The credit crunch, along with the downturn in business has many welding/fabricating companies rethinking their equipment purchasing strategy. A report released by Agie Charmilles shows that machine shops' business activity and financial strength both weakened sharply in January to the worst levels since at least October 2004. The Agie Charmilles Business Activity Index, generated exclusively by Agie Charmilles, was down to 49 in January from 60 in December. However, that picture isn't the entire story. Many shops are buying new equipment, and negotiating some good deals at a time when machine inventory is high. Harry Moser, Chairman of the Board of GF Agie Charmilles, said that while machinery sales are good, they are not “overall great” citing the downturn in the automotive industry taking its toll on the machine tool industry in the Midwest.

Moser agrees that one bright spot is that some machining/fabricating work “returning” from Asia. “The costs to manufacture, ship, and then rework it - when you get all of that factored in - it makes more sense to bring it back to the U.S.,” he said.

Fabtech/AWS 2009 didn't generate the usual “uptick” in machine tool and welding equipment sales that it typically generates. However, the accelerated depreciation from the Economic Stimulus Package, which is the second time the government has done this, was a “psychological encouragement” for buying new equipment more than an economical one. “It's a shift forward in your tax deduction — a net present value in those future years brought to now,” said Moser. “We'd probably be seeing 5% fewer orders without this incentive.”

Pat Simon, director of marketing for MC Machinery Systems Inc. (www.mitsubishi-world.com) supported that outlook, and said that business was good during the third quarter of 2008, he expected that trend to have continued through November and December. “There was a lot of push [in the third and fourth quarters] because people are afraid that Obama won't extend the tax incentives for small business — the 179 tax incentive,” Simon said. “Coming off IMTS and Fabtech we saw a huge dip in the stock market which scared people. We have a lot of the wait-and-see customers, but they are still quite busy. On the fab side of the business, it's has been very good for lasers, press brakes, and waterjets. On the straight machining side — EDMs and mills — it's been a bit flat.”

Mitsubishi offers in-house financing for its customers through MAC Funding, which is Mitsubishi's bank. After Fabtech last fall, MAC Funding was offering no payments for 90 days and rates ranging from 4.9% to 5.9%.

“We can buy down the rate, so we have more control over the rate,” said Simon. “With MAC Funding, we're able to be more flexible in financing because we only fund machines. We'll look at a company differently than regular bank might. If it's a startup company but they have a good business plan, or even if they have a lower rating, we'll give them a good rate. Having in-house funding for our customers provides us with the flexibility to keep orders going and supply customers with an option they can't get anywhere else.”

Lloyd Keller, national sales manager-Forming, for Murata Machinery USA Inc.'s machine tools division, (www.muratec-usa.com) said, “We have to be more conscious of a customer's credit rating. and that of their bank's. We typically file a UCC1 to protect the dealer and the manufacturer.”

However, Keller added that business is strong and sales are being helped by lower interest rates and tax incentives. “People who are ahead of the game are taking advantage of these breaks and buying equipment. Those who aren't will be hurting when things turn around.”

North American Cutting Systems (www.nacs-inc.com), the sales and service arm Profile Cutting Systems, manufacturer of laser and plasma cutting machines in Melbourne, Australia, sold a plasma-cutting machine that was on the floor at Fabtech. The machine was sold to Valley Fab Corp. in Brooks, Ore. Dennis Phillips, vice president of sales for Profile Cutting Systems, said, “Business was probably in a better position last year than in quite a while. The company had good cash returns and is not borrowing funds.”

Saz Yakis, owner of Valley Fab Corp, a full-service fabrication, machining and manufacturing company, said he bought the new plasma cutting system to replace an older unit. “We're upgrading, trying to keep up with technology to stay competitive,” said Yakis. “Business is good and for the most part we're holding our own. 2008 was a good year and so far 2009 looks like it will stay that way.”

Ryan Willette, director of sales and marketing for Matrix Metalcraft Inc. (www.matrixmetalcraft.com), said that new business is driving that company's purchases. Recent investments include a Mitsubishi VZ1 5-axis laser cutter with pallet changer, and a second Mitsubishi Laser NX 5-axis laser cutter purchased last fall. In total, the company has four lasers: two 3-axis laser cutters and two 5-axis laser cutters. Matrix Metalcraft is a full-service fabrication company with welding, stamping, metal-forming, press brake and low-volume and high-volume production and prototyping capabilities. It serves the military, heavy truck, aerospace and aircraft industries. “The Mitsubishi Laser NX was purchased because of some new business we picked up that warranted buying another laser,” said Willette. “We couldn't sustain the amount of business we had with just the one 3-axis running 24/7. There's business out there and expanding our capabilities helps keep us competitive.”

Keeping up with technology is also a factor for Matrix Metalcraft. “Technology changes so much in just eight years since we bought our first 3-axis laser in 2000,” Willette explained. “The new one is faster — it cuts at twice the speed with a 6,000-watt resonator, more powerful, and more accurate. It gives us the ability to cut thicker material. Before, we had to turn away business because we couldn't cut 3/8”-thick plate. The NX also allows us faster turn-around of up-armoring for military vehicles by being able to cut up to 1-inch-thick armor plates, 1-inch stainless steel and .50-inch aluminum.”