Weak dollar is double-edged sword for manufacturers

Last updated on May 13th, 2019 at 02:41 pm

The declining value of the U.S. dollar is providing a needed boost to many Wisconsin manufacturers. Manufacturers that sell to Europe, China, India and other emerging markets are benefiting from the weak dollar because it makes the U.S.-made products less expensive for foreign buyers. However, for Wisconsin manufacturers that rely on foreign markets for outsourced production and machinery, a weak dollar has the opposite effect – it raises their costs.

American Signal Corp., a Milwaukee-based manufacturer of emergency sirens, has leveraged the weak dollar in its launch into new markets in recent years.

“We believe that it’s helping sell our projects, especially against European companies,” said Chris Roller, sales manager for the company.

Before 2000, American Signal Corp.’s sales were almost entirely in North America, Roller said. After the 2004 tsunami ravaged Thailand and Indonesia, sales of related products rapidly increased in those parts of the world.

“We had a big project that we just completed in Thailand, where we competed against a European company,” Roller said. “(The weak dollar) made our price attractive. We hope it will have the same impact on other projects. In Europe, there are some developing areas we’re hoping to hit this year.”

American Signal has 22 employees, and it is looking to hire two or three more. The company’s revenues doubled in 2005 and increased by an additional 20 percent in 2006, Roller said. The firm expecting to nearly double its sales again this year.

Similarly, locomotives, passenger cars and related equipment made by Milwaukee’s Super Steel Corp. for original equipment manufacturers (OEMs) are in global demand, said Keith Trafton, president and chief executive officer.

The locomotives that Super Steel helps its OEM customers produce sell for several million dollars, and any price break for customers can work for the company’s advantage, Trafton said. The company now forecasts strong sales in Europe and Asia into 2009.

“We see it as an opportunity,” he said.

Super Steel has about 780 employees in Milwaukee and Schenectady, N.Y. The company is planning to improve efficiencies at those plants in the coming years, increasing output, while maintaining current staffing levels. The company had about $100 million in revenues for 2006 and anticipates an increase of about 15 percent for 2007, Trafton said.

The weak dollar has helped Milwaukee Forge, a Milwaukee-based metal forger of carbon, alloys and steel, gain new orders for its rolled rings products, according to Bob Buss, vice president of sales and marketing.

“For rolled rings, there aren’t a lot of manufacturers (in the world),” he said. “Since the world has gotten smaller in the 1990s, we’ve lost several million dollars of business to European companies. With the exchange rates being so favorable, we’ve seen some of that come back.”

The weak dollar has opened a few new doors for Milwaukee’s NORAM Power Transfer Solutions. NORAM makes clutches that are used in lawn and power equipment, go-karts and related gear. Some of its clutches are exported to China and other developing nations, where they are incorporated into equipment being built there, said Jeff Hargarten, president and chief executive officer of the company.

“We’ve gotten a few new orders from Turkey,” Hargarten said. “They were making stuff on their own. They saw our prices, they were very competitive and decided to outsource from us.”

However, the lower-valued dollar also has hurt NORAM, Hargarten said, because of inflation.

“The weaker the currency becomes, the higher the interest rate goes, and that starts to hurt us,” he said. “I’d rather have the interest rate lower and a few less minimum sales.”

The weak dollar has also hurt American Signal Corp., even though it’s provided the company with growth opportunities. Roller said the company could not afford to buy equipment made in Australia because of the exchange rate, even though it had purchased similar machinery in 2000.

“It was double the price we paid for it in 2000,” he said.

Companies that rely on outsourcing from China have felt the pinch because of the weaker dollar. Gerald Mengo, president of Kenosha-based Mengo Industries Inc., which makes fishing, tackle and marine products under the Dotline name, said his Chinese suppliers have used a weak dollar to justify price increases on outsourced materials.

Mengo Industries outsources materials such as aluminum tubing and woven bags for fishing nets.

“We just got done placing a substantial order for aluminum tubing,” he said. “We sent over the purchase order with the last pricing we had, and it comes back revised per the Chinese dollar that bumps it up just under 2 percent.”

Manufacturers that use foreign outsourcing need a stronger dollar, Mengo said.

“It would mean we could buy more of our overseas product for the same dollar,” he said. “We would be buying more raw materials. Now we are buying less.”


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