Manufacturers See Upside to Weak U.S. Dollar

“Over the last six months, activity from the U.K. to the U.S. has picked up dramatically. Before that, it was insignificant,” says Mitch Free, owner of Mfg.com, a Web site for sourcing and selling manufacturing services. “We also see work coming back from Canada because the Canadian dollar now has a 28% disadvantage against the U.S. dollar. Canadian manufacturers who get contracts from the U.S. tell us they are scrambling because their profit margins on that work is often less than the 28% decline.”

Other observers have noticed the impact of low-cost dollars, but say the benefits are hard to quantify.

“I would say the manufacturers I follow have benefited to some degree,” explains KeyBanc Capital Markets securities analyst Jeffrey Hammond. Hammond also says the value of the dollar has changed the economics of offshoring. “Companies trying to be vertically integrated are now more likely to keep work in the U.S. when there is intellectual property built in. These jobs would have been candidates for being sent elsewhere. Now, that isn’t going to happen.”

The argument for manufacturing in the U.S. seems particularly compelling for components going into products that ultimately will be sold here. That was the case for Mc- Daniel Manufacturing in Diamond Springs, Calif., a machining job shop. Owner John McDaniel says his firm recently used Mfg. com to get an order from a U.K. supplier of refurbishment kits for printer and copiers. The customer is now convinced of the economies available by manufacturing in the U.S. and aims to send more work here, McDaniel says.

For similar reasons, Custom Build Golf Co. in the U.K. recently outsourced a swing arm and framework to the U.S. The components are part of an exercise machine for aspiring golfers. Owner Willie White says the cost of making components in the U.S. was about the same as that for the U.K. China was cheaper, but, “I wanted to avoid having parts made there. Quality was also important. At some point in the near future I plan to sell in the U.S. So U.S.-based manufacturing made sense as a way to make distribution that much easier,” he explains.

Jon Wilbrecht, owner of Wilbrecht Electronics in Huron, S.D., says similar factors brought his company work from Switzerland. Microprecision Electronics, a Swissbased maker of custom microswitches and sealed position switches, now sends parts to Wilbrecht.

“Four years ago, when exchange rates were switched around, they probably wouldn’t have moved that operation here,” says Wilbrecht. “Now rates are favorable. And their product is a standard part that is customized for the application. So we can do the customization locally and give better turnaround.”

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Microprecision Electronics in Switzerland moved some manufacturing activities to Wilbrecht Electronics in Huron, S.D., partly because of favorable exchange rates. Wilbrecht’s quality systems put in place to support precision lead welding of NASA-qualified, metal foil resistors also played a role in the decision.