Attendance data from August's IWF 2006 allows the amendment of Business Briefing's February 2005 report on industry demographics. The adjacent chart shows attendance trends by major industry sector:

• Turnout from the residential wood furniture and contract wood furniture sector remained about level with 2004, after falling from 1996.
• Buoyed by a strong housing market, the audience from the cabinet sector jumped by 11 percent over 2004 and over 40 percent in 1996. This industry defends its market from foreign competitors by investing in technology that enhances speed to market and customization. Will the recent decline in housing starts cause this sector to pull in its horns?
• The architectural millwork sector, which produces to customer specifications, sent nearly 9 percent more attendees than in 2004 and over 80 percent more than 1996.

Importantly, small woodworking companies continue to be important customers of technology:

• Companies with less than 100 employees accounted for nearly 76 percent of attendees in 2006, up from 69 percent in 1996. Since 1996, attendance from companies with fewer than 10 employees grew by 19 percent.
• Companies with greater than 100 employees sent 19 percent fewer attendees.

Are Labor Unions On The Rise?

Today, only one out of eight U.S. workers is represented by organized labor. But every day the business news includes the story of labor unions' relentless attack on Wal-Mart, the world's largest retailer.

As the Wal-Mart situation confirms, manufacturers, whose ranks employ only 16 percent of the U.S. work force, are not their target. Instead, unions are going after the 42 percent of workers in the burgeoning service sector. Last July, the Service Employees International Union (SEIU) led a coup by leading 4.6 million workers out of the AFL-CIO, the largest U.S. labor organization. The SEIU is the fastest growing union in the U.S.

Most service employees work in jobs that are relatively protected from the threat of outsourcing. Unlike manufacturers, the service sector cannot easily replace U.S. workers with a lower cost Chinese. Union organizers understand the leverage that situation creates.

The globalization of business also enhances this leverage as the labor movement becomes more international in reach. More than ever businesses are dependent on foreign suppliers and complex supply chains to generate their product offerings. This dependence comes with a price - the risk of disruption from supply chain links beyond a company's control. A union like the SEIU with memberships around the world could outsource a strike against a U.S. company by paying Indian workers in its supply chain to walk out. This type of action is part of the SEIU's strategy.

To confront this threat, U.S. businesses must unite themselves. Labor-related problems like the cost of health care require the combined thinking and effort of every business operating in the U.S. Groups like NAM and the WMMA are good vehicles for this dialogue. Individually, every business must work to persuade workers and consumers alike that its objective is not short term profit at the expense of its work force.

The dynamics of your business and those of your customers' businesses are changing. With this change comes risk that you must work hard to mitigate. As a start, don't stick your head in the sand.

Economic Factoid
From 1980 to 2006, the U.S. trade deficit jumped from $19 billion, less than 1 percent of gross domestic product, to about $786 billion or about 6 percent of GDP. Employment in the U.S. during that period rose from 99 million to 145 million. Yes, every 3 months between 7 to 8 million jobs are lost, but the culprit is not just foreign trade. Domestic competition and improved productivity also contribute to these losses. Fortunately the job creating miracle that is the U. S. economy continues to make work available to those who want it.

Sector Report

Kitchen Cabinets
Cabinet sales rose only 0.8 percent in October versus the same month in 2005, according to the KCMA's Trend of Business Survey. For the year to date, sales were up 8.6 percent. Drilling into the numbers, October custom cabinet sales fell by 6.2 percent. Semi-custom cabinet sales rose by 1.8 percent; stock cabinet sales, by 1 percent.

After 120+ months of growth, the cabinet industry appears to be falling on a year-on-year basis. The drop in housing starts has hit this important wood products sector.

At the cabinetmakers...

• Masco reported 3Q2006 sales up one percent over the same period last year. Cabinet sales decreased as a double-digit decline in RTA cabinet sales offset a small gain in assembled cabinets. The company's performance continues to be adversely affected by the accelerating decline in housing activity.
• American Woodmark 2Q2007 sales fell two percent led by a decline in sales to homebuilders. In its core cabinet business the company continues to take market share at both Home Depot and Lowe's and expects to reach double-digit growth in the remodeling sector. Remodeling accounts for about 60 to 65 percent of the company's revenues. Gross margin improved to 20.3 percent followed by an improvement in operating profit to 6.8 percent.

Home Furniture
Soft business persisted for domestic furniture producers as shipments in August fell 1 percent behind the same month last year. Companies interviewed at the October High Point Furniture Market indicated that the higher sales levels seen during the Labor Day selling period have not continued. In contrast, retail furniture sales data reported by the U.S. Department of Commerce have shown steady strength for the full year. Could retailers now be relying more heavily on direct imports, a channel that cuts out U.S. furniture makers?

News at the company level is correspondingly gloomy...

• Ethan Allen reported a 3.4 percent decline in its 1Q2007 sales, as continued retail weakness impacted performance. Gross margin, however, increased to 52 percent while operating profit fell from 12.9 percent to 11.6 percent.
• Stanley Furniture announced an 11.3 percent decline in its 3Q2006 sales. Gross margin followed suit by falling to 19.7 percent from 23.9 percent. Operating profit also fell from 11 percent to 6.5 percent.
• La-Z-Boy reported an increase of 1.4 percent in its 2Q2007 sales and turned a small 1.4 percent operating profit. For the quarter, upholstery sales which account for 70 percent of revenues, rose while casegoods fell. The company continues to reorganize its retail operations, a segment that analysts believe is key to long-term success. For the quarter, retail sales rose 6.7 percent, but this operation generated an $8.8 million loss.
• Furniture Brands reported a 2 percent increase in its 3Q2006 revenues while gross margin improved to 21.6 percent and operating margin fell to 2.3 percent. Inventory rose by $84 million as the longer supply chain from offshore manufacturers combined with an inaccurate forecast of retail sales. Earlier this month, management slashed its forecast for 4Q sales.
• Chromcraft Revington reported a 13.4 percent decline in its 3Q2007 sales and a $640,000 operating loss.

Some good news was reported among industry participants...

• Swedwood, the manufacturing arm of the world's largest furniture retailer Ikea, announced the construction of an 810,000 square foot factory in Danville, VA. The plant will employ 740 workers, open in early 2008, and support Ikea's 28 U.S. and 11 Canadian stores.
• Linwood Furniture continues to expand production at its Lexington, NC, plant. The company purchased Lexington Home Brands' Plant No. 2 in March 2006 to produce a collection of furniture designed by Bob Timberlake, a well-known local designer. Employment has expanded from 50 to 90 as production grows.

Meanwhile, more plant closures and restructurings were announced by other U.S. producers...

• Broyhill Furniture, a division of Furniture Brands, is closing its last remaining casegoods plant in the U.S. The facility, located in Lenoir, NC, employed 390 workers. Earlier this year the company shuttered another casegoods plant and its particleboard mill also located in Lenoir along with a frame plant in Marion, NC. The company now operates only two plants in North Carolina, both producing upholstery.
• Good Cos. has ceased production at its Carson, CA, plant as sales of its particleboard-based casegoods declined.
• Chromcraft Revington said its Warrenton, NC, wood processing plant will close in early December. The 166,000 square foot facility employed 58 workers. The company will source the parts manufactured at the Warrenton plant from overseas suppliers.
• SLF, recently created by the merger of Samuel Lawrence Furniture and Pulaski Furniture, is closing its Plant 12 in Pulaski, VA. The curio products made there will be shifted to its Plant 1 also located in Pulaski. The closure will affect 119 workers and will leave the company with a single domestic production facility.
• Davis Furniture is shifting production of its fully finished upholstery furniture line to China from its plant in Houlka, MS. That plant will be converted into a distribution center employing about 20 workers. The closure will affect about 130 production workers.

Office Furniture

BIFMA reported that October orders grew by seven percent and shipments by 7 percent. Trailing 12-month shipments was $10.7 billion, the highest level since January 2002 and well above the $8.46 billion experienced in the late 2003 bottom. While orders and shipments over the last six months have shown an average growth rate of seven percent, this performance must be compared with the 11 percent average growth in the prior six months. Analysts believe these numbers show that the industry is reverting to its long-term growth rate of three to six percent

At the company level...

• HNI Corporation reported a 13 percent jump in 3Q2006 office furniture sales, a product segment that accounts for 78 percent of total sales. Operating margin in that segment was 8.7 percent. Profitability was negatively impacted by higher materials and transportation costs.
• Kimball International reported a 1.9 percent decline in furniture revenues in its 1Q2007 as it continued to exit the contract sector of that business. The furniture segment generated a 4.2 percent net margin, up from a small loss year-on-year.

Wood Flooring

October 2006 shipments of strip flooring declined to 34.805 million square feet, down 27 percent compared with the same month in 2005. Year to date, the industry has shipped 413.746 million square feet, a 4 percent decrease for the first ten months of 2006.

At the company level...

• KKR, a major private equity investor, has acquired a 50 percent interest in Tarkett, one of the largest U.S. flooring manufacturers.

Softwood Lumber

With new home construction accounting for 75 percent of demand for softwood lumber, the recent 30 percent decline in housing starts has translated into shorter hours and layoffs at many softwood mills. Production at Western mills was off 6 percent in the first nine months of this year and continues falling. Southern mills, which saw about one third of the U.S. softwood supply, are also curtailing production. Softwood demand in the U.S. is forecasted to fall from a record high 64 billion board feet to 57 million next year. As a result, the U.S. Forest Service is extending logging contracts by one year to minimize mill shutdowns.

No whining. We no longer will have a pro-business majority in Congress. The 110th Congress will be controlled by the Democrats. More importantly, we will be hard pressed to find 60 pro-business Senators. In the House, thanks to a group of folks known as the "blue dogs" we might have a pro-business simple majority. This is a group of Democrats in the House who generally are fiscally conservative and open-minded about tax relief. They improved their numbers to 44 in the election. They may be persuaded to take on a few pro-business initiatives and, if they are so persuaded, they may cobble together a block that overrides the House leadership. If a proposal is palatable to them, it is equally as likely a filibuster-stopping majority can be assembled in the Senate on such an initiative. (In their own words, "the 'Blue Dog' moniker was taken by members of the coalition because their moderate-to-conservative views had been 'choked blue' by their party in the years leading up to the 1994 election.")

It may surprise you to find out I am still optimistic about the possibility of action on the WMMA public policy agenda in 110th Congress. Admittedly, I have to lower my sights a bit, but we can still be on the winning side. In February, we will be returning to Washington for our Fly-In. We will focus on three issues.

First, while we have little or no chance of securing passage of our statute of repose bill, the "Workplace Goods, Job Growth, and Competitiveness Act," we still have to keep the issue in front of Congress. The bill will prohibit the filing of any civil action against the manufacturer or seller of a durable good for damage to property arising out of an accident involving that durable good if the accident occurred more than 12 years after the date on which the durable good was delivered to its first purchaser or lessee.

Second on our list is additional estate tax relief for smaller businesses. We won't be going after repeal, but some Democrats have indicated that now that the election is over, they would be willing to talk about some modest relief. It won't be a $10 million exemption as we pushed for in the 109th Congress, but something is better than nothing. As you know, if we do nothing, we get repeal in 2010, but the exemption and the rates return in 2011, back to their pre-2001 levels.

Currently, we are on schedule to raise the exemption and lower the rates as follows:

Third on the list is to create a new, easy to use, small business research and development (R&D) credit. The research tax credit applies only to the extent that the taxpayer's qualified research expenses for the current taxable year exceed its base amount. The base amount for the current year generally is computed by multiplying the taxpayer's fixed-base percentage by the average amount of the taxpayer's gross receipts for the four preceding years. If a taxpayer both incurred qualified research expenses and had gross receipts during each of at least three years from 1984 through 1988, then its fixed-base percentage is the ratio that its total qualified research expenses for the 1984-1988 period bears to its total gross receipts for that period (subject to a maximum fixed-base percentage of 16 percent). All other taxpayers (so-called start-up firms) are assigned a fixed-base percentage of 3 percent. In computing the credit, a taxpayer's base amount may not be less than 50 percent of its current year qualified research expenses.

For many smaller businesses, the complexity of the calculation and the rigorous recordkeeping necessary to establish proper cost allocations outweigh the value of the credit. Many do not have the in-house staff to manage the on-going accounting and recordkeeping. In addition, for many small businesses, maintaining a steady commitment to research and development is a challenge. Making a significant incremental commitment is not realistic.

While some suggest that subsidies may raise the wages of scientists, and hence research spending, without increasing actual research, the argument for a simple flat credit is that subsidies are exactly what we should attempt to achieve, to create greater opportunities for engineers. This, in turn, would have a ripple effect on a greater interest in engineering as a profession, and more educational opportunities.

Our solution is to create a simple, flat R&D credit. To readdress the current imbalance in usage and to limit the tax revenue impact, limit the credit to companies with 500 or less employees or an asset size of less than $50 million.

Is our list far fetched? No. These are reasonable and realistic goals. If you want to help us make a difference, join us for the public policy fly-in on February 13-14. Let's convince Congress to embrace an action plan that is good for U.S. manufacturers and good for the U.S. economy.

WMMA is continuing its lunchtime Lean Webinar Series in 2007 exclusively for and free to WMMA members. Make 2007 the year you get serious about driving down production costs, increasing efficiency and bettering customer service and satisfaction. Mark your calendar, invite your colleagues and plan to participate in the following information packed sessions. Each webinar goes from 12:00 pm -1:30 pm EST.

• January 4: Lean Office: Explore lean applications where you least expect to ---- the office. Drive non- value added activities from your "transactional environment" that inhibit your ability to meet customer requirements.
• February 1: Performance Management: The concepts of standard costs, inventory valuations and variances all drive behaviors that are in conflict with Lean Thinking. Change the mindset and build a culture that supports lean thinking, using a combination of lean performance metrics at the corporate, value stream, and cellular levels.
• March 1: Kaizen Blitz: Learn and share tips and techniques to launch a Kaizen Blitz, keep the process on track, link it to other company areas and get you and your employees comfortable with initiating them on a regular basis, reinforcing your Continuous Improvement Culture.

To register for the Lean Office webinar:
Click the link below. Once you have registered an email with the meeting information and password will be sent to you.
https://imcconsulting.webex.com/imcconsulting/j.php?ED=95715777&RG=1

To register for the Performance Management webinar:
Click the link below. Once you have registered an email with the meeting information and password will be sent to you.
https://imcconsulting.webex.com/imcconsulting/j.php?ED=95715977&RG=1

To register for the Kaizen Blitz webinar:
Click the link below. Once you have registered an email with the meeting information and password will be sent to you. https://imcconsulting.webex.com/imcconsulting/j.php?ED=95781497&RG=1

If you need assistance with the registration process please contact: Miriam Grap at mgrap@consultimc.com or call 410-505-4661

Please verify that you have rich media players installed before joining the webinar.

This Webinar series is brought to you by WMMA's Manufacturing Strategies Committee. To learn more about the committee's programs, members and how you can participate click here.

ScanTech and SawTech 2006 seminar took place in Buenos Aires, Argentina from November 2-3, 2006. The seminar was organized by ExpoVETAS and Forestry and Wood Industry Magazine, Buenos Aires, Argentina in cooperation with the Wood Machining Institute, Berkeley, California. John S. Schultz, President of WMMA Member Super Thin Saws, Waterbury, VT, presented a seminar titled, "Cost Effectiveness of Thin Kerf Sawing: How to Analyze Your Payback."

In November 2006, Modern Woodworking featured an interview with Tom Onsrud, CEO of C.R.Onsrud and Vice President of the Wood Machinery Manufacturers of America), offering his insight into U.S. technology and its contribution to the wood industry.

What are the current trends in American machinery?
"Our machines seem to be getting faster and faster and combining more and more processes. We have machines that have not only one, but two, five-axis heads on them so they can run two five-axis parts at the same time and the parts can be totally different. All of that is really attributed to the controls. The controls are getting to the point where they can juggle more balls at the same time without making a mistake. Again that comes with faster and faster processor speeds. The machine controls are becoming more sophisticated, which again makes them easier to use and allows you to have smoother motion. The computer has to do an awful lot of number crunching to make tool tip programming practical. So between the software being able to generate the code to give to the machine and then the machine being able to make the calculations to follow the surface, we're finding that machines we are building today are doing carvings at three times the speed that they were doing only three years ago. That all gets back to the controller being able to crunch the numbers fast enough to smooth the motion. It's like the suspension on the car - as the suspension gets better you can drive faster over a rutted, potholed road and the car still rides smoothly. Computers have come a long way. As the market for threeaxis and five-axis machines gets bigger, it's worth the control companies and software companies putting the resources forward to make advances."

What are some U.S. technological innovations that stand out?
"I think we may be a little bit more innovative in our controllers and ease of use, making the machines so that anybody can run them. The ultimate in sophistication is ease of use. Software gets back to the ease of use of the control. It's very difficult to make something that appears simple. What makes it simple is that behind the scenes it is very complex. The reality is the CAD/CAM software is getting more and more advanced, which makes processing easier and easier - more automated. The cabinet software where you can look at a virtual reality picture and door types and then generate the cut list and generate the code didn't exist 10 years ago. A lot of the development work in software is happening here in the U.S. And software makes the CNC router easier and easier to use. It wasn't that long ago that you had to be able to write manual G-code to be able to program a five-axis router. That whole process has become so automated that now it is actually quite simple to run a five-axis router."

With so many advances, is it possible to "future-proof" your machinery?
"Many of the changes nowadays have a lot more to do with updating the software and the control. If one of the software companies comes out with a new version, the fact that it generates G-code means even a 10-year-old router is going to be able to follow it. Machines made a huge advancement when machinery manufacturers went from box ways and slower componentry to everyone using "ball bearing profile ways", and higher speed ballscrews. Accuracy and speed jumped dramatically. Now that everyone is doing that, you get to a limitation of how quickly the physics of the machine can change direction. But the smoothness of motion is controlled more by the number crunching capability of the control. So as software advances and the firmware within the control gets better, we're going back and putting new firmware into older machines and they are performing better."

How is American equipment different from European equipment?
"The Americans approach CNC routers from a little different angle than the Europeans do. A lot of European equipment has evolved out of panel processing where most of the American equipment has evolved more from the solid wood direction. I perceive the American CNC routers as being built a lot heavier than a lot of the foreign equipment. Some of that comes from the fact that Europeans are processing a lot of thinner material and panel products to make boxes, whereas the American equipment comes more from the heavier millwork side. Possibly, some European equipment is built lighter because it has to be put into a container and shipped. With many overseas distributors wanting to sell our equipment, we're in the process right now of figuring out how to get our equipment in a container without taking it completely apart due to our equipment being larger and heavier. A lot of the foreign equipment consists of one-sided open frame gantries, possibly, because they couldn't fit into a container if they had two sides on the gantry and dual drive the way we do it.We're going at the same speeds as far as rapid traverses that any of the point-to-point machines are, and I think that's true of any of the American routers. The rapid traverse is right up there with any point-to-point, yet it's a more rigid and robust machine. I believe the American equipment also tends to be higher horsepower, and more reliable."

WMMA's Leadership Development Committee is preparing the slate of Directors for the Board term expiring in 2010. Kenny Moffatt, Chairman of the Leadership Development Committee, is open to your suggestions on who the committee should consider for these openings. Your suggestions should include members who have been active in the Association and its activities.

These individuals should be known for their character, strength and integrity. They must also embrace change, while maintaining the strengths of the existing organization and identifying the key challenges facing the Association and industry. Nominations should be sent immediately to Mr. Moffatt, c/o Unique Machine & Tool Co., 4232 E. Magnolia Street, Phoenix, AZ 85034 or via fax (602) 470-1916 or email at moffy@uniquemachine.com.

The WMMA® Baldwin Award is named for Ralph B. Baldwin, long-time member and Past President of the WMMA®. During his career with Oliver Machinery Company and his involvement with the WMMA®, Ralph exemplified the kind of commitment that really makes an Association function at, or near, its peak potential. It is in the spirit of Ralph Baldwin's vitality and dedication to the woodworking industry that this award was created-to recognize those who have contributed similar levels of involvement and to encourage others to do the same. The award's significance can be quickly determined by the prestigious list of recipients.

Nominate the individual you believe is deserving of this prestigious industry recognition. The award seeks to honor individuals who have made outstanding contributions to the industry, regardless of their affiliation with WMMA. Some activities that warrant consideration are: leadership in WMMA or the IWF Board, active committee involvement, innovations introduced to the industry, and participation in programs that benefit the industry. Please submit your nomination to WMMA by February 27th.

Download Baldwin Award Competition Rules

Download Baldwin Award Nomination Form

Earlier this month, WMMA sent out the 2007 membership dues invoices. WMMA has always been on the cutting edge of the latest technology, and this year, we're going online with dues!

By now, you should have received a hard copy of your dues invoice. You have the option of paying your 2007 dues by remitting a check, or by going online and paying via credit card. Online credit card payments can be made beginning January 2, 2007. If you'd like to pay for your 2007 dues THIS YEAR (before the end of 2006), WMMA will accept checks only. After the first of the year, dues will be accepted online. Complete details on how to submit your electronic payment will be sent after the first of the year.

The woodworking industry and your business face new challenges every day. WIC offers thought-provoking discussions, workshops and other educational forums to better prepare you for today's ever-changing business environment.

The 16th Annual Woodworking Industry Conference will be held April 25-28, 2007 and is the premier forum for education and networking. Attending the WIC '07 at the Renaissance Vinoy Hotel in St. Petersburg, FL, is the right choice for your business.

To read about this year's exciting program, visit wmma.org/events/wic.cfm.

WMMA will hold its annual Public Policy Fly-In on February 14, 2007 in Washington, D.C.

The Fly-In will be preceded by two days of WMMA Board and Committee meetings on February 12th & 13th. Make your voice heard on Capitol Hill as you lobby for the positive future of U.S. manufacturing. Mark your calendar today to attend one of WMMA's most influential events!