The keys to manufacturing recovery

The following is an interview with Carlos Cardoso, chairman, president and CEO of Kennametal Inc., Latrobe, Pa. The interview, conducted by CTE Editorial Director Alan Rooks, took place at IMTS 2010 in Chicago.

Carlos Cardoso

Rooks: The metalworking industry appears to be recovering from the recession more rapidly than some had expected. What are the factors behind the recovery?

Cardoso: This is clearly an industrial-led recovery. One reason is that the recent recession was different than most. It was much deeper and many companies not only took out their finished inventory, they went deeper and took out work-in-process inventory because they were trying to protect their balance sheets. Companies went from managing profit and loss to managing cash. The inventory levels got extremely low and what’s happening now is not necessarily inventory building, but rather inventory replenishment. Also, the global economy is stronger than in past business cycles. Every time we go through a recession, the global economy becomes stronger, and the current recovery is being led by developing countries. So developing countries are having more of an impact on the recovery than they would have 10 years ago. Also, a low U.S. dollar is helping U.S. exports.

Rooks: How has the U.S. auto industry factored into the recovery?

Cardoso: Automotive was obviously very hard hit during the recession, but it has so far been the highest growth industry for us coming out of the recession. In North America, for example, we scrap about 12 million cars a year and for 2 years now the U.S. has been producing below that level, so there is some pent-up demand. I’m sure some people are holding onto their cars a little longer so the 12 million per year scrap rate may actually be somewhat lower, but, even so, production has not kept up with the scrap rate.

Rooks: Why did Kennametal develop separate brand identities for Kennametal and Widia products?