|OUT OF GAS Firms report few design opportunities from U.S. manufacturers for new auto plants.|
Concern about the impact of the Iraq War on manufacturing has largely diminished, but designers still worry about the effect on capital spending of soft demand in a lackluster economy.
"General manufacturing is at a terribly low ebb and not picking up very quickly," says Dick Bither, executive vice president of buildings practice at ARCADIS, Detroit.
Manufacturing activity picked up in May, although the sector is still contracting, according to the Institute for Supply Management. The Tempe, Ariz.-based trade organizations purchasing managers index rose to 49.4 from 45.5 in April. But the slight improvement still leaves the index below 50, which indicates that the manufacturing sector is contracting, says ISM.
Despite the weak economy and global uncertainty, domestic light vehicle sales totaled 16.8 million vehicles in 2002the fourth-strongest sales year on record, according to the National Automobile Dealers Association, McLean, Va. For 2003, NADA expects sales of 16.3 millionthe fifth consecutive year of sales of above 16 million, says chief economist Paul Taylor.
But design firm executives claim those robust sales are not translating into new plant work, which remains flat at best and is expected to stay that way for a while. Carl Roehling, president and CEO of Detroit-based SmithGroup, predicts his companys automotive work will be down five to 10% in 2003.
In late May, DaimlerChrysler announced it was scrapping plans to build a greenfield pick-up truck assembly plant in Windsor, Ontario, due to market pressure, ongoing finance incentives and increasing overcapacity. "The Big Threes capital spending is related to retooling and new modelsnot adding capacity for the sake of capacity," says Arcadis Bither. His firm is working on a renovation and expansion of General Motors assembly plant in Lordstown, Ohio.
Most investment in U.S. auto manufacturing capacity is coming from the foreign manufacturers, say design firm executives. ARCADIS is designing a 2-million-sq-ft facility in Montgomery, Ala., for Hyundai USA that includes an assembly plant, body shop, engine plant, stamping plant and paint shop. And Detroitbased Albert Kahn Associates Inc. is working on a $225-million expansion to the Mercedes-Benz M-Class body, paint and assembly shop in Tuscaloosa County, Ala., slated for completion in July. Kahn designed the existing plant in 1994.
Automakers and other manufacturers are showing a growing interest in environmental building issues. "Its still early, but were seeing more interest and awareness of sustainable development in the manufacturing industry in general," says Bither. His firm is architect and engineer of record for Ford Motor Co.s $2-billion upgrade of its 85-year-old River Rouge plant in Detroit. The project includes a new 600,000-sq-ft truck assembly plant and initiatives aimed at managing stormwater and cleaning soil of contaminants.
Another example of sustainable development is a research and office facility for automotive supplier Visteon Corp., designed by SmithGroup. The 1-million-sq-ft complex under construction in Van Buren Township, Mich., is situated so that wetlands are retained and people have access to trails throughout the 265-acre site, according to Roehling. Water from a man-made lake will be used for cooling and fire protection.
In aerospace, the U.S. share of the global market has fallen from 72% of aircraft sales in 1985 to less than 52% today, says John W. Douglass, president of the Aerospace Industries Association of America Inc., Arlington, Va. The aerospace industry also has seen a 13% decline in its work force since Sept. 11, 2001, says AIA. The association predicts that sales of civil aircraft will decline by nearly $20 billion between 2001 and the end of this year.
But opportunities with the Dept. of Defense and NASA are expanding, says Roger Starr, president of Jacobs Sverdrup, Tullahoma, Tenn. In May, Jacobs received a $126-million contract to provide test operations services at NASAs John C. Stennis Space Center, near Bay St. Louis, Miss., and at Marshall Space Flight Center in Huntsville, Ala. Jacobs will support rocket propulsion and component testing at both sites. Jacobs also provided architecture and engineering for the recently completed propulsion research lab at the Huntsville facility.
Firooz Israel, senior director of defense and government at Lockwood Greene, Spartanburg, S.C., says his company currently is working with Lockheed Martin on facilities for the F/A 22 fighter in Marietta, Ga. In the past year, the firm completed two smaller projects for Lockheed in Forth Worth, Texas, and Palmdale, Calif., that included work on facilities for the Joint Strike Fighter. Israel also predicts that security concerns will increase funding for development of unmanned aircraft.
The semiconductor market appears hardest hit among manufacturing sectors. Design firm executives report continued flat spending for the past two years in the U.S. domestic market due to excess capacity in chip fabrication facilities.
Much of this unused capacity has accumulated as a result of tremendous technological advances, say sources. "In the 1990s, construction [of chip manufacturing facilities] was running at 20 to 30 new fabs per year worldwide, compared to only two or three today," says Randy Smith, vice president of the electronics division of Industrial Design & Construction, the Portland, Ore.-based industrial services division of CH2M Hill Cos. Ltd. Just two or three facilities using current technology have the capacity to produce the same number of chips produced by 20 to 30 factories using 1997 technology, he explains.
In the midst of market contraction, IDC is making an effort to use its skills in other markets. Among other things, the firm is using its expertise in designing high-purity process piping for pharmaceuticals and food processing clients.
A major shift in worldwide semiconductor consumption with rising chip consumption in Asia and the Pacific Rim is having a dramatic impact on the U.S. market, say experts in the industry. Sales in the Asia-Pacific marketthe worlds largest with 36% of total chip consumptionas of March rose 17.2% over the previous 12 months, according to the Semiconductor Industry Association, San Jose, Calif. Sales in the Americaswith a 20% market sharefell 8% during the same period, the association reports.
Construction of new facilities seems to be following the same patterns, say industry sources. "Since taking a hit two years ago, microelectronics has been down and new construction appears to be going to China and other offshore places," says Pete Primm, vice president at Lockwood Greene. While the focus of the U.S. semiconductor industry is primarily in the Southwest, Primm says most new construction will occur in Asia and the Pacific Rim.
To follow the work, Lockwood Greene has shifted its strategy toward establishing a greater offshore presence while maintaining existing U.S. business, Primm says. The company has set up offices in Shanghai, Bangkok, Singapore and Malaysia.
Despite ongoing market pressure and demand for reduced production cycle time, some design executives are upbeat about future prospects. Primm says he has observed more activity in the past few months and expects companies are beginning to unleash spending again after a prolonged period of pent-up demand. "Were optimistic," he says.