For the fourth quarter of 2006, planned maintenance work spending in the U.S. industrial manufacturing industry is expected to be down 25 percent compared to the same time period in 2005, according to Industrial Info Resources.
Although more maintenance projects are currently projected, almost 100, for the fourth quarter of 2006, the overall spending total for the quarter is seen dropping to $175 million. In the 2005 fourth quarter, abput 80 maintenance projects worth $236 million were planned, the report said.
Usually industrial manufacturing plants shut down their operations in July and in December, two months that have major holidays and make it easier for facilities to close for a time to perform routine maintenance work and keep plants up-and-running.
The suffering U.S. auto industry can be held responsible for the decline in maintenance spending for fourth quarter of 2006, as the problems at GM, Ford and a several of their major suppliers, such as Visteon and Delphi, have caused a decrease in overall spending.
Although the automakers and their suppliers are still planning to perform the routine maintenance they do each year, they are decreasing some of the spending associated with these maintenance programs. Much of the spending will be only for necessary maintenance to keep plants running, rather then performing complete maintenance programs.
The auto industry is delaying as much maintenance work as possible, with the hope that by the next scheduled maintenance work in July 2007, business will have turnaround and there will be more money available for maintenance spending.
Foreign automotive assembly companies and their tier suppliers, though, are not encountering similar limits on spending. With market share continuing to move in their favor, foreign automakers are not feeling the same types of pressures to reduce spending compared to American automakers and are able to spend what is needed to perform annual maintenance work.
Maintenance spending is highest within the Great Lakes region, where the automotive industry maintains the majority of its manufacturing presence. Almost half the money being spent during the fourth quarter within the Industrial Manufacturing Industry will fall within this region - about $82 million spread across 40 maintenance projects.
The Southeast region has the second most spending with 12 projects representing $26 million worth of maintenance spending - the Southeast region is where foreign automakers have increasingly set up shop.
Illinois will be spending the most this winter with with $26 million in maintenance spending followed closely by Tennessee with $23 million. Rounding out the top five maintenance spending states are Michigan at $19 million, Indiana at $17 million, and Ohio at $13 million, Industrial Info said.
If the U.S. auto industry cannot find methods to reduce overall costs and curtail harmful spending habits, the reduction in maintenance spending will pose severe problems for the future. The delay on investment in routine maintenance spending can lead to more significant capital spending as equipment begins to fail due to overuse and lack of repair, the report notes.