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Dollar is vital part of Taylor

Weak dollar, better exports factors in Taylor’s banner year

Louisville — Taylor Machine Works is the last manufacturer left in the U.S. that produces a complete line of fork lift trucks and other types of heavy material handling equipment used at ports and other sites where heavy materials need to be moved.

While manufacturing jobs in general have declined significantly in recent years, Taylor — helped by the low value of the U.S. dollar — saw a great year in 2004.

“Business improved dramatically in 2004,” said president Lex Taylor. “During an election year, historically the economy improves. It certainly did in this election cycle. More than that, I think the weaker dollar has been a Godsend to us and American manufacturers, in general.”

Overseas competitors

As the last manufacturer of such equipment in the U.S., the only competition for Taylor is overseas. Therefore, the swing of the dollar is very critical in terms of higher market sales.

“The dollar is a very important aspect of our competitiveness, both domestically and internationally,” Taylor said. “If the dollar is strong, foreign manufacturers are more competitive. Not only do we suffer in international exports, but the foreign manufacturers are able to be more competitive in our domestic market. We see a double whammy when the dollar moves. Certainly with the lower dollar, the foreign manufacturers are less competitive. It allows us to be more competitive in their home markets, so our exports are better.”

The high price of steel — pegged in large part to dramatic increases in demand from China — has had a negative effect on all American manufacturers that use steel. Taylor said 2004 would have been an even better year for those manufacturers who use steel if it weren’t for the high prices.

“That has really dampened our profit margins this year,” Taylor said. “Come April, when the year-end results from American industries come out, those who use steel as part of their product will show less profit.”

The flip side of that is those businesses that produce and market steel had a windfall year. Taylor said that is particularly significant because that industry has been depressed for the past five to seven years.

“The steel industry probably is one of more decimated types of industry outside of the textile industry in the U.S.,” Taylor said. “It has been an amazing turnaround this year because of steel prices. That is really nothing more than a supply and demand issue. There is a great demand and a limited supply. It is has been a boon for those who make and distribute steel. And it has been tough, tough, tough for those who use it in their products.”

Steel price moderation?

The outlook in the future is that there is expected to be some improvement in availability of steel. That should lead to moderation in prices. Taylor predicts prices will be relatively high compared to the past three years, but there should be some movement downward in prices by the middle of the year.

“Despite the weak dollar that makes foreign steel manufacturers less competitive, there is going to be a great increase in importing foreign steel simply because the weak dollar is not having any impact on the price of steel,” Taylor said. “Imported steel is just as competitive as domestic steel despite the weak dollar. We will see supplies coming in from foreign steel greater than we have seen in recent years. The weaker dollar should make foreign steel more expensive, but it hasn’t because of the limited supply and demand in the U.S. That should moderate prices some.”

What about 2005?

The plan for Taylor Machine, which broke some sales records this past year, is to hold its own in 2005 compared to 2004. With such a significant ramp up of business in 2004, maintaining that level of sales would be very healthy for the company.

“We won’t see dramatic improvements in 2005,” Taylor said. “I think we will do great if we maintain the business as we did in 2004. From all the indications we see, the prognosticators are saying the dollar will remain weak and maybe go weaker in 2005. That is encouraging to us as a U.S. manufacturer.”

Taylor added that one of the biggest concerns looming in 2005 for manufactures of high-dollar capitalized items is that 2004 was the last year that bonus depreciation was in force. Because of measures in the Economic Recovery Bill, any company that bought a capital item could immediately depreciate 50% of its value from taxes.

“That was a huge tax avoidance measure,” Taylor said. “And, in addition, you could use the normal depreciation schedule. People took advantage of that to upgrade buildings and equipment. That ended December 31. That could impact sales in 2005. People may have bought more equipment last year to take advantage of the bonus depreciation. It will be interesting to see if people buy equipment at the same level without good tax avoidance. We’re also coming off an election year. Cyclically that tends to lead to a downturn in the economy.”

One concern currently is regarding exports to Chilé. The government of Chilé has passed tariff legislation that encourages the industry in Chilé to buy from Europe rather than the U.S.

“Chilé in the past has been a good market for us in the port area,” Taylor said. “But it has sort of been cut off and, as I understand, a lot of it has to do with some new tariff laws put in at the end of 2003, which I think have dramatically impacted sales of U.S. goods into Chilé. I have written all of our congressmen and senators about this. It is not fair trade, not at all.”

For more information about The Taylor Group, see the Web site www.taylorbigred.com.

Ocean Springs-based freelance journalist Becky Gillette writers regularly for the Mississippi Business Journal. Contact her via e-mail at bgillette@bellsouth.net.


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