Industry Consumption Down 45 Percent, Yet Huffman Market Momentum Continues

FROM THE PRESIDENT'S DESK
by President Roger H. Hayes

The most recent US machine tool consumption figures reported a 45% decline in machinery orders for the first quarter 1999 over the same period one year ago. Although some analysts are foretelling the industry is headed for a recession, facts indicate that many companies' sales are still at a healthy level in a recovery period that has lasted eight years from the previous business recession.

Wall Street refers to a recession, or an economic slowdown, as a "bear" market. In slower times, businesses have fewer orders, lower profits and thus put a hold on capital spending for new equipment and building additions. Our industry is naturally impacted by such a scenario. However, with early planning, a bear market can be a chance to favorably alter one's competitive market position.

Seeds of Failure or Success

Although everyone prefers a "bull" market, that is, an expanding economy, recessions are a normal part of the economic cycle. They are not good or bad any more than winter following autumn.

The desire for more profit motivates businesses to provide better quality, improve service, lower prices and develop new products. According to MIT Economist Lester Thurow, a selfish approach can overtake companies, industries and whole economies, toward the end of a "bull" market. Companies forget the customer and think only of themselves. Greed triggers recession.

The Dow Jones stock averages on any given up day may show two-thirds of the firms ahead and one third behind. On a "down" day the reverse may be true. This is the case during a business recession, too. A good percentage of the companies still do well during down economies. Thus the business maxim that says, "Market share gains are made in down markets." Smart firms plan for their customers' futures and dismiss themselves from the eventual shortcomings caused by greed.

Outsmart Competitors

For most of the eight-year up market, Huffman has been under severe sales pressure by foreign competition who have enjoyed government subsidies and favorable currency exchange rates. Now the underdog is in the attack mode and rallying to the occasion.

Already in this recent industry sales decline, one US competitor has filed for bankruptcy, and two others have been sold to larger holding companies. To help sagging income, both have raised prices 15-20%. US imports of machine tools from Australia were down 35% in 1998 over 1997, falling below the 1996 level.

Still, Huffman sales continue on the upswing with our overseas "partnership" in the UK. We currently hold a quality, productivity and pricing edge over European competitors. Our upgrade and retrofit packages are being heartily embraced by our installed machine base as well.

New Strategy Paying Off

Our collaborative process development approach to selling has our focus on the successful application of our machines rather than on selling one-size-fits-all machines like some of our competitors do. Our modular design allows us to customize products to match specific customer needs, providing higher productivity at far less cost.

One competitor boasts to the marketplace of their economical disposable-type machine as a far better value than the Huffman "overbuilt" machines. They had quite a burst in sales for a number of years. Today, the production customer demands more reliable, precise and productive equipment. As recession looms, the throwaway machine providers find themselves with an installed base of unreliable machines and a poor performance reputation.

Positive Future

Huffman is in a strong competitive position with new products aimed specifically at target markets, a new PC-based Open Architecture Control, a full plate of upgrades and retrofit products to add higher productivity to older machines, and a solid reputation for handling customers with their futures in mind. This track record for delivering value over time becomes more critical in recessions when customer capital is scarce and one wants to eliminate undue risk in buying new machines.

By remaining focused on partnering with our customers in helping them process parts better, faster, cheaper and safer for themselves and/or their customers, Huffman will sustain its high value reputation, survive the recession turmoil, and keep a good long step ahead of competition.