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By Shea Gibbs, Senior Editor

The U.S. House of Representatives and Senate came together to pass a cohesive economic stimulus package; President Barack Obama signed it. The question now is whether the law can alleviate the domino effect of the current economic situation and improve the deteriorating market for metal castings.

The American Recovery and Reinvestment Act, signed into law by the president on Feb. 17, will cost $787 billion over 10 years in tax relief and spending. It will focus on infrastructure modernization, promoting clean, efficient energy, helping Americans hurt by the economy, supporting education and training, and advancing science and technology. The package includes several initiatives that should directly impact metalcasters, most importantly a series of small business tax breaks and a call to buy American goods (see sidebars). Less clear is the effect the law’s numerous infrastructure spending initiatives will have. Because much of the allocation of these funds has been delegated to the state and local levels, the number of metal castings that will be needed to complete all of the slated projects has yet to be determined.

And with politicians, lobbyists and civilians debating the merits of the recovery plan, how can the metalcasting industry be sure it will help in the long run? And what areas of the industry might see the greatest uptick?

“We hope that this brings us a lot of work,” said Bill Martin, vice president, international and business development, Neenah Foundry, Neenah, Wis. “But there’s quite a decision process remaining on how exactly the money’s going to be spent. We just don’t know yet.”

Infrastructure Spending

Metalcasting is a support industry. If the stimulus package puts people to work making and using the things that require metal castings to operate, the industry should benefit.

“We’re at the front end [of the supply chain],” Martin said. “If the economy picks up, then we’ll pick up.”

Following is a look at the monetary break down for infrastructure spending in various areas of
the economy.

Transportation—Transportation improvements will take several forms and therefore could help metalcasters serving a number of markets. The largest portion of the transportation spending, $29 billion, is earmarked for modernizing roads and bridges. Those improvements will require considerable amounts of construction equipment.

“The U.S. stimulus package should spur demand for the types of products made by Caterpillar,” said Jim Owens, the company’s chairman and chief executive officer. “The passage of [the bill] in the U.S. [should] help move the global economy toward a recovery. We believe strongly [the law] will create construction jobs in the near term.”

What’s more, the recovery package dictates that at least half of the funding dedicated to roads and bridges must be allocated at the state level no more than 120 days after the bill’s signing, meaning metalcasters will in three months have a decent idea of what the impact will be. The states will have more time to determine how to spend the remaining 50% of the money, as well as an additional $1.5 billion that has been given to state and local governments for discretionary local transportation improvement projects.

Metalcasters serving the railroad industry might also see a boost, with $8.4 billion going toward public transportation (construction of commuter and light rail systems, modernizing existing systems and purchasing equipment) and $8 billion dedicated to the creation of high-speed rail corridors. Commercial rail travel carrier Amtrak will receive $1.3 billion from the stimulus package.

The air and waterborne transportation industries have been given smaller amounts of money—$1.3 billion for aviation projects, $4.6 billion for water infrastructure and $100 million for maritime administration.

Energy—Energy is a buzzword surrounding the stimulus package, and it can take on two distinct meanings for metalcasters. One, it can refer to the energy that is being produced in this country. Two, it can refer to the energy that’s being used in your plant. Spending in both of these senses stands to affect metalcasters.

The recovery plan includes $30 billion for energy efficiency initiatives like a “smart power grid” ($11 billion) and advanced battery technology. It also attempts to boost clean energy production through $20 billion in tax incentives for renewable energy and energy efficiency over the next 10 years and provides grants of up to 30% of the cost of building a new renewable energy facility. The law stipulates a three-year extension of a tax credit for electricity derived from wind and a four-year extension of the credit for electricity from biomass, geothermal, hydropower, landfill gas, waste-to-energy and marine facilities.

Vestas, Alsvej, Denmark, one of the world’s largest manufacturers of wind turbines, recently has expanded its U.S. operations, creating more than 1,200 jobs in engineering, service and skilled labor. With the passage of the recovery bill, the company expects that number to increase to more than 4,000 by the end of 2010.

“This of course strengthens our positive outlook for the long-term growth prospects in the American market and our ability to grow a strong, local supply chain,” said Jens Søby, president of Vestas Americas A/S.

Back at your plant, the recovery package will provide tax credits through 2010 for energy-efficient capital investments like new furnaces, energy-efficient windows and doors or insulation.

Waterworks—Metalcasters supplying the waterworks industry would benefit from any new construction that results from the stimulus package, but a few provisions were included that more directly address them, as well.

The law allocates $18 billion for clean water, flood control and environmental restoration; $1 billion of that sum will be dedicated to creating new pipelines for underserved areas, including rural localities and western lands subject to severe drought. Another $6 billion will be used to enhance local clean and drinking water infrastructure, and $1.28 billion will support $3.8 billion in loans and grants for needed water and waste disposal facilities in rural areas.

Housing and Education—The decline of housing starts has had a significant effect on metalcasters, and the stimulus package has a number of provisions included to turn the market around. It earmarks $2 billion for the Neighborhood Stabilization Program, intended to assist in purchasing and rehabilitating foreclosed properties. Another $1 billion will go to the Community Development Block Grant program, which performs development projects for depressed areas.

A very large portion of the stimulus, $53.6 billion, will go toward education improvements at the state level. It is difficult to determine how much of this might lead to new construction; $40.6 billion can be used for preventing cutbacks and layoffs, school modernization or other purposes. But at least $100 million of that money will be used for school construction and additional aid.

One Positive Step

Wherever the money goes, the final outcome of the stimulus package has yet to be determined, and much of the industry’s future remains up in the air. As National Association of Manufacturers President John Engler indicated in a recent public comment, only time will tell when the dominoes will stop falling.

“We view this [law] as a very positive first step in promoting our nation’s economic revitalization,” Engler said. But, “there is more work to be done, and we will continue to work with Congress and the administration to advance follow-on legislation that will help all manufacturers and our nation’s entire economy get back on track and ensure job creation and sustainable economic growth.”  MC

For More Information

• Visit www.recovery.gov to see how the money allocated to the American Recovery and Reinvestment Act is being spent.
  
• For information on how the bill will affect the national deficit, visit www.whitehouse.gov.