Machine tool lease delinquencies again at an all-time low

July 18, 2007

For the second consecutive month, the delinquency rate on machine tool leases was at an all-time low in May, approaching 1 percent, about one-third of the delinquency rate of credit cards and about 20 percent of the rate of home mortgages, according to a report from Agie Charmilles US in Lincolnshire, IL ( “In contrast to the mortgage market, there do not appear to be many ‘subprime’ machine tool leases. Shops are uniformly in good shape judged by their ability to pay their bills,” said Harry Moser, Chairman of Agie Charmilles US.

The Agie Charmilles Machining Business Activity Index decreased to 62 in May from 67 in April. The Index is created by surveying machine tool users concerning their current business level versus three months earlier (February 2007). Any reading above 50 indicated that business activity has improved. The Index was inaugurated in October 2004. Business activity was strongest in the Stamping Die Category and the South region.

The Agie Charmilles/USBancorp Equipment Finance (USBEF) Machining Industry Financial Strength Index was 555 in May vs. 526 in April 2007, previously the best reading on record, 313 in May 2006 and 55 in January 2002, the worst reading on record. Any reading above 100 indicates that USBEF’s machine tool lease payment delinquencies (a good measure of machine tools users’ liquidity and consistent profitability) are at a rate below the average rate of 1990 to 1999. As profitability rises liquidity rises, delinquencies fall and the Index rises.

The approximately 126,000 U.S. companies that use machine tools have about 2 million machine tools and 750,000 to 1 million directly related employees (toolmakers, machinists, operators, programmers, etc.). Almost all mid-size to large manufacturing companies use, and periodically purchase or lease, machine tools. Thus, these indices give timely insight into the condition of U.S. manufacturing. The Machining Business Activity Index is a coincident indicator of this key manufacturing sector. The Financial Strength lags business activity and leads capital investment.

Agie Charmilles, a Swiss company, is a major supplier in North America of wire EDM, CNC, diesinking and manual EDM systems and high speed/performance and 5-axis CNC milling machines.