulated construction and farming equipment make up 11 percent.  The remaining 9 percent is attributed to commercial lawn and garden businesses. 

However, California Governor Gavin Newsom has approved 2024 legislation that bans the sale of small offroad gas engines (SOREs) in 2024; ATVs and dirt bikes are not affected by the legislation.  CARB states that a commercial operator using one backpack leaf blower for 1 hr. generates the same smog-forming emissions as a car driving 1100 miles, and that the regulation will reduce smog-forming emissions (including NOx) by 72 tons/day. New York, Illinois, Texas and Virginia are looking into similar ordinances. Among manufacturers likely to be affected:  Briggs and Stratton, Honda, Kawasaki and Kohler.


Dave Arndt is principal, AVCMI-LLC (a Harbour Results Inc. partner), president emeritus, Pentaflex, and a past-chair of the Precision Metalforming Association. He prepares this report quarterly for PMA's Press Club networking group.

Industry-Related Terms: Center, Core, Forming, Model, Nominal, Point
View Glossary of Metalforming Terms

Technologies: Management


Must be logged in to post a comment.
There are no comments posted.

Subscribe to the Newsletter

Start receiving newsletters.