Manufacturers Make Do with Old Equipment

October 6, 2013

As American manufacturing continues to improve, news reports about industry inevitably focus on the technological advances that drive many modern facilities. But not all of the nation’s factories are teeming with robots and high-powered computer systems. Due to razor thin operating budgets, a number of plants across the country use the same machinery they’ve relied on for decades. For instance, an Alcoa plant in Cleveland still presses aluminum alloys with a 50,000-ton forging machine that arrived on American soil from Germany in the 1950s as part of reparations for World War II.

For Alcoa and a host of other manufacturers, it often makes more economic sense to upgrade old machinery than to replace it outright. With the American market still growing slowly, many companies can’t afford to risk the expense of implementing new equipment. Instead, machines like Alcoa’s aluminum forge, which was declared an historical landmark in 1981, have a few parts upgraded and computer controls added to make them slightly more efficient. Other equipment operates by even more archaic means, such as the football-field sized, partially steam-powered papermaking machine used at an International Paper mill in upstate New York.

But just because that’s the way the company does business in Ticonderoga doesn’t mean that’s how it operates worldwide. Paper demand has been shrinking in the U.S. for years, leading some to speculate that domestic plants may disappear entirely within a few decades. Meanwhile, demand for paper has been growing faster than ever in expanding economies like Russia, Brazil and China. International Paper doesn’t settle for steam power in those countries: the company’s operations abroad tend to feature state-of-the-art equipment and computer software. In fact, manufacturers across the board have become less willing to invest in older domestic plants. In 2010 companies spent $152 billion improving their home market factories, a 22 percent decrease from 10 years earlier. Conversely, over that same period capital spending outside the U.S. increased 64 percent to $107.3 billion.

 

Questions:

  1. What’s a key reason firms renovate instead of replace key production systems?
  1. Is the United States in danger of losing its edge in manufacturing?

 

Source: James R. Hagerty, “Forget Revolution. More Like Renovation,” The Wall Street Journal, June 11, 2013. Photo courtesy of Bob Jagendorf.

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