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Weak Dollar Can Bode Well for Manufacturers

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Weak Dollar Can Bode Well for Manufacturers


Weak Dollar Can Bode Well for Manufacturers

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The weaker dollar may not be good for Americans traveling overseas, but it is good for U.S. manufacturers. It makes their exports cheaper overseas, and so they sell more products. In a global economy, the relationships between U.S. companies and overseas markets are complicated, so not all exporters are happy about the falling dollar.

That's what NPR's Jim Zarroli discovered when he spent some time with a couple of Connecticut manufacturers.

JIM ZARROLI: The aerospace industry these days is often depicted as ground zero in the trade wars. It's the U.S. company Boeing doing battle against the European contender, Airbus.

But John Kornegay says, in reality, the nationalist lines aren't so easily drawn.

Dr. JOHN KORNEGAY (President, Kamatics Corporation): The aerospace industry has become a very international industry. While the aircraft might be - have the Boeing nameplate in Washington or the Airbus nameplate in France, the parts for those airplanes are made all over the world.

ZARROLI: Kornegay is president of Kamatics Corporation, which makes bearings for commercial and military aircraft. It manufactures them here in this sleek, brightly lit new plant in an industrial park outside Hartford, Connecticut. But fully a third of its products go overseas. Airbus is a big customer. So is the Brazilian company Embraer.

The conventional wisdom is that the declining dollar is good for manufacturers like Kamatics, and John Kornegay says, to some extent, that's true.

Dr. KORNEGAY: Where it helps us, if we are, in fact, head-to-head competition with one of our competitors for a particular application and they're building in Europe, then we now have a price advantage because our costs are the same as they were and our price is now 40 percent less than it was just three years ago, versus the Euro.

ZARROLI: But Kornegay says most of the bearings that Kamatics makes are produced under long-term contracts. Prices were set years ago, and they're not affected by today's currency swings.

In another way, the decline of the dollar is actually bad for Kamatics. In an effort to break into the European market, the company built a plant in Germany. With the Euro up, labor costs there have become much more expensive. Kornegay sees the swings in the dollar as more trouble than they're worth.

Dr. KORNEGAY: Large fluctuations in currency don't really help anybody in the long run. In the short run, they can help or hurt somebody pretty badly. In the long term, they don't help anybody. They just make business more unstable.

ZARROLI: As the economies of the world become more intertwined, the impact of currency swings becomes more ambiguous. Increasingly these days, large companies have substantial investments in operations overseas. That protects them from economic downturns in any one country, and it also minimizes the risks of currency swings. It's small and medium-sized companies that are often most affected by the fluctuations.

An hour south of Kamatics, near New Haven, sits Ecoair Corporation. The company makes alternators for emergency vehicles and utility trucks.

Mr. DAN KNUDSEN (Ecoair Corporation): It's the voltage climbing up. Now it's reached its set point.

ZARROLI: Today, Dan Knudsen, the son of the company's president, is testing one of the alternators. He attaches it to a machine that simulates heat and engine pressures.

(Soundbite of machine engine)

ZARROLI: When Ecoair opened in the early 1990s, it manufactured in Romania, where wages were pretty low. Romania eventually converted to the Euro, and its labor costs began to climb.

Pete Knudsen says by 2006, wages had grown so much that Ecoair could no longer afford to operate there, and it stopped manufacturing altogether.

Mr. PETE KNUDSEN (President, Ecoair Corporation): We made a very tough decision to not manufacture any product in the meantime.

ZARROLI: So did that mean for the company?

Mr. KNUDSEN: Oh, we went through a very tough financial period - very, very tough.

ZARROLI: After more than a year's hiatus, Ecoair resumed manufacturing in China. On the day of this interview, Pete Knudsen was still jet-lagged from a recent trip to inspect his plant there. Knudsen says the company is getting back on its feet. With the dollar down so much, he's now doing business in Iceland and the Netherlands, and he's making new contacts in Canada, the Middle East and Asia.

Mr. KNUDSEN: You know, I think it's true that whenever one door shuts, another door might open. And so if you're nimble enough to figure out what kind of opportunities are open to you, I think that you can benefit from these exchange rate fluctuations.

ZARROLI: Knudsen has seen the damage that a falling dollar can do, and like a lot of other American manufacturers right now, he hopes he can reap the benefits as well.

Jim Zarroli, NPR News.

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