North American companies are sending out robots, even as productivity plummets

North American companies are sending out robots, even as productivity plummets

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(Reuters) – North American companies hijacked a record number of robots in the first half of this year as they struggle to keep factories and warehouses running in the face of a tight labor market and high compensation costs.

Companies ordered a record 12,305 machines in the second quarter worth $585 million, up 25% from the same period last year, according to data compiled by the industry group. Automation Development Association. Besides a strong first quarter, the North American robotics market had its best first half ever, the group said.

“Businesses need to get the product out of the house — and so they need ‘new automation,’” said Jeff Bornstein, president of the Association for Advanced Automation, better known as A3.

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For example, Eaton Corporation PLC (ETN.N) is working on 150 different robotic facilities over the next year and a half at electrical equipment plants in North America.

Incentives for companies to pursue a robotic workforce are clear in today’s tight job market. With nearly two jobs open for every unemployed worker, employers bid for wages: Total U.S. labor costs — which cover wages and benefits — rose 5.1% year-over-year in the second quarter, the most since the Labor Department began In his tracking in 2001.

However, if robots are designed to make workers more productive, that’s not clear yet: These dense order books come with US productivity falling in the second quarter at the steepest pace year-over-year since the government began reporting it in 1948.

One possible explanation is the distortions caused by the COVID-19 pandemic. The crisis has seen massive shifts in the workforce, including an exodus of workers during the darkest days of the crisis who are slowly returning to jobs. It is normal for workers to be less productive if they are moving to new jobs or changing jobs in their current fields.

Moreover, much of the recent employment gains have come in lower-productivity service sectors such as entertainment and hospitality, which may also mask improvements that robots might make elsewhere.

A3’s Bornstein said it takes time for companies to implement entirely new machines to maximize their capabilities. “There’s a learning curve,” he said.

This is especially true in sectors that are embracing entirely new technologies, such as the auto industry’s shift towards electric vehicles. A3 found that nearly 60% of the robots ordered in the second quarter went to car companies.

Mike Seko, CEO of FANUC America, the US division of the Japanese robotics maker, estimates that half of his industry’s sales to automakers are currently dedicated to new electric vehicle factories.

“This is all an investment for factories that will not be operational for several years yet,” he said, so it is no surprise that these robots have yet to contribute to increased productivity.

The rush to add robots is part of a larger recovery in investment as companies seek to keep pace with strong demand, which remains high even as the Federal Reserve raises interest rates to rein in inflation.

Knapheide Manufacturing Co. is among the companies investing in new robots — including a new production line for flatbed truck chassis scheduled to be brought to its Quincy, Illinois, plant this year. The new line will use robots to feed steel parts through an automated welding process.

Mike Bovey, the engineer supervising the installation, said the new robots should help alleviate a chronic shortage of welders. Cannavid is currently recruiting these workers from as far away as Texas.

“We will always need as many welders as possible,” he said, but they could be redeployed to other parts of production at the 1,500-worker plant.

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(Reporting by Timothy Abel) Editing by Nick Szyminski

Our criteria: Thomson Reuters Trust Principles.

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