The U.S. is the third-largest producer of metal castings in the world after China and the EC countries collectively; historical data indicate a slow decline in the U.S. share of total world output. For both ferrous and non-ferrous castings, international trade accounts for a very small but growing percentage of the U.S. casting market.

The U.S. ferrous metal casting industry has seen a considerable decline in aggregate production, overwhelmingly due to a drop in gray iron production. Production of non-ferrous castings (dominated by aluminum castings) is at about the same level it was 30 years ago, having recovered from a steep drop in the late 1970s and early 1980s.

The typical U.S. foundry is a small business; about 80% of operating foundries employ fewer than 100 workers. Small foundries spend a higher proportion of their funds available for capital improvements on pollution control equipment. Compared to other manufacturing industries, and with the exception of the steel casting sector, the ferrous sectors of the industry had above-average capital stock (investment in new capital of all types) from 1972 to 1987 when measured by the value of assets per employee. New investments in the nonferrous sectors of the industry were about average compared to other industries.

In the late 1980s, total funding for metalcasting research in the United States amounted to less than $500,000 per year. As of 1992, the U.S. metalcasting industry was receiving approximately $5 million in funding from various sources. Despite the recent growth in funds for metalcasting-related R&D in the 1990s, the United States lags behind major competing nations in total research dollars spent on metalcasting. In Germany, there are three major foundry research institutes to which the German government provided matching funds to industry for their R&D investments. Metalcasting research institutes in Japan, Brazil, and many European countries receive substantial funding from their governments.

Specific factors that affect the industry's health include interest rates, currency exchange rates, inflation, industry capacity, and tax laws, among others. Total cost will continue to put major pressure on metalcasters. Costs may also result in continued globalization, as casters expand into regions of the world where labor is inexpensive and plentiful. The majority of U.S. metalcasters are small businesses that lack the resources to upgrade their operations and to perform research and development.

Another trend has been the downsizing of many domestic equipment suppliers as a result of the dual forces of increased foreign competition and a contraction of the U.S. metalcasting industry. The research and development budgets of these companies were frequently reduced or eliminated.

New technology spawned by the computer revolution has required a shift from a "cottage industry" to larger capitalization to finance improved efficiencies. This leads to a requirement for new skills for operators, maintenance personnel, engineers, and management.

Other key challenges to industry profitability facing metalcasters in the near future include the changing demands and needs in the marketplace; tougher domestic and foreign competition; more aggressive marketing efforts by competitive processes and materials; and the growing numbers of environmental, safety, and health regulations and laws. In addition, quality systems like ISO 9000 are becoming critical for successful competition in the world-wide market.

As shown in Table 1, barriers to increased industry profitability and health are categorized in terms of costs and profits, capital expenditures, R&D expenditures, and markets and marketing.

A significant challenge will be to recognize the extent to which improved operating efficiency can be leveraged into lower prices for customers without reducing or eliminating profits.

Small foundries seldom have the financial resources or access to credit that is necessary for capital expenditures in extensive modernization or even equipment. Many of them cannot afford state-of-the-art technologies (e.g., CAD/CAM/CAE) that would help them compete in the international market.

A competitive disadvantage is created by purchasing equipment (particularly molding machinery and technology) from foreign suppliers. The same weak dollar that helps U.S. metalcasters export castings makes the capital cost of expansion incrementally more expensive when the equipment and technology are imported. Molding technology that comes with the machinery is developed offshore. The tie to technology is necessary for companies that do not have their own in-house resources to overcome molding and coremaking problems.

Table 1: Major Profitability and Industry Health Barriers

Any R&D efforts that result in the development of new markets and products or the recapture of lost markets will therefore have a positive effect on the industry's health and profitability. Similarly, improvements in casting quality, consistency, performance, lead time, and productivity will help maintain and improve the industry's status.

Increases in industry profits will enable the industry to further invest in its future by sponsoring more technical research and development, investing in new technologies and processes, and increasing its educational investments.

Willingness to change ways of doing business, management techniques, and products and services offered will be important to long-term industry viability.

Other changes and developments that would contribute to a healthy industry are shown in Table 2.

Table 2: Profitability and Industry Health Needs