SIC 3541
MACHINE TOOLS, METAL CUTTING TYPES



This industry details establishments primarily engaged in manufacturing metal cutting type machine tools, not supported in the hands of an operator when in use, that shape metal by cutting or use of electrical techniques; the rebuilding of such machine tools; and the manufacture of replacement parts for them. Also included in this industry are metalworking machine tools designed primarily for home workshops. Establishments primarily engaged in the manufacture of electrical and gas welding and soldering equipment are classified in SIC 3548: Electric and Gas Welding and Soldering Equipment ; those establishments manufacturing portable power-driven handtools are classified in SIC 3546: Power-Driven Handtools.

NAICS Code(s)

333512 (Machine Tool (Metal Cutting Type) Manufacturing)

Industry Snapshot

The metal cutting industry is concerned with the removal of metal from a larger piece of metal to create a desired shape. Metal cutting, also referred to as machining, is performed on most manufactured items. The uses range from low-precision machining, such as grinding undesired protrusions from a rough casting, to high-precision machining, which involves working tolerances of less than half the thickness of a human hair (0.0001 inch). Classic metal cutting produces scrap pieces, called chips, that are relatively useless and generally cannot be reused through remelting or pressing. Both the environmental and economic consequences of such waste have created new processes referred to as chipless machining. General machining processes include turning, shaping, milling, drilling, sawing, abrasive machining, and broaching.

The machine tool industry as a whole is closely tied to national and world economic conditions. The total shipments of metal cutting machine tools dropped sharply between 1982 to 1983 from $4.5 billion to below $3 billion. From that point, shipments recovered somewhat, but remained greatly reduced. The worldwide recession of the late 1980s and early 1990s created a trough in machine tool-related sales. Shipments between 1990 and 1994 varied only slightly, hovering around $3.5 billion. By the late 1990s shipments had recovered, climbing to $5.33 billion in 1997; however, levels began to decline again in 1998, a trend which continued into 2000, when shipments totaled $4.48 billion. In the late 1990s, 369 establishments participated in this industry.

The prices for metal cutting machine tools ranged from under $100,000 to several million dollars, depending on the sophistication and purpose of the tool. Multiple machining centers, capable of performing several metal cutting processes, were becoming more popular with larger companies interested in decreasing the amount of time handling materials between machining stations.

As worldwide competition increases in areas of quality and precision, U.S. machine shops will be forced to update or totally replace machine tools with those that possess higher levels of technical innovation. However, a significant downward trend in employment levels continued through the late 1990s and 2000 as machine tool manufacturers cut direct labor costs. This trend, a disheartening one for those seeking employment in this industry, has come about due to higher levels of automation throughout all related industries and the continued drive to manufacture still more automated machine tools.

Half of the machine tool market is concentrated within the automotive industry, one-quarter within nonmechanical industries, and the remainder within aerospace, defense, and other industries.

Organization and Structure

Four major categories comprise this industry: classic machine tools; automated machine tools; expendable tools; and machine tool repair. Classic metal cutting machine tools are characterized by manually operated, power driven (usually electric) stationary machines. These machines are operated by skilled machinists with relatively good trigonometry skills. The demand for these machines has dropped, giving way to the use of automated machine tools.

Automated machine tools are more commonly known as numerically controlled (NC) machine tools. NC machines use a generated program of coordinate values (numerics) to move machine parts quickly, with consistency and precision. Downtime between tool changes is minimized, compared to classic machining methods. The information is loaded into the machine by punched tape, punched cards, or magnetic tape that has been generated by a computer program written by an NC programmer. The NC machines have given way to computer numerically controlled (CNC) machines due to the affordability of microcomputers. The next wave of NC machines is expected to include downloadable numerically controlled (DNC) machines, which are network-based CNC machines. This technology reduces the steps between design engineering and manufacturing. All NC machines created a large market for manufacturers of machine controls, and increased microcomputer markets. Chipless machining processes implement some form of NC capabilities to the various machine configurations.

Expendable tools are the actual cutting pieces that wear as a result of use. Therefore, this segment of the industry is closely tied to client industry levels of activity. Although many of these tools can be resharpened and reused, many machine shops find it more economical to replace the tool once it is worn. When industry success is high, this segment of the industry experiences increased sales.

Machine tool repair has become a more specialized segment due to the increased popularity of NC machines. The nature of this business category requires that repair technicians have adequate computer hardware/software trouble-shooting skills. Machine tool repair in the late 1990s was thus closely related to computer electronics as well as mechanics.

Background and Development

Various machine tools have been crafted through the centuries to address man's specific needs, but it was the invention of the clock in 1364 that created a need for higher precision machining methods. Clocks require accurately turned arbors, machine-cut gears, and screw threads. The concepts of precision and consistency in product quality thus pushed machine tool technology to the point that, by the seventeenth century, clock making was regarded as a particularly painstaking craft.

During the second half of the eighteenth century, the barriers between pure science and workshop technology were dissolving. Scientists began interacting more closely with mechanical engineers, spawning new ideas for improved machining techniques. The steam engine was born from this interaction, an invention that drastically increased the potential of the machine tool in the minds of the industrial leaders of the day. The industrial age was afoot. This period was greatly influenced by Henry Maudslay, who is known as the man responsible for the introduction of many of the early engineering machine tools.

Maudslay introduced the concept of precision to heavy machinery, which before that time had been only the concern of watch and scientific instrument makers. In the early 1800s he made the first screw-cutting lathe, a device that remains the standard even today. His second great contribution was the creation of a method of finishing a plane surface with a surface plate, marking compound, and hand scraper. Maudslay also constructed a micrometer in 1805 that enabled machinists to measure work to one tenthousandths of an inch. Maudslay's successors furthered his craft and assisted in the evolution of machine tools, thus encouraging the industrial revolution.

Today, metal cutting tools remain very similar to those used in the nineteenth century. The implementation of computers has increased the precision and time efficiency of the metal cutting tools, but the basic processes have not changed significantly. However, new metal cutting advances are gaining acceptance and applicability in industry, whereby metal is eroded by chemical discharges, electric discharges, water jets, and laser beams. These advances could again bring significant changes to the methods employed to cut metal to achieve a desired shape.

In the early 1990s, the industries placing the most orders with metal cutting machine tool manufacturers had limited orders due to large financial losses, as exhibited by the poor performance during that time of some American auto makers. Decreases in spending by farming and construction industries in the late 1980s and early 1990s were offset by the aerospace industry. However, this industry also suffered due to the financial instability of various airline companies, as well as military spending cutbacks. The condition of the industry was attributed to three factors: high sensitivity of the industry to the overall health of the economy; a lag time of a year between economic improvements and growth in machine tool shipments; and long-term decline in machine tool demand.

Current Conditions

After peaking in 1997 at $5.33 billion, the value of shipments for the metal-cutting machine tool industry began to drop. One reason for this decline was the collapse of Asian economies—an essential market for U.S. manufacturers' machine tools. As Asian currencies rapidly devalued, the construction and automotive industries in once-expanding economies such as China curtailed spending. A market analyst explained the effect on the metal-cutting machine tool industry to Manufacturing Automation by saying that "the sudden drop in purchases by Asian economies caused a supply glut and an over-capacity in manufacturing." Moreover, a widespread strike by General Motors workers eroded demand for machine tools from U.S. car companies. Shipments fell to $5.2 billion in 1998, to $4.6 billion in 1999, and to $4.4 billion in 2000.

Industry Leaders

In 1998, Giddings & Lewis, a subsidiary of Thyssen Krup AG, was the largest manufacturer of industrial automation products and machine tools in the United States. With operations in over 70 countries, Giddings & Lewis sold its tools under brand names such as Cordax, Fadal, and Giddings & Lewis. The company's key clients included the automotive industry—especially the Ford Motor Company—as well as firms in the aerospace, construction, and defense sectors. In 1998, the Fond du Lac, Wisconsin-based company employed 3,100 workers.

Milacron Inc. had maintained a rare position in the early 1990s by reporting profits at a time when other metal cutting machine tool manufacturers were suffering losses. These salubrious results were largely due to the company's diversified interests outside of the machine tool industry, including plastics machinery, computer controls, measurement and inspection equipment, and grinding wheels. In 1996 Milacron reported record sales of $1.73 billion, with machine tool sales remaining level with 1995 at about $372 million. However, in 1998, the company reported falling sales because of weakened Asian demand for its products, as well as the General Motors strike that temporarily closed GM factories. 1998 sales were $1.5 billion, while employment levels declined slightly to 11,855.

Ingersoll International Inc., of Rockford, Illinois, was another leading company in the metal cutting machine tools industry. Ingersoll produced machine tools, manufacturing systems, and metal-cutting told to a number of businesses in the transportation, construction, and agricultural sectors. With 1998 sales topping $611 million, Ingersoll manufactured 40 percent of its products in Germany, and the remaining 60 percent in the United States.

Bridgeport Machines Inc., a subsidiary of Goldman Industrial Group, reported 1999 sales of $179 million. With its 934 employees, the company manufactured manual milling machines, machining centers, and CNS controlled manual tool change milling machines. Well aware of the technological changes sweeping the industry, Bridgeport also created software for machine control and computer assisted manufacturing. Based in Bridgeport, Connecticut, the company sold its products to small job shops worldwide.

The industry leaders in NC machine tools are General Electric and Allen-Bradley, both of which primarily manufacture control systems. Expendable tools, such as drills, taps, chucks, and reamers are produced by TRW Geometric Tools, Acme-Cleveland, and National Twist Drill, among others.

Workforce

A total of 23,896 workers were employed in the metal cutting machine tool industry in 2000. Of this total, 13,721 were production workers, who earned an average wage of $18.84 per hour—well-above the national average for manufacturing jobs. Most people employed by this industry reside in the Great Lakes region and the northeastern United States (Michigan, Ohio, Illinois, Wisconsin, and New York), as well as in California. In 1997, 89 hundred metal cutting-related establishments and 5,761 employees called Michigan home, with 21 percent of all American machine tool shipments originating in that state. With its 46 companies and 4,382 employees, Ohio accounted for 16 percent of the industry's total shipments in 1997.

America and the World

Throughout the 1980s, the Japanese provided stiff competition for American manufacturers of metal cutting tools. In 1974, the United States enjoyed a machine tool trade surplus relative to the Japanese. In 1991 that surplus had been transformed into a $1 billion trade deficit. As a result, seven of the world's largest machine tool companies were based in Japan in the early 1990s. An increasing German presence also threatened the U.S. metal cutting industry, as German companies produced some of the leading specialty CNC machines. German metal cutting machine tool manufacturers had a successful 1998, in which the overall tool market grew 21 percent. Exports were an important facet of these good fortunes. In 1998, German exports rose 9 percent, with the United States named as a major export market, according to Industry Sector Analysis.

Between 1992 and 1997, imports of machine tools rose dramatically at an average annual rate of 18.2 percent. In 1995, import penetration had reached 39 percent. Nevertheless, American metal cutting machine tool manufacturers saw their exports rise during this period, as well. According to Manufacturing Automation , exports increased at an average annual rate of 10.5 percent. The economic crisis that buffeted the economies of Asia and Latin America in 1997 reversed this trend, however, as export markets eroded and foreign producers achieved significant cost advantages due to favorable exchange rates. As a result, the level of exports in 1998 stagnated while imports increased an additional 11.5 percent.

Research and Technology

Due to the limitations and adverse side effects of traditional machining, chipless machining processes have been developed. These processes are primarily concerned with chemical, electrochemical, electrodischarge, water jet, and laser machining techniques. Intricate parts require non-traditional machining methods and the advent of the computer age have hastened the research and development of chipless machining processes. As NC controls become more sophisticated, environmental laws grow more stringent, and technology advances, the need for chipless machining processes is expected to increase. Promising technological developments in the later 1990s included robotized water jet cutting systems (developed by Ingersoll-Rand Company of Woodcliff Lake, New Jersey, and a Swedish partner) and sophisticated laser cutting systems.

Further Reading

"Giddings & Lewis, Inc." Hoover's Company Capsules , 1997. Available from http://www.hoovers.com/ .

"Domestic Machine Tool Demand Should Moderate After Peaking in 1995." Manufacturing Automation , 1 March 1996.

"Industrial Laser Shipments Shine Through Third Quarter." Manufacturing Automation , 1 March 1997.

"Machine and Plant Floor News." Manufacturing Automation , 1 September 1999.

"Machine Tool Market by End Use." Market Share Reporter. 7th ed. Farmington Hills, MI: Gale Group Inc., 1997.

"Milacron Reports Record Orders, Sales and Earnings in 1996." PR Newswire , 7 February 1997.

United States Census Bureau. "Machine Tool (Metal Cutting Types) Manufacturing," October 1999. Available from http://www.census.gov .

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

"Waterjet Cutting Now Available for Fully Automated Production Lines." Manufacturing Automation , 1 February 1997.

Weydman, Ulrich. "Germany: Metalworking Machine Tools market." Industry Sector Analysis , 25 May 1999.

Young, David. "Mammoth Machines Get Fitting Showcase." Chicago Tribune , 4 September 1996.



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