Motors industry to raise prices

After rising sharply in November, prices for motors and generators (SIC 3621) retreated 0.14% in December 2002. Prices for fractional horsepower engines, down 0.8%, led the deflationary charge. On the cost front, per-unit spending on manufacturing rose 0.3% thanks to a 1.4% jump in wages paid to factory floor workers.

03/15/2003


After rising sharply in November, prices for motors and generators (SIC 3621) retreated 0.14% in December 2002. Prices for fractional horsepower engines, down 0.8%, led the deflationary charge. On the cost front, per-unit spending on manufacturing rose 0.3% thanks to a 1.4% jump in wages paid to factory floor workers.

Thinking Cap Solutions estimates industry prices in the motors industry must rise an average of 1.5% in order to generate a fair return on manufacturing-related spending. To get a return equal to the one earned a year ago requires a much smaller increase of 0.2%. This means cost/margin-based negotiation strategies favor suppliers. Luckily, demand trends favor buyers. Year-over-year end market growth for SIC 3621 remains mired in negative territory. Buyers can use weak demand conditions as leverage at the negotiation table.

Meanwhile, plant engineers who are buying speed changers, drives, and gears (SIC 3566) face a different environment. After three months of increases, prices for speed changers, drives and gears took a breather, remaining flat in December. On the cost front, per-unit spending on manufacturing edged ahead 0.07% thanks to a 0.35% jump in wages paid to production workers.

Our economic analysis indicates SIC 3566 can afford to lower tags by an average of 1.2% and still earn a fair return on manufacturing-related spending. The road will not be smooth as producers of speed changers and gears struggle with inflation concerns. A roundup of 12-month cost increases shows: U.S.-made raw materials, up 2.2%; imported materials, up 1.7%; production worker wages, up 4.7%; fuels, up 22.5%; and inbound freight, up 3.5%. Note that fuel costs are a negotiation red herring because fuel represents a relatively minor budget item.

Price/cost/demand roundup

Industry SIC Average Product Prices Average Product Prices Direct Mfg. Costs Direct Mfg. Costs Growth in U.S. End Markets Growth in U.S. End Markets

the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs.

Other Hand and Edge Tools34232.210.96stableC-0.380.33
Hand Saws and Saw Blades34250.271.03stableD-2.03-0.38
Other Hardware34291.290.90stableC-2.03-0.31
Other Power Transmission Equipment35681.781.78stableC-5.97-2.67
Conveyors and Conveying Equipment35350.830.32stableC-4.04-3.62
Hoists, Cranes and Monorails35360.710.59stableB-4.52-4.85
Industrial Trucks and Tractors3537-0.02-0.07stableF-1.52-0.63
Metal-Cutting Machine Tools3541-4.84-4.11stableD-7.21-4.43
Machine Tool Accessories35450.900.41stableD-2.510.68
Power Driven Hand Tools35460.640.24stableF--1.43-0.77
Welding Apparatus35481.431.11stableC-3.78-2.47
Pumps and Pumping Equipment35612.662.15stableB-4.05-2.33
Air and Gas Compressors35632.171.98stableA-4.05-2.33
Speed Changers, Drives and Gears35661.251.09stableB-5.97-2.67
Transformers3612-1.89-2.01stableF-4.83-2.90
Motors and Generators3621-0.110.07stableF-5.36-2.65
Process Control Instruments38231.371.19stableA-2.33-0.95
Fluid Meters and Counting Devices38240.350.88stableA-2.33-0.95
Instruments to Measure Electricity38250.810.73stableB0.213.43





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