Business Briefing

The Credit Crisis - What Happened?
by Art Raymond, araymond@raymondnet.com

The public, fed by the media, believes that greedy Wall Street types caused the current credit crisis. The talking heads point at the giant Ponzi scheme made up of exotic securities concocted in search of higher investment yields. This pyramid required ever rising home prices for support. Once the speculative bubble broke, the scheme collapsed under the weight of negative homeowner equity.

According to Russell Roberts, professor of economics at George Mason University, there's more to the story. Beginning in 1992 Congress pushed Fannie Mae and Freddie Mac to increase their purchases of mortgages aimed at low and moderate income borrowers. By 1996 the Department of Housing and Urban Development (HUD) set the target of Fannie and Freddie-backed loans extended to these classes of borrowers at 42 percent. That target increased to 50 percent for 2000 and 52 percent in 2005.

For 1996 HUD additionally required that 12 percent of all Fannie and Freddie mortgage purchases be to borrowers with incomes less than 60 percent of their area's median income. These target purchase amounts rose to 20 percent in 2000, 22 percent in 2005, and 28 percent in 2008. Billions of dollars of these loans were adjustable rate and required less than 10 percent down payments.

At the same time the Community Reinvestment Act (CRA) was forcing traditional banks to increase loans to sub-prime borrowers. This law, passed in 1977 during the Carter administration, was modified in 1995 to increase by 80 percent the number of loans going to low and moderate income home buyers.

In 1997 a major milestone in this story occurred: Fannie and Freddie guaranteed the first securitization of CRA loans by the late investment banking firm Bear Stearns. Politicians and policy makers magically had a method of increasing home ownership without committing federal budget dollars. And bankers of every ilk who followed suit made nice profits in abetting this sleight of hand.

Add the Taxpayer Relief Act of 1997. That law increased the demand for high-value homes by raising the capital gains exclusion from $125,000 to $500,000 on primary homes. Beneficial changes affecting capital gains earned on rental property also increased demand for that investment class.

And don't forget the Federal Reserve who added to the speculative fire in 2003 by pushing the federal funds rate to a 40-year low of 1.25 percent. Rates on adjustable rate mortgages followed thus making monthly payments more affordable. Bankers then made matters worse by creating more and more exotic mortgages that lowered the hurdles required to qualify.

These conditions fueled heavy speculation. Economist Robert J. Shiller calls it irrational exuberance, the social contagion of boom thinking. We simply reached a tipping point after which everyone became overly optimistic. Continuing market feedback encouraged further bidding up of prices.

The result: the average price of a house in the U.S. doubled between 1997 and 2005. And the homeownership rate rose from 64 percent in 1994 to 69 percent in 2004.

But speculative bubbles always end with blood in the streets. As interest rates ticked higher, mortgage payments rose. Demand for houses stalled and then fell. Once home prices started dropping, the values underlying those exotic mortgage-backed securities fell too. The smoke and mirrors that camouflaged the house of cards blew away and with it the house itself.

There is plenty of blame to go around: politicians and policy makers; bankers on Wall Street and Main Street; over-leveraged investors in mortgage-backed securities and real estate; and yes, the seemingly innocent who were using their home equity to finance an excessive lifestyle. When something is too good to be true, it usually is…

Bottom Line: Beware of free lunches. The aforementioned smoke and mirrors used by Washington have put the entire global financial system at risk. Hundreds of billions of dollars have been shifted into housing instead of more productive investments. We absolutely must learn the hard truths from these painful lessons. Attempting to remedy this crisis with more fiction will simply mean repeating this sad history.

What's Next?

In hopes of remedying this situation, Congress, after an intense last-minute debate, finally approved a bill that will enable the Treasury to invest $700 billion in mortgages and mortgage-backed securities combined with $152 billion in tax breaks and other tools useful in combating the credit crisis. While the mechanics of this intervention are unknown at the moment, we can anticipate that something akin to the Resolution Trust Corporation of 1989 (RTC) will be implemented. The RTC was an asset management company owned by the federal government and charged with liquidating real estate-related assets previously owned by insolvent savings and loan associations. It also assumed the insurance functions of the former Federal Home Loan Bank Board. In 1995 the RTC's duties were transferred to the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation (FDIC).

Between 1989 and mid-1995, the RTC closed or otherwise resolved 747 S&Ls with total assets of $394 billion. For a full explanation on how the RTC operated, go to Wikipedia.

What happened after the RTC solution was set in place in August 1989? In a recent presentation, Merrill Lynch's David Rosenberg answered that question:

• Stock Market: The U.S. stock market dropped for another year with the S&P 500 index falling nearly 30 percent before the bull market of the 1990s took off in October 1990. Remember the stock market is a leading economic indicator.
  
  
• The Economy: Real GDP fell from about 3.5 percent growth to a 1 percent decline over nearly two years before bottoming in 1Q1991.
  
  
• Home Prices: Prices of houses declined for another two years finally hitting bottom in mid-1991.
  
  
• Unemployment: Unemployment rose from just over 5 percent to a peak of nearly 8 percent over three years. Remember that unemployment is a trailing economic indicator.
  
  
• Interest Rates: The yield on 10-year Treasuries jumped a full point over the next year before declining by three points over the subsequent three years.

Bottom Line: Batten down your hatches. A consumer recession still lies before us. If history is prologue, the next few years will be tough economically speaking. The economy always returns to its mean, and those transitions can be painful.

Europeans Woodworkers Feeling Impact of Log Exports

Since 2004 the export of hardwood logs has increased by 50 percent. The main species include oak, beech, and poplar, and the primary destination is China and other Asian markets. China is the world's largest timber importer. These sales are reducing the availability of logs and lumber for European woodworkers and causing prices to rise. More importantly Chinese and other producers in low labor cost countries are converting these logs into value-added products for export back to European markets. The result is low-cost competition. Chinese plywood shipments to Europe have increased tenfold in five years. Parquet flooring imports jumped 164 percent in 2007. Wood furniture imports are growing by 30 percent annually. Various woodworking trade associations are calling for anti-dumping tariffs on Chinese imports and restraints on log exports.

U.S. Enacts Illegal Logging Ban

An amendment to the Lacey Act has banned the import of products that contain illegal timber. Illegally logged wood is defined as timber sold below market price or cut in violation of treaties, laws and regulations. The intent of this amendment is to protect the world's forests from deforestation.

The impact of this bill is twofold:

• Improved market opportunities for U.S. log exporters - These firms faced competition from traders who sold at prices as much as 50 percent of market price.



• Higher prices for imported products made of wood - Foreign converters of illegally logged timber will be forced to use higher priced, legal timber.

Importers of wood products will be required to document wood species and country of origin. Exact methods of enforcing this law are under development.

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Economic Tidbits

Those opposed to offshore drilling are most probably ignoring the full story. Few know that offshore development is one of the federal government's greatest sources of non-tax revenue. Energy companies paid $7 billion in 2007 in rents on their drilling leases. The government also receives a royalty on the market value of gas and oil produced from these leases. And don't forget that oil companies pay lots of taxes on their profits.

Add the fact that fossil fuels are expected to provide the same share of total energy in 2030 as they do today. Our foreseeable future depends on oil and gas. Isn't it better for us to keep a few of the bucks we are now shipping to unfriendly, oil-rich countries?

Sector Report

Kitchen Cabinets

The downturn in cabinet production is now in its twenty-second month of negative performance. According to the KCMA's Trend of Business Survey, August cabinet sales fell by 26.2 percent versus the same month last year. Year to date cabinet sales have dropped 17.2 percent vs. 2007 with stock cabinet sales down a whopping 19.2 percent, custom sales down 17.4 percent, and semi-custom sales off 15.3 percent.

At the company level…

• Masco reported cabinet sales of $608 million in its 2Q2008, a decline of 18 percent. Operating profit fell to $37 million, a drop of 61 percent.
  
  
• American Woodmark announced a 16 percent decline in its 1Q2009 sales. The company is growing market share in a very weak environment. Remodeling sales were down 16 percent. Management has reduced headcount by about 30 percent in the last three years but maintained excess capacity. As a result overhead costs as a percent of sales have increased. Gross margin fell to 15.9 percent from 20.7 percent, and the bottom line was breakeven.
  
  
• Kohler Company has announced the closure of its kitchen cabinetry division, Canac. Canac's primary market was new home construction in North America. Their Statesville, NC, plant will be shuttered in October idling 522 workers. The company will cease distribution operations across the U.S. by year end resulting in the loss of another 280 jobs. Kohler acquired Canac in 1996 and had already closed their Thornhill, Ontario, plant earlier this year due to the strong Canadian dollar.

Home Furniture

Furniture Factory Orders Drop

According to accounting firm Smith Leonard, orders for furniture from U.S. factories declined by 17 percent in July vs. the same month last year. This performance marks the worst month in over a year. Shipments also were down falling by 10 percent from last year.

Year to date orders are running 10 percent behind 2007 while shipments are behind by 8 percent. For 2007 83 percent of the survey participants reported orders down for the year.

At the company level note the layoffs, closings, and consolidations in the upholstery sector. Historically upholstery is the first furniture category to recover following an economic downturn. The continuing rationalization of capacity by upholsterers confirms that the economy remains in the doldrums. This product category has heretofore been less affected by imports…

• Furniture Brands International, the second largest U.S. furniture maker/importer, reported a 13.4 percent decline in 2Q2008 sales. Gross profit dropped by 8.9 percent to 24 percent; operating income, by nearly 74 percent to 0.97 percent. Its Broyhill division announced the consolidation of five of its upholstery plants into a former case goods plant in Lenoir, NC. Four of the shuttered plants are in Lenoir while the fifth is in nearby Taylorsville, NC. About 75 workers or 10 percent of the work forces in the five plants will be laid off. In better news, its Thomasville division is adding about 100 jobs to its Plant C in Thomasville, NC. Plant C was largely idled in mid-2007 and will be used to improve delivery times to retailers. Earlier this year Thomasville added 100 jobs at its Lenoir, NC, wood furniture plant.
  
  
• Producer/retailer Ethan Allen is expanding its presence in Europe by adding small stores and studios within existing home furnishings stores. The company currently operates 295 stores and nine manufacturing plants in the U.S.
  
  
• Producer/retailer La-Z-Boy reported a 6.6 percent decline in its 1Q2009 sales to $321 million. Sales dropped across all product lines with upholstery falling 6.9 percent; case goods, 10.2 percent; and retail, 6.2 percent. Operating profit was $(13.2) vs. $(12.9) in the same quarter last year. Management reported that cost savings in their manufacturing operations were yielding positive results. However their retail stores are operating at an out-sized loss.
  
  
• Case goods and upholstery importer/producer Hooker Furniture reported 2Q2009 sales down by 12 percent. Profits declined 57 percent from the same quarter a year ago. The company has laid off 25 employees in its wood furniture due to the prolonged industry slump. The workers were primarily in operations, administration and warehousing.
  
  
• Upholstery producer/retailer Norwalk Furniture, closed early in September due to a lack of bank financing, has been purchased by local investors. The company will operate under the name Norwalk Custom Order Furniture and will continue production at its Ohio plants. The Mississippi and Tennessee plants are not included in the deal. The new owners expect to hire 150 to 200 workers. Details of the new financing were not released. However the State of Ohio had earlier offered a low-interest loan of $1.86 million to keep the company in business. No news was released on the fate of the 59 Norwalk retail stores. In July contract producer Kellex Corporation purchased one of the Valdese, NC, plants operated by Norwalk under the name Hickory Hill. That 354,000 sq. ft. plant will employ 50 workers, and the new owners plan to invest $1.7 million to update the facility.
  
  
• Chromcraft Revington reported a 2Q2008 loss of $6 million as sales fell by nearly 22 percent. The company operates under the Chromcraft, Peters-Revington, Silver, Cochrane, and Sumter brand names. Also management announced its plan to cease manufacture of upholstery and the closure of its Lincolnton, NC, upholstery plant. About 185 workers will be laid off, and the plant assets will be sold.
  
  
• Cramco, the Philadelphia, PA-based casual dining supplier, is bringing its plant back on line in response to rising costs from its foreign suppliers.
  
  
• Statton Furniture Mfg., Hagerstown, MD, is ceasing operations after 82 years producing high-end solid cherry 18th century case goods. In the last 15 years their employment had declined from 200 to 38.
  
  
• Upholstery producer Flexsteel said its 4Q2008 residential furniture sales were off 6.4 percent while full year revenues dropped by 0.6 percent. The company has implemented price increases and closed two plants to balance capacity with demand. The Lancaster, PA, plant produced home furniture and will continue as a distribution center. The second plant in New Paris, IN, produced seating for recreational vehicles. In total about 250 jobs will be lost.
  
  
• Ashley Furniture is laying off about 200 workers at its upholstery plants in Ecru and Ripley, MS.
  
  
• CR Home is closing its Lincolnton, NC, upholstery plant idling 185 workers.

News from the Canadian furniture industry was mixed…

• Canadian furniture producer Dorel posted its 2Q2008 revenues at $594 million, a 29.3 percent gain over the same period last year. For the first half sales were up nearly 26 percent. These performances represent the strongest second quarter and first half in company history. Their RTA division, Dowagiac, MI-based Ameriwood, is resuming operations at one of their plants to meet increased demand. The plant will employ as many as 100 jobs.
  
  
• Canadian case goods producer DeFehr Furniture has received court-ordered protection from creditors under the Canadian Companies' Creditors Arrangement Act. The company will shutter its Transcona plant near Winnipeg and lay off as many as 200 workers. Operations will be consolidated into its Furniture Park factory.
  
  
• Canadian upholstery specialist Sklar Peppler is closing its Ajax, Ontario, plant and moving all production to its facilities in Mississippi and Oregon.
  
  
• Canada's oldest furniture maker Gibbard Furniture Shoppes of Napanee is ceasing operations after 173 years. Management blames the strong Canadian dollar and increased competition from Asia. About 90 workers will be idled.

Chinese furniture producers are also suffering…

• Samson Holding reported a 32 percent decline in profits as its first half 2008 sales dropped by 9 percent. The company is the parent of Lacquer Craft, China's second largest furniture maker, as well as U.S. divisions Universal Furniture, Legacy Classic and Craftmaster.

Office Furniture

BIFMA, the sector trade association, reported a 1 percent decline in August orders and a 4 percent decline in shipments. Year to date, orders are flat while shipments are down 1 percent vs. 2007.

At the company level…

• Steelcase, the world's largest manufacturer of office systems and business furniture, reported a 9.3 percent gain in its 2Q2009 revenues with North American sales growing by 2.1 percent and international sales by 34 percent. Operating margin was 9.17 percent, down from 6.7 percent last year.
  
  
• Herman Miller announced a 2.6 percent decline in its 1Q2009 revenues to $479 million. Operating margin rose to 11.8 percent. North American sales fell 2.6 percent while international sales dropped by 4.5 percent. One positive note - total backlog rose by nearly 19 percent vs. last year.

Wood Flooring

• Lumber Liquidators, one of the largest U.S. specialist flooring retailers, reported 2Q2008 sales of $128 million, up 21 percent from last year.

Lumber, Wood Components & Panelboard

• Uniboard Canada, a producer of panelboard, has purchased ATC Panel's particleboard mill in Moncure, NC. The company plans to invest $120 million at the Moncure facility to install MDF and HDF lines. This expansion will add about 100 employees to the current work force of 160. The recent opening of Swedwood's new furniture plant in Danville, VA, has increased local demand for HDF, which is used in lightweight furniture panels made for parent company Ikea.
  
  
• Catawissa Lumber is closing its West Jefferson, NC, wood component plant and idling 67 workers. Production will be consolidated into its factory in Paxinos, PA.
  
  
• Georgia-Pacific is closing its Columbus County, NC, saw mill and plywood operations due to slow sales to the housing industry. About 400 workers will be laid off.
  
  
• Weyerhaeuser is selling its Delta, BC, hardwood sawmill which produces lumber for use in furniture, cabinet and pallet production

Non-Residential Construction

The American Institute of Architects' Architecture Billings Index rose to 47.6 in August but remained below 50 for the seventh consecutive month. A score below 50 indicates weakness in the pipeline for new projects that will be constructed nine to 12 months in the future.

Inquiries about new projects were above 50 for the third month in a row.

Those firms specializing in institutional projects remain the only group that is yet to fall below 50 in the current downturn. Billings at residential, industrial, and commercial specialists, however, have remained below 50 the entire year.

The AIA Index score plus anecdotal evidence from millwork firms specializing in non-residential work continue to show a negative outlook for this sector as well as office furniture.

Public Policy

One of the notable provisions was renewal of the Research and Development tax credit, which had expired at the end of 2007. We know a number of you take advantage of the credit and you have been in limbo all year, maintaining the records necessary to take the credit, hoping it would be renewed. The new law extends it through the end of 2009. In addition, the new law increases the alternative simplified credit from 12 percent to 14 percent for the 2009 tax year, and repeals the alternative incremental research credit for the 2009 tax year. Unfortunately, given the complexity of the R&D credit computations, not enough WMMA members as we would like can take advantage of the credit. It has been our goal for several years now to convince Congress to create a simple flat credit for smaller businesses.

The new law renews the so-called Alternative Minimum Tax (AMT) patch. The law increases the AMT exemption amounts to $46,200 (individuals) and $69,950 (married filing jointly) for tax year 2008. In 2009, the exemption amounts revert back to $33,750 (individuals) and $45,000 (married filing jointly).

There are several disaster tax relief provisions that are available to businesses covered by certain disaster declarations. These provisions include an increase in the depreciation bonus, an increase in direct expensing allowance, and extending the net operating loss carryback period from two years to five years. The depreciation bonus increase and direct expensing may be helpful to your customers if they are located in those areas. The new law permits businesses that suffered damages to claim an additional first-year depreciation deduction equal to 50 percent of the cost of new real and personal property investments made in the disaster area. The law increases the direct expensing allowance by another $100,000 for qualifying expenditures made in the disaster area through December 31, 2011. The law also increases by another $600,000 the level of the phase-out cap on such investments. The rules are a bit more complicated than for the regular depreciation bonus and direct expensing provisions, so some research will be necessary. The IRS will publish some guidance soon and we will pass it along. In the meantime, you can go to www.irs.gov for the latest information available.

The law extends the tax credit for energy-efficient existing homes for 2009. Contractors receive a credit for the construction of energy-efficient new homes that achieve a 30 percent or 50 percent reduction in heating and cooling energy consumption relative to a comparable dwelling. The credit equals $1,000 for homes meeting a 30 percent efficiency standard, $2,000 for homes meeting a 50 percent standard.

The law extends the energy efficient commercial buildings deduction for five years, through December 31, 2013. The provision allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50 percent energy savings target. The energy savings must be accomplished through energy and power cost reductions for the building's heating, cooling, ventilation, hot water, and interior lighting systems.

A little noticed but important provision in the financial markets stabilization package allows community banks to deduct their capital losses against ordinary income for the stocks they held in Fannie Mae and Freddie Mac. Many community banks held stock in the two entities. If you have a line of credit with a local bank this may help keep the credit window open.

Congress also decided, at the last minute, to extend temporarily two trade programs. The Generalized System of Preferences was extended for one year. The Trade Adjustment Assistance (TAA) program was renewed until March. The TAA program provides assistance to workers affected by unfair international trade. Congress did not act to approve any of the pending free trade agreements.

The WMMA and 11 members will be exhibiting at Woodex, December 2 - 5, 2008 in Moscow, Russia. The market deserves a closer look for all members looking internationally for sales.

Source: The Economist

In 2007, the Russian economy continued its sustained steady growth. GDP grew by an estimated 8.1 percent to $1.344 trillion. Russia now ranks as one of the top ten economies in the world. In 2007 Russia won the bid to hold the 2014 Winter Olympic Games in the resort town of Sochi and there will be opportunities for international companies supplying goods and services for the event.

In 2007 the American Chamber of Commerce surveyed U.S. companies currently operating in Russia and came up with these major findings: 50 percent report sales increases of 200 percent from 2001 to 2005; profitability during 2001 to 2005 was on or above target and; 67 percent expect sales growth of more than 50 percent through 2008.

While the economic outlook for 2008 to 2012 looks good overall, consumer inflation and increasing state control over the economy will bring uncertainties for local business owners.

Market Challenges

• Russia's different business practices and its uneven transition from a socialist, centrally planned economy to a market-oriented one.
  
  
• European and Asian companies remain tough competitors for U.S. firms, due to their proximity to Russian markets and their long-standing relations with Russian organizations and companies.
  
  
• Government bureaucracy, poorly established rule of law and corruption affect such areas as establishing a business, tax collection, dispute settlement, property rights, product certification and standards, as well as Russian Customs clearance.
  
  
• Adequate financial resources for Russian small and medium-sized companies still remain a problem, but it is not as acute as it was in years past. More foreign banks are operating in Russia and more cash is circulating within the economy due to the Russian oil and gas boom.
  
• The Russian government continues to use its oil and gas resources to increase state ownership in strategic industries and companies.

Forest Situation/Outlook

Russia's forests comprise one-fifth of the world's forested area (850 million hectares) and one quarter of the world's timber stock (73 billion m³). Nearly 70 percent of Russia's total forested area is in Siberia (43 percent) and the Far East (27 percent).

Coniferous trees account for 58 billion m³ (80 percent), softwood species for 13 billion m³ (18 percent), and hardwood species for two billion m³ (two percent) of the total timber volume. Planted forest is estimated at 20 million hectares. The total volume of logging is estimated at 183 million m³, including 129 million m³ of forests administered by Federal Forestry Agency (FFA). This amount is still well below the total allowable cut estimated at 559 million m³.

U.S. industry reports that illegal logging accounts for as much as 20 to 30 percent of Russia's timber harvest. Illegal logging continues to increase, particularly in the Far East due to its proximity to China. According to World Wildlife Fund data, the share of unregistered wood to total volume of timber consumption is 53 percent Chita region, 34 percent Primorskiy Kray, 33 percent in Khabarovsk Kray, 17 percent in Vologda region, and 10 percent in Krasnoyarsk Kray.

The Russian Woodworking Market

• Exported over 40 percent of the world's exports of rough wood ($4 billion);
  
  
• Was the third largest exporter of sawn wood ($3.2 billion and a 40 percent jump over 2006) and;
  
  
• Purchased $434 million of woodworking machinery (third largest importer behind the U.S. and China).

For more detailed statistics, contact Harold Zassenhaus, WMMA Export Consultant, (301) 652 0693, zemg@erols.com.

In the first six months of 2008 Russia imported $425 million of woodworking machinery, a 208 percent jump over 2007 making it the second largest purchaser behind the U.S. The U.S. was a significant supplier, exporting $21 million but only was able to keep pace with the 2007 level.

Russia's domestic wood processing sector is expected to grow by more than 8 percent annually in 2008 and 2009. The increase is due to a boom in housing construction, a 14 percent increase in panel products production and; continued demand for Russian exports from China, Japan, and countries of the former Soviet Union.

The size of the wood processing industry in Russia is estimated at $2.5 billion, of which lumber represents 50 percent, veneer 40 percent and panel products 10 percent.

Solid wood product production is impeded by outdated machinery, lack of accessible roads to forest resources, higher energy and oil prices, and the transition period before the new Forestry Code is fully enacted.

The Russian Construction Industry

The Russian construction market continues to grow 10 to 15 percent annually, creating sizable opportunities for U.S. manufacturers and suppliers. Sector growth is being driven by the Sochi Olympics, residential and commercial construction and infrastructure projects.

The 2014 Games in Sochi will be a huge event that requires significant investment in the construction of sports facilities, hotels and transportation systems. Due to the government's National Priority Project, "Affordable and Comfortable Housing for Russian Citizens," the U.S. Department of Commerce expects strong growth in a residential construction. By 2010 residential construction will increase to 80 million square meters per year. Construction of commercial property will grow as a result of continued high demand for offices, shops and warehouses.

About 90 to 95 percent of apartments and homes in Russia are sold without interior decoration. To meet market demand, local production of materials is growing; however, according to various estimates, the market share for imported construction materials is about 60 percent. The "Do it Yourself" (DIY) segment continues to expand as demonstrated by growing consumer purchases at such stores as OBI, Castorama and IKEA.

Doing Business in Russia

Distribution

It is not common in Russia for foreign companies to rely solely upon the services of an agent. Distributors and representative offices, however, often employ agents in the Russian regions in order to promote their products.

The most common market entry strategy is to select a good distributor or several distributors. A good distributor will typically sell and install foreign suppliers' products to end-users and provide logistical support, i.e., customs clearance, warehousing, inventory management, etc. However, handling promotion and advertising campaigns exclusively through independent distributors can often result in disappointing results. Russian distributors normally handle products from multiple suppliers and are not typically dedicated to promoting a specific company's product unless the supplier provides substantial support for promotion and advertising.

U.S. exporters are advised to cultivate personal relationships with their Russian representatives and clients, to proceed gradually, and to ensure they have a contingency plan should problems arise.

The U.S. Department of Commerce's Foreign Commercial Service cautions U.S. companies to take primary responsibility for registering their brand names in Russia and not to rely on a partner to do this. Finally, it is important to provide a Russian partner with Russian language product information and marketing materials. These can be prepared in the U.S. or done jointly with your Russian dealer.

For a listing of Russian woodworking equipment dealers, visit the members' only portion of the WMMA Web site, http://www.wmma.org/members/intldir.cfm. In 2005, I prepared a report on the Woodex trade fair and Russian dealers. Much of it, including an overview of the dealer landscape, is still relevant today and deserves a review; visit http://www.wmma.org/members/secureDocument.cfm?docID=413 for the report.

Marketing

There are abundant opportunities to reach customers through Russia's vigorous print media and Russian-language trade journals are good marketing vehicles. The country has six publications catering to the woodworking industry:

Participation in well-organized trade shows is one of the best ways for a company to enter the Russian market, facilitating contact with potential buyers and distributors. Companies occasionally make substantial sales at Russian exhibitions. Representatives of regional governments and state enterprises from remote areas often visit exhibitions in major cities to purchase goods. For a listing of 2009 trade fairs in Russia go to the WMMA Web site, http://www.wmma.org/members/09intntl_calendar.cfm.

Pricing

Russian consumers are attracted to bargains, but are increasingly willing to pay for quality merchandise. U.S. companies exporting to Russia should be prepared to offer competitive prices, knowing that in many areas they face inexpensive Russian and strong European, Chinese and Taiwanese competition.

After Sales Service

Good after-sales service, training and customer support are commonly offered by European suppliers and will be required for most U.S. exporters. Russian manufacturers are known for inadequate post-sale service and as a consequence, for low cost items, Russian buyers are accustomed to purchasing several units in order to have a supply of spare parts. Similarly, buyers of sophisticated woodworking equipment are interested in training, as their employees may never have used particular products or brands. After-sales service is also often an important component to accessing leasing in Russia, and will play a larger role in the decision process as leasing continues to develop.

Import Duties and Value Added Tax (VAT)

The import duty for most woodworking equipment is 5 percent, assessed on CIF (cost, insurance and freight) value.

VAT is designed as a tax to be borne ultimately by consumers, but is collected on a basis similar to the European Union model. VAT is calculated on the sales value and is applied at a uniform rate of 18 percent for woodworking equipment and tooling. Imports are also subject to VAT, calculated CIF plus customs duties and fees.

St. Petersburg remains the main port of entry for industrial products for European Russia (Russia west of the Urals). Vladivostok is the main port of entry for the Russian Far East. In general, the transportation infrastructure is still underdeveloped. The majority of cargo moves by rail and the road network needs to be expanded. Major Western freight forwarders and express couriers are active in Russia.

Customs

In a country where clearing goods through customs can still be more art than science, and significant delays remain common, the new import structures are seen as taking Russia a step further along the road to reduced barriers to foreign trade, conformity to world trade practices, and membership in the WTO.

A new Customs Code, intended to bring Russia's customs regime into compliance with WTO requirements, came into force on January 1, 2004. The new Customs Code has simplified customs processes and established specific procedures for the application and payment of tariffs. However, abuses still abound. One intended improvement in the new Code is to reduce from ten days to three the time required for customs clearance. It also offers the possibility of advance declaration of cargo before its arrival at customs.

Customs Valuation

The customs value is generally considered to be the CIF price of the goods imported. A customs-processing fee is also levied. If customs officials do not agree with the declared value of goods they are authorized to request additional documents to support the claim. It is a normal practice for customs officials to request the Shippers Export Declaration (SED), which they consider to be a sufficient proof of the customs value. However, presenting SED is not mandatory and the importer can present other available documents.

Temporary Entry

Temporary entry of goods is allowed with full or partial relief from customs duties for a period of up to two years. The Customs Authority issues authorization for temporary entry of goods based on a written application submitted by an importer. Full conditional relief from customs duties is allowed when it does not affect the Russian economy in such cases as the temporary import of:

• Commercial samples, not for sale, used at trade shows and exhibitions;
  
  
• Containers, pallets, and other types of containers and packages for repeated use;
  
  
• Goods for the purposes of the development of international relations in the scientific, cultural, sports, cinematography and tourism fields; and
  
  
• Products for international assistance.

Russian Customs accepts the use of ATA Carnets, which are widely and effectively used.

Payment Methods

As in other markets, payment methods and terms vary depending upon the U.S. company's business model and relationship with Russian trading partners. For new-to-market companies, requesting advance payment for goods and services from a Russian customer may be a prudent course to follow until both parties establish a positive record of payment. There are a limited number of U.S. banks that accept Russian letters of credit from some of the largest Russian banks, specifically those that have been approved by the U.S. Export Import Bank. Once a U.S. firm has established a strong relationship with a Russian trading partner, it may consider extending short and eventually longer-term credit as a way to bolster sales volume. This should be done with caution and only after careful evaluation and establishment of successful payments. The U.S. exporter might also consider insuring such credits with one of the larger Russian insurance companies that offer export credit insurance to foreign firms. For some large transactions, advance payment from a Russian buyer may be impractical. In such cases, financing may be provided by a bank, export credit agency or venture fund. Exporters' risk can be minimized with a bank or insurance guarantee from a Russian bank that would be acceptable to a U.S. bank. In leasing deals, exporters should insist on an upfront payment of three to fourth months upon delivery as a way to mitigate some of the risk.

Many Russian banks now offer factoring services. However, the volume and value of transactions using this technique have yet to achieve levels that are either profitable or self-sustaining.

Leasing has become increasingly attractive to both lessees and lessors because of its economic effectiveness, flexibility and accessibility in comparison to bank finance. Most large Russian banks have leasing programs and there is a growing list of foreign leasing companies operating in Russia that can offer Russian clients leasing terms for imported equipment.

The use of barter, estimated to account for 70 to 80 percent of foreign transactions in the USSR, has declined to 1 to 2 percent, as liquidity has developed in the Russian economy.

Business Customs

At first meeting, Russian business people can come across as indifferent and cool to Americans. Russians are known for not smiling and once they get to know someone will indicate that they save their smiles for home and family.

Scheduling meetings can be difficult, but this is also the norm. It can sometimes take weeks to get a response to an email, fax or a telephone message request for a meeting. Once contact has been established, patience is still required to confirm a date and time to meet. And, it is not uncommon for meetings to be cancelled with no explanation. Since traffic is a problem in Moscow and St. Petersburg, Russian company representatives appreciate meeting at locations convenient to the metro, and are not averse to meeting in their offices or accepting an invitation for a lunch meeting.

Russian language ability is a must and an interpreter should be hired if necessary. An increasing number of Russian businesspeople speak a courtesy level of English; however, they prefer to conduct business discussions in Russian. The U.S. Commercial Service can arrange for the services of qualified interpreters upon request.

Business cards are important and are exchanged freely. Cards should have regular contact information and an email address and Web site if available. Most foreign businesspeople in Russia carry bilingual English/Russian business cards (one side English, the other Russian).

Translation services are an important tool for creating interest for a company's products in the Russian market. It is very important that the services be high quality. Many companies interested in the Russian market have used online translation services for translation of their promotional material, only to learn that the translation was inferior and did not serve the intended purpose. For the best results, it is highly recommended that professional translation services be used. The U.S. Commercial Service can recommend fully qualified translators upon request.

Refreshments are usually served at business meetings - coffee, tea and water are the norms. Small gifts are acceptable but not expected.

Intellectual Property Rights

Three general principles are important for effective management of intellectual property rights (IPR) in Russia. First, it is important to have an overall strategy to protect IPR. Second, IPR is protected differently in Russia than in the U.S. Third, rights must be registered and enforced in Russia under local laws. Companies may wish to seek advice from local attorneys or IP consultants.

In general, U.S. firms should proactively take steps to protect their intellectual property in Russia, including registering their trademarks with Rospatent and the Russian Federal Customs Service. Russia enacted new IP legislation that went in to effect on January 1, 2008, but problems still exist in compliance with international IP norms. Most IP office contact information can be found at: http://www.wipo.int/directory/en/urls.jsp.

Federal Service for Intellectual Property
Patents and Trademarks (Rospatent)
30-1, Berezhkovskaya nab. 123995 Moscow
+7 (495) 956-8109
International Cooperation Department: rospatent@rupto.ru

For U.S. small- and medium-size companies, the Department of Commerce offers a "SME IPR Advisory Program" available through the American Bar Association that provides one hour of free IPR legal advice for companies with concerns in Russia. For details and to register, visit: http://www.abanet.org/intlaw/intlproj/iprprogram_consultation.html.

The U.S. Commerce Department also has positioned an IP attaché in Russia:

Tracy T. Perrelli
U.S. Patent and Trademark Office American Embassy
U.S. Commercial Service
23/38 Bolshaya Molchanovka, Building 2
Moscow 121069
+7 495-737-5014
tracy.perrelli@mail.doc.gov

BUSINESS DEVELOPMENT

An Economic Update from ITR

The bottom line is that recent actions by the Treasury and the Federal Reserve Board increase the odds that the waning months of 2008 won't live up to our forecasted expectations, and that our forecast of recession for 2009 looks more and more like a sure thing. We continue to be downbeat about 2010.

It appears to us that the Fed and the Treasury missed a golden opportunity to get the pain over with quickly and let market forces take hold, which would have increased the odds of a 2010 recovery. By clinging to the past, supporting flawed practices and investors that should accept risk along with reward (the Fannie Mae and Freddie Mac bond holders in particular); they have seriously delayed the recovery process. The market is saying some entities must go, prices must come down, and poor risks should be removed from the balance sheet.

The government is saying some things are too big to fail. This last point is probably the driving force behind Bank of America buying Countrywide and Merrill Lynch.

Beware of more bank failures in 2009 - lots more. Not so much in big names, although there will likely be more of those, but in the local and regional entities that form the economic capillaries of our economic system.

We have not changed our outlook, but heightened concern over the precedents Washington is establishing.

Sales Forecasting Tools

Manufacturing and Trade Inventories and Sales—July 2008
Business inventories in July 2008 rose 1.1 percent from June and increased 6.4 percent from July 2007, to $1,507.1 billion. Sales rose 0.5 percent from the prior month and increased 8.8 percent from the prior year, to $1,219.5 billion.

Manufacturers' Shipments, Inventories and Orders—August 2008
New orders for manufactured goods in August, down following five consecutive monthly increases, decreased $18.6 billion or 4.0 percent to $444.4 billion. This was the largest percent decrease in new orders since October 2006 and followed a 0.7 percent July increase.

New Residential Construction—August 2008
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 854,000. This is 8.9 percent below the revised July rate of 937,000 and is 36.4 percent below the revised August 2007 estimate of 1,343,000.

Gross Domestic Product: Second Quarter 2008 (Final)
Real gross domestic product—the output of goods and services produced by labor and property located in the United States - increased at an annual rate of 2.8 percent in the second quarter of 2008, (that is, from the first quarter to the second quarter), according to final estimates released by the Bureau of Economic Analysis.

U.S. Leading Indicator—August 2008

News You Can Use

Manufacturing Leasing Expertise at Your Fingertips

In the current credit climate, it's good to know that WMMA members have a partner who has the manufacturing industry knowledge, funding resources and lease financing expertise to deliver equipment financing options for their customers.

Many participating members have used National City to enhance their relationships with customers. But did you know that National City also provides solutions and systems that enhance the sales process? For example:

• Communication. During the sales process, National City will communicate closely with WMMA companies when certain potential customers pose credit challenges.
• Customized schedules. Weekly schedule rates are emailed to participating members. Further, National City is able to customize these schedules with a company logo so that members can use them as more effective sales tools.
• Progress payments for out-of-stock equipment. National City will fund progress payments at 1 (one) percent. This is unique among banks which traditionally would fund it at a full monthly lease payment.
• InfoTrac. For companies who would like to follow the leasing process online, National City offers various Web technologies. InfoTrac, a proprietary internet-based program, allows companies to transmit credit applications electronically and facilitates transparency between the member company and National City.

National City Manufacturing Finance representatives Dan Whiteash, (513) 455-9845, daniel.whiteash@nationalcity.com, and Bill Colwick, bill.colwick@nationalcity.com, remind members that the Economic Stimulus Act of 2008, passed earlier in the year, offers a first-year bonus depreciation equal to 50 percent of the adjusted basis of the qualified property. This applies to leased equipment as well, although only to new equipment.

Extension of the R&D Tax Credit

The Black Line Group, a leading provider of Research and Development (R&D) tax credit services, noted that Congress has approved a seamless two-year extension of the R&D tax credit, a tax credit for U.S. businesses that expired at the end of 2007.

The R&D tax credit provides support to U.S. businesses for research and development capital expenditures incurred in the United States. The extension is retroactive to January 1, 2008 and runs through 2009. In addition, the bill also strengthens the R&D tax credit by increasing the rate for the alternative simplified credit (ASC) to 14 percent in 2009 from 12 percent.

In other news, Black Line Group has been invited to speak this fall at two major industry conferences.

• FABTECH International/ AWS Welding Show, Monday, October 6th: Black Line Group spoke at North America's largest metal forming, fabricating, and welding event. It is the longest running and only annual North American event dedicated to showcasing a full spectrum of sheet metal forming and fabricating, welding, stamping, and tube and pipe equipment.
  
  
• 2008 Annual Meeting of the Precision Metalforming Association (PMA), Friday, November 7th: Black Line Group will be presenting at the annual meeting in the Grand Bahamas. The Precision Metalforming Association is the full-service trade association representing the $91-billion metalforming industry of North America. Its 1,200 member companies include metal stampers, fabricators, spinners, slide formers and roll formers as well as suppliers of equipment, materials and services to the industry.

Because of its very specialized nature, large numbers of small and mid-size manufacturers are not taking advantage of this underutilized part of the tax code that can provide qualifying firms with substantial tax benefits.

The definition of research and development (R&D) is much broader than people realize. Manufacturers of all kinds often believe that they DON'T have R&D taking place. They mistakenly believe it's only their customers who are doing the R&D, and that they are simply making products for their customers who provide them with drawings for products/parts. However, these companies can have substantial R&D taking place through their "PROCESS" development and improvement activities. For companies that have not taken advantage of the R&D tax credit in the past, this can potentially mean the creation of immediate and substantial amounts of cash, minimally into the many tens of thousands of dollars, and often $100,000 or more. In addition, companies can reduce future tax liabilities and improve cash flow.

For more information about the R&D tax credit and Black Line Group's work, call Scott Schmidt at (763) 550-0111 or visit www.blacklinegrp.com.

How to Link Your Way to the Top of Google, by Bob DeStefano, SVM E-Business Solutions

How popular is your Website? I ask this question because it can have a dramatic effect on your search engine ranking. Specifically, I am referring to your Website's "link popularity" - that is, how many quality Websites link into your Website as a resource. Every link into your Website is a vote for its quality, and Google and the other engines tally these votes when determining your Website's rank.

Link popularity is the most impactful, and most neglected, search engine optimization strategy. Recently, I talked to a company that learned this fact the hard way. They just completed a sizable investment in a great new Website with a great design that was optimized for a top search engine position. However, they couldn't understand why they could not earn a ranking higher than their competitor who had a very poor Website with an old, outdated design. After reviewing their situation, I was able to determine that link popularity was the cause. Although the competitor's Website was poorly designed, it had thousands of links into an article posted on its Website. The company I was advising had barely 100 inbound links.

So, how do you make your Website more popular? Conduct a focused link building campaign. Link building involves gaining links to your Website from other quality Websites that are frequented by your targeted visitors. The more quality inbound links you have, the more popular your Website is in the eyes of Google and other engines. And, these links can have a dramatic effect on your search ranking.

Create link-worthy content.

As profiled in the example above, one of the best ways to attract scores of inbound links is to make your Website's content link-worthy. Think strategically about the audiences you are trying to attract and the content that interests them. Then load your Website with useful, educational content that changes regularly. You may want to consider starting an educational blog to help with these efforts and position you as a leader in your industry. If you follow this best practice, you can turn your Website into a link magnet.

Assess and improve your current inbound links.

Are you making the most of the links you already have? Do you even know how many inbound links you have? If your answer is no to either of these questions, this is the best place to start your link building efforts. Take advantage of advanced search tools offered by each of the search engines to find pages that already link to you. Then, make a list of sites that should have links to you but don't, including trade associations, customers, vendors, suppliers, online magazines and other business partners or industry resources. Make a thoughtful, personalized request to the owner of each of these sites and respectfully ask them to add your link.

Get listed in industry and topical directories.

Online directories are a great resource for building inbound links. Focus first on important directories within your industry - those offered by trade associations and online publications for your industry are a great place to start. Then, investigate opportunities with paid directories like ThomasNet, GlobalSpec, IQS Directory and others. Finally, get your site listed in topical directories like DMOZ, Business.com and Yahoo Directory.

Submit articles and press releases online.

Online public relations is a great way to build scores of relevant inbound links over time. If you do not produce press releases regularly, then start! Make sure you craft them leveraging your most important keyword phrases. Then, distribute these press releases using an online press release distribution service like PRWeb and watch as they get picked up by online publications and blogs. In addition, begin writing educational articles and submit them to industry publications. Don't forget to include an active link back to your Website in your byline or profile.

Review your competitors' links.

Perform a search on Google for your most important keywords. Anyone in the top ten listings is your competitor, whether you know them or not. Chances are they each have great inbound links to achieve that ranking. Don't worry, that's great news for you. Once again, take advantage of Google's advanced search tools to find pages that are linking into each of these competitors. This is a great way to determine what sites you should be targeting for your link building efforts.

Avoid these link building mistakes.

Almost as important as following the best practices for link building, you must also avoid the following worst practices:

• Don't load up on reciprocal links. Unfortunately, trading links with other sites will have minimal impact on your link building efforts. While it may make sense to do so from a business point of view, don't overdo it. It's not worth the effort.
  
  
• Don't buy links from link farms. A link farm is a site that does nothing more than list links to other Websites. These sites are a waste of time and money. Search engines discount link farms entirely and humans will never visit them, so there is no good reason for you to be there.
  
  
• Don't spam sites requesting links. Your link building efforts should be targeted and personalized. Avoid the urge to spam a bunch of sites en masse asking for a link. It doesn't work and often causes more problems by tainting your online image.

Free Guide to Lean Planning
(from IndustryWeek's Continuous Improvement - 10/7/08)

Find out how you can apply Lean techniques to your manufacturing plans, cutting both risks and costs while increasing efficiency and service to the customer. Download this free guide that includes information on:

• Lean production planning (Generate "Need" reports)
  
  
• Understanding and managing customer demand
  
  
• Tips on better forecasting
  
  
• Prioritizing supply chain infrastructure

Manage demand, streamline production and get the most out of your business through Lean - start now!

EDUCATION & SCHOLARSHIP

My Internship within a WMMA Company,
by Melissa Lee

I was the best. Or so I thought. I was the best in my high school class at computer aided drafting, and I quickly excelled at each and every CAD system thrown at me. When I began my work at TigerStop as a CAD assistant, I thought for sure that I had it made. My first grandiose task at TigerStop: add hundreds of PDFs of part drawings to our inventory control program. "Oh, gee," I thought, "this is going to be a blast."

After enduring countless hours of near-sleep encounters while wading through my PDF operation, I was finished! First task: completed. To my relief, my next task was to dimension some parts the engineers had modeled. "No problem," I thought. I went about my second task with confidence. I printed out the drafts and showed them to the head mechanical engineer with gleeful anticipation. It was at that very moment that I learned the difference between a drafter and a high school student who essentially Xeroxes drawings.

I had to learn that each drawing was a new set of instructions on how to make a part, and if a part was made wrong, it was most likely due to inadequate instructions. From there, and through my developing education at the local university, I learned how to design parts to be functional and to be manufactured correctly. After lightly dipping my toe into engineering, I learned of the famed designing vs. engineering scuffle. What I learned: Good Designer—someone with years of experience in knowing what works and what does not; Not So Good Designer—me: newbie who comes up with psychedelic ideas; Good Engineer—someone who puts in the time, effort, and struggle to learn the theory, math, and application, but also one who anticipates complications (see requirements for Good Designer).

I am now in my senior year of my bachelors' degree for mechanical engineering at Washington State University taking such courses as machine design, heat transfer, and advanced manufacturing engineering. I have learned a great amount of knowledge that I will be able to apply to my position at TigerStop. I am now organizing part number and parts list creation, creating assembly instructions, associating with vendors, and designing and engineering parts and small systems. This scholarship graciously provided by the WMMA to continue my education has brought a great amount of knowledge. The internship provided by TigerStop has brought me a great amount of skill. I hope to continue to further my knowledge and skills at TigerStop after graduation. For any WMMA company looking for the seemingly rare mechanical engineer, I highly recommend an intern who can grow within your company. My workings with the WMMA and TigerStop have brought me an invaluable life and engineering experience.

I sincerely thank the WMMA for their assistance with my education.

WoodLINKS USA: 1,000 Companies - $100.00

Companies in the woodworking industry are finding it difficult to attract young skilled people. The education system is not aware of the job opportunities in the wood industry and generally doesn't even know the wood industry exists.

WoodLINKS USA was created to overcome this problem by facilitating a cooperative effort between industry and education. Individual companies support local WoodLINKS USA programs by providing their expertise, encouragement, materials, plant tours, and opening doors to make students and teachers aware of the technology and opportunities available today. Local industry participants then benefit directly by recruiting the skilled, knowledgeable students as their own employees.

Currently, there are over 80 schools in 20 states providing the WoodLINKS USA program to over 8,000 students. There are 20 schools waiting to become active providers of the WoodLINKS USA program in need of funding.

WoodLINKS USA is entirely funded by the U.S. wood industry and its friends. To date, industry trade associations, trade shows, companies, and individuals have provided the funding. Members in the industry's associations are now encouraged to make their own contributions.

WoodLINKS-USA is a 501 c (3) non-profit organization so contributions are 100 percent tax deductible. For your contribution, you will receive the WoodLINKS USA newsletter, assistance starting a local program, and, a list of current WoodLINKS USA schools.

Please consider partnering with WoodLINKS USA by committing to an annual donation. WoodLINKS only needs 1,000 companies giving $100.00 annually to make a difference.

For further information, please visit the WoodLINKS website at www.woodlinksusa.org or contact Mark Smith, national program director of WoodLINKS USA at woodlinksusa@netcare-il.com.

WMMA COMMITTEE UPDATES

Public Policy Committee Meets to Target Top Priorities,
by Frank Kobilsek, Public Policy Committee Chair, Black Bros. Co.

The WMMA Public Policy Committee Roadmap offers members a choice:

1. To be a bystander, without input, and accepting the laws and regulations as they are dictated by Washington; or
2. To be a participant in the process and affect changes by understanding the process and conveying their issues and possible solutions to their legislators, regulators, and respective staff.

The regular members of the Public Policy Committee have made the choice to participate actively in the legislative process. The Committee invited the members of all other WMMA committees attending the fall 2009 committee meetings to ask their input in selecting the target issues we, as an organization, will take to Washington in the February 2009 Fly-In. Approximately 35 attended the meeting on Tuesday afternoon, September 30th—even while the banking crisis bail-out remained a very open question.

The meeting, facilitated by WMMA Legislative Counsel John Satagaj, opened with a discussion which revealed that regardless of who becomes our next president, pro-business legislation will be difficult to move through Congress.

• Estate tax repeal or reform
  • In 2011, the "death tax" returns to the 55 percent rate with a $1 million exemption.
• OSHA dust regulations
  • The adoption of NFPA Standard 654 is interpreting wood dust as an explosive dust and the cost of conformance to the regulation may close many wood product manufacturers.
• Statute of repose
  • A historical WMMA issue
• Health care
• Card check legislation
  • Union organizing
• Direct expensing/depreciation bonus
  • As a stimulus package
• Paid leave
  • Under the Family and Medical Leave Act, this may levy an additional payroll tax.
• Manufacturing Extension Partnership (MEP) funding
  • Should federal funding be a performance based grant?

After a great deal of discussion, dust regulations, statute of repose and paid leave were selected as our priorities for the February Fly-In. John Satagaj and the WMMA management team will now prepare educational materials for both members and Congress and begin building coalitions to promote our positions in Washington. These materials will be distributed to WMMA members for their preparations to meet with legislators during the Fly-In.

The Public Policy Committee invites all WMMA members to join us in Washington on February 9 to 11 for this educational and effective meeting. Members need not be concerned that they have no experience with politics or communicating to Congress. First of all, you should remember your Congress has an obligation to listen to your concerns and secondly, when working with the tools and guidance provided by the Public Policy Committee and Association management team you will find the experience both rewarding and simple.

Later in the evening, Mr. Satagaj gave us his always entertaining politic analysis. As of that date the presidential election was too close to call, but he noted that it really doesn't matter. From a business point of view the U.S. House of Representatives will still be "Nancy's House" yet Nancy Pelosi will still lack a veto proof majority as will the Democrats in the U.S. Senate. So, in short, Republicans may lose some seats but not enough to change the dynamics of Congress.

Mark your calendars and I look forward to walking with you through the "People's House."

ASSOCIATION EVENTS

The Second Annual Woodworking Equipment and Wood Processing Public Policy Fly-In:
February 9 - 11, 2009

WMMA continues its role as an active participant in the Washington, D.C. scene by understanding and becoming involved in the political process. The year 2009 ushers in a new administration and Congress which will address important issues affecting every manufacturer and small- and medium-sized business.

Members—Save the dates! February 9 - 11, 2009 in Washington, D.C. You will be receiving sign-up information in the next few weeks.

Consistent with the WMMA Vision, the objectives of the WE and WP Public Policy Fly-In are to:

• Educate members—managers, owners, and employees—on the issues impacting manufacturing and business
  
  
• Inform members on the tools with which to educate their legislators, regulators, and their respective staffs
  
  
• Facilitate member cooperation with joint legislative meetings
  
  
• Facilitate industry cooperation with joint legislative meetings

New This Year at WIC 2009: April 29 - May 2, 2009

The changing face of the conference will feature a newly revamped one-day only Contact Table Program. WIC's forums have been expanded to include not only a "Green User" Forum but two End User Forums, a Distributor Forum, a Manufacturers Forum and the Public Policy Forum and Economic Outlook. Also new on the horizon is an Industry Roundtable Discussion and an Industry Panel of Change.

Members - Save the dates! April 29 - May 2, 2009 at the Sawgrass Marriott Golf Resort & Spa, Ponte Vedra, FL

ASSOCIATION NEWS

Export Mentors: Did You Know?

The WMMA, through the International Business Development Committee, offers a mentoring program to link members interested and capable of exporting with members who have extensive experience and are willing to donate time to mentor other members. If you'd like to learn more about this program go to http://www.wmma.org/members/mentor_program.cfm.

To Serve You Better: Aligning Programs with Business Functions

WMMA is optimizing the way it delivers WMMA program and service announcements to your company to make sure that every good program gets in the hands of the "right person" at the "right time."

This initiative segments WMMA programs and services into appropriate business functions; e.g., scholarship would fall under human resources, research and development tax break assistance with finance, economic analysis under marketing/sales, etc. WMMA recently asked members to help by identifying their key personnel in the following areas:

• Sales/Marketing
• R&D/Engineering
• Market Research
• Operations/Supply Chain
• Finance/Accounting
• Human Resources
• International

Given the diverse nature of members' businesses in size and resources, not every company necessarily has personnel assigned to each business function. The CEO/owner/general manager will need to make the decision as to whom to re-direct information about specific programs.

This does not replace the role of the key contact, but rather enhances it. Members will benefit when we increase the efficiency of and target WMMA communications about important programs and services to the right people.

Members will receive reminders. To those who have submitted their additional contact information, thank you!

WMMA Debuts New Web Site Design

Visitors to the Web site will notice that it is sporting an updated, clean design with new content and functionalities. The goal is to allow visitors and members to locate information and resources more easily. Partnering with Potomac Digitek and SVM E-Business Solutions, the WMMA leadership and management have been working hard all summer to streamline the look, add content to the public pages that describes WMMA's rich programs and services and phase in member-only features and functionalities that will ease communications between prospective and current members and the Association, and among members themselves.

Members are now able to login in and update their own contact information and profile. Coming soon are online dues renewal, member application and events registration. Some other enhancements under construction are: a revamped Best Practices Forum for peer-to-peer business networking, the Virtual Corner which will house a learning center of webinars developed exclusively for the membership, and a blog/wiki and other Web 2.0 functionalities. This is just the beginning!

In addition, WMMA is using search engine optimization techniques to increase the Web visibility of the Association and the membership.

MEMBER NEWS

Welcome New Member

Hermance Machine Company was started in 1902 by Albert D. Hermance at the pinnacle of the lumber boom that gave Williamsport PA its nickname, "Lumber Capital of the World." While today Williamsport is better known as the "Little League Capital of the World," Hermance Machine is still known by the same name, and still provides the same high quality machines that were once mass produced for almost 100 years since the start of the 20th century.

Joseph G. Strouse, a Williamsport native, bought the business in 1987. While Hermance Machine no longer manufactures mass quantities of woodworking machines, it has a fully functional machine shop with updated CNC milling capabilities that enable it to continue its manufacturing heritage. Hermance currently manufactures an internally designed cutterhead along with a preset stand for measuring moulder heads.

NAM Members Discuss Credit Crunch with President Bush

On its front page, the Los Angeles Times (10/3, A1, Puzzanghera, et al.) notes that the National Association of Manufacturers (NAM) and other major business groups "have been rallying their rank and file to press lawmakers to support the" financial rescue plan.

The AP (10/3, Rugaber) reports that, in recent weeks, "large manufacturers have started to see their customers pull back...due to difficulties with credit." But "there's no need to explain to Al Lubrano how deeply tight credit has wounded the economy." As president of Technical Materials Inc., a metal components maker, Lubrano "said orders from his customers in the automotive, computer, and telecommunications industries have 'dropped precipitously' in the past six weeks." Across the manufacturing industry, factory orders fell in August, and "more people than expected lined up at the unemployment lines last week." And according to Lubrano, "there's more pain to come...if the House doesn't pass a $700 billion plan to buy bad assets from banks and other institutions to shore up the financial industry and eventually thaw frozen lending." Lubrano and 12 other members of the National Association of Manufacturers (NAM) "met with President Bush Thursday as part of a group of business representatives who favor the package approved by the Senate Wednesday night."

Also participating in the meeting, Carter Products president Peter Perez said, "If I can't get capital, I can't pay my payroll, I can't buy equipment, I can't buy raw materials I need to run my business and I can't pay suppliers who provide me with those goods and services," Michigan's Grand Rapids Press (10/3, Knape) reports.

The Detroit News (10/3, Aguilar) adds, "Trade associations representing Perez and other small businesses are aggressively lobbying lawmakers to pass the bailout package." NAM and other business groups have "urged their members to call elected officials in the U.S. House and push for passage of the rescue plan, scheduled for a vote" on Friday.

Manufacturing.net (10/2) noted that, in addition to Technical Materials, Pine Hall Brick, and Carter Products, other NAM members represented at the meeting included Power Curbers, Inc., Vermeer Corporation, Bison Gear & Engineering Corporation, Click Bond, Inc., Cummins, Inc., ACE Clearwater Enterprises, Marlin Steel Wire Products LLC, Quality Float Works, Compass Minerals International, and Phoenix Closures Inc.

WoodLINKS USA Names WMMA Members to Board of Directors

Three WMMA members joined the WoodLINKS USA board of directors in August 2008. They are:

• David Hildenbrand, Thermwood Corporation
• Anthony Lynn, Castle, Inc.
• David Peel, Microvellum