2011 Abbreviated Annual Report · INDUSTRIAL FASTENERS INSTITUTE 2 0 1 1 OFFICERS Chairperson,...

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annual report

2011

celebrating 80 years

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2011

Celebrating 80 years of service to the fastener industry

I N D U S T R I A L F A S T E N E R S I N S T I T U T E 2 0 1 1

OFFICERS Chairperson, Jennifer Johns Friel ............................................................................ Mid West Fabricating Co. Vice Chairman, David L. Monti ................................................................... Fall River Manufacturing Co., Inc. Immediate Past Chairman, Larry Valeriano .........................................California Screw Products Corporation

BOARD OF DIRECTORS John Grabner................................................................................................................ Cardinal Fastener Inc. Steve Paddock .............................................................................................................................Böllhoff, Inc. Preston Boyd .................................................................................................................. Tramec Hill Fastener Karl Hutter .............................................................................................................................. Click Bond, Inc. H. Ross Wambolt......................................................................................... Monogram Aerospace Fasteners Pat Wells ...............................................................................................................The Young Engineers, Inc. Raymond L. Gurnick .........................................................................................Seaway Bolt & Specials Corp. Mark Quebbeman...........................................................................................................Semblex Corporation David J. Lomasney ..................................................................................................MacLean-Fogg Company Bruce Smith .............................................................................................. Carpenter Technology Corporation

DIVISION OFFICERS DIVISION I: INDUSTRIAL PRODUCTS Chairman, Nilo Urbani .....................................................................................................................Nylok LLC Vice Chairman, David Jendre ................................................................................... Quality Bolt & Screw Co. DIVISION II: AEROSPACE PRODUCTS Chairman, Donnie Autry .........................................................................................................MacLean-ESNA Technical Chairman, Owe Carlsson ........................................................................Alcoa Fastening Systems Vice Chairman, Mike Lawler .................................................................................................PennEngineering DIVISION III: AUTOMOTIVE PRODUCTS Chairman, David Hebert ...........................................................................................................SFS intec, Inc. Vice Chairman, Jason Surber............................................................................................................ATF, Inc.

ASSOCIATE SUPPLIERS’ DIVISION (ASD) Chairman, Alan Hariton .............................................................................. Hariton Machinery Company, Inc. Vice Chairman, Matt Delawder ......................................................................................................... SWD Inc.

T A B L E O F C O N T E N T S EXECUTIVE SUMMARY ............................................................................................................................... 1 INTRODUCTION ........................................................................................................................................... 1 General Economic Overview ............................................................................................................ 3 The Industry...................................................................................................................................... 7 Aerospace ........................................................................................................................................ 8 Automotive........................................................................................................................................ 9 Industrial Products.......................................................................................................................... 11 Imports/Exports .............................................................................................................................. 13 Raw Materials................................................................................................................................. 13 Government Affairs......................................................................................................................... 14 INSTITUTE OPERATIONS.......................................................................................................................... 18 MEMBERSHIP SERVICES ......................................................................................................................... 20 ENGINEERING TECHNOLOGY ACTIVITIES ............................................................................................. 23 IFI Standards Activities ................................................................................................................... 23 SAE Standards Activities ................................................................................................................ 24 ASME & ASTM Standards Activities............................................................................................... 25 ISO Standards Activities ................................................................................................................. 26 DIVISION I: INDUSTRIAL PRODUCTS....................................................................................................... 27 DIVISION II: AEROSPACE PRODUCTS..................................................................................................... 28 DIVISION III: AUTOMOTIVE PRODUCTS .................................................................................................. 28 ASSOCIATE SUPPLIERS’ DIVISION (ASD) ............................................................................................... 29 2011 – 2015 STRATEGIC PLAN................................................................................................................. 30 2012-13 CALENDAR................................................................................................................................... 40

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EXECUTIVE SUMMARY

The details of what is summarized here follows in the text of the Annual Report, but the quick read for 2011 is:

• The fastener industry had a good year with increased sales, solid margins and the continuing careful control of cost by limiting labor and facilities expansion. Fasteners tie to the assembly of durable goods is the key, and durable goods had a very good year.

• The U.S. economy showed soft growth (1.7% GDP growth) while China experienced deceleration in its growth and Europe evidenced a developing recession, which will be a critical issue to watch going into 2012.

• The automotive sector exceeded growth and profit expectations throughout 2011, while aerospace was largely flat lined, though with the aerospace order book backlog this will be a healthy industry for the foreseeable future. The industrial products segment depended on which part of the segment you served – agriculture and off road showed tremendous growth; machinery, equipment and electronics were solid; residential and commercial construction of structures and infrastructure remained largely in recession.

• Manufactured goods exports were a significant part of manufacturing performance.

• The Institute had another good year financially driven by solid Member participation and our P & I projects. We were very active with respect to the technical, business information and government affairs aspects of our Members’ operations.

• The fastener industry has achieved a high level of recognition by the industry’s customers, our suppliers and the legislative and regulatory bodies in Washington due to your knowledgeable and active participation in the association.

INTRODUCTION

This is the twelfth Annual Report to the Membership detailing the operations of the Institute, the key issues confronting the industry in 2011 and some projections for 2012. This year also marked the 80th Anniversary of the IFI! CY-2011 was a continuing recovery year with respect to the economy. Speculation throughout the year ranged from the possibility of a double dip recession to slowly accelerating growth from a flat lined economy to a slight upward trend somewhat held hostage by the European sovereign debt crisis and its potential impact on the North American economies. This resulted in 2011 real GDP growth of only 1.7%. Other drags on the economy were a significant repayment of debt and very tight credit. Some industries, however, showed stronger than average growth, including a number in the manufacturing sectors. The

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fastener industry fell into that category representative of durable goods manufacturing companies – autos, metals, machinery, computers and electronics where both production and new orders grew. In the aerospace segment, this was tempered somewhat by both Boeing and Airbus delivery issues, and most things related to commercial and residential construction were off pace, as were new infrastructure projects. Domestic defense spending tightened but at year end defense export orders surged. Manufacturing ended 2011 with the ISM at 54.1, down from year end 2010, but with 28 months of greater than 50.0. Manufacturing discipline has kept production in line with inventories and sales with year ending ISM Orders up 4.3 points to 56.7. Exports helped fuel the growth, with ISM Exports up 2.0 points to 52.0, while ISM Imports fell 0.5 points to 49.0. Operationally, IFI ended the year with a positive $186,750 in cash operating funds plus $1,374,170 in reserves at market value. A decision was again made to continue cleaning up the Balance Sheet with a non-cash write-off of the IFFI trade show trademark worth $10,534. Sales of the 8th Edition Inch Fastener

Standards commenced as planned and with other P & I projects produced $239,830 in non-dues net income. Our operating profit before special projects was $19,450. Our Director of Technical Engineering, Joe Greenslade, continued to generate new publications ideas and other non-dues revenue programs. Our Aerospace Division Manager, Pat Meade, continues to lead that Division, with its officers, with success in recruiting new members and in the aerospace technical, regulatory and government affairs (GA) arenas. John O’Brien, former IFI and Division III Chairman in a similar role to Pat for the Automotive Division is starting to see success there as well with three very likely new Division members lined up at year end. This Division remains a very vital and active Division, meeting every other month. In 2011, we added Bob Hill, also a former IFI Chairman on a part-time basis to manage our Industrial Products Division. He was very busy with plant visits to pursue both new membership development and current member retention by providing them an awareness of the scope of our operations on their behalf. Our Washington representatives, the Laurin Baker Group, continue to keep us well advised and represented on the government affairs issues that impact our businesses, and with the coming elections, it is hoped we’ll soon be working with a more business friendly Washington. The office staff, Barbara and Michelle, continued to provide services to the Members at a level of competence equal to previous significantly larger staffing levels, and along with the controller services and IT support we received from PMA, we are able to meet our accounting, financial reporting and IT requirements. Our strategy of cutting costs and then restaffing with the best people available on a part-time

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basis, getting everyone on the same page and then freeing them to do their thing, has been both operationally and cost effective, as reflected in the financial performance of the Institute. General Economic Overview

For the general economic overview, we are going to skip most of the graphs this year as we have already seen that 2011 was a largely flat lined economy. With GDP growth at 1.7%, it was a little worse than projected, but some areas of improvement were seen in the manufacturing and exports sectors. Europe was a basket case all year long and Japan has not yet fully recovered from the tsunami disaster. Only China, India and Brazil had the type of GDP growth that all would like to see. Given this we will look at what was in 2011 and focus on what is projected for 2012. U.S. GDP growth in 2012 is projected to be a plus 2.6%. Worldwide GDP growth in 2011 was about 2% for the UK, less than 1% in the Euro zone, 6.5% in Asia, 2.5% in Eastern Europe and 3.5% in Latin America largely driven by Brazil. China contributed almost 40% of all global growth in 2011, but is now experiencing a slow down. What in 2011 was perceived as a risk for inflation in China is now looking like the possibility of disinflation in 2012. This could trigger Chinese policy changes to counter this possibility resulting in an even more mercantilist currency policy to promote more exports. This would not be good for the U.S. or the rest of the world. The only alternative for China is promoting more spending internally, which they will probably also do, while keeping a wary eye on what many see as a Chinese real estate bubble and some serious bad loan banking problems – sound familiar? All are aware of the sovereign debt crisis in Europe, particularly in Greece and Spain during 2011 and extending to Italy, Portugal and Ireland in 2012, which is not yet fixed, and which is driving European austerity programs going into 2012 with very tight credit. The last time this scenario played out was 1929, and that is why the European problem will remain a drag on the economy in 2012, though the U.S. should continue with a modest recovery. We ended 2011 with a U.S. balance of trade deficit of $47.8B – as usual mostly because of Chinese exports to the U.S. and oil imports. The U.S. federal deficit rose to a whopping high of $1.299 trillion. Unemployment ended the year at a somewhat misrepresentative 8.5% due to the math of its calculation. It is expected to initially further decline in early 2012, but then to possibly rise again to the high 8% range as time goes on. As in the immediate past years, unemployment is not all driven by the economy because manufacturing productivity has averaged 4% growth each year for the past ten years and more productivity can equal less jobs. The rest of the non-manufacturing economy’s growth has averaged 2.5% per year, so

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manufacturing is pulling the train. In 2011 manufactured products exports increased by 15% and that is where additional growth lies more than in a scramble for domestic market share. The global market pie is increasing in size while the U.S. portion thereof remains pretty static as a percentage of the whole. American manufactured goods produced in 2011 totaled $1.074 trillion. At year’s end the Institute for Supply Management (ISM) Purchasing Manager’s Index (50.0 + equals economic growth) was at 54.1. If sustained at that level, GDP growth in 2012 would be expected to be about 4%, but that is not expected to happen. The ISM indexes composing that number were New Orders at +0.9 points to 57.6, production +3.3 points to 59.9 and even employment +3.3 points to 55.1. Inventories ISM fell 1.2 points to 47.1 (meaning a need for future production) and exports up 1.0 points to 53.0. The ISM Price index rose 2.5 points to 47.5 but is now declining. All-in-all a good start to 2012 but the headwinds caused by Europe, China’s response to its issues and oil price volatility argue for continuing caution going forward. If we summarize the economy in 2011, perhaps most striking is that it is the first time since WWII that our national debt being just over $15.23 trillion is just about equal to our total national output of $15.3 trillion. Worse than that, the Administration’s 2012 budget shows debt soaring to $26 trillion in the early 2020’s. For perspective, among the advanced economies, only Greece, Italy, Portugal, Ireland and Japan have a similar debt problem, and we know what’s happening there. Other numbers of significance are that the prime rate ended the year at 3.25%, with the Fed still suppressing interest rates; the Dow ended 2011 at 12,234, S&P at 1260 and NASDAC at 2,606 with a lot of volatility in the system. With some hope that with the production of real value, meaning making, mining or growing things, the economy will be more sustainable than an economy driven by financial gimmickry! Personal consumption did rise in December, though it was up and down through the fall months, and that still drives 70+% of the economy. Inflation in 2011 was 2.5% with core inflation (total less food and energy) only at 1.7%. U.S. 2011 auto sales were 12.7 million units, up 9.5% (LMC) and 2012 sales projections show a high estimate of 13.8 million units. The 2005 high of 17.0 million units is not expected to be reached again until 2018. Worldwide auto sales beat expectations as they were up 4% to about 75 million units with expectations of another 4% growth (IHS) to 79 million units in 2012. That, despite the quite dramatic impact of the Japanese tsunami and the flooding in Thailand. Worldwide auto sales saw North America up 9.2%, Japan down 20.0%, China actually up only 5%, W. Europe down 1.1%, Central and E. Europe up 28.3%, S. America up 9.8% and Asia/Pacific up 2.8%. A somewhat different picture than expected.

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U.S. aerospace sales are expected to have hit $218 billion in 2011, up 3.5% (AIA), but with a $400 million decline forecast for 2012 largely due to declining U.S. military spending. This might get offset by military aerospace export sales increasing significantly. Oil and raw materials pricing was volatile in 2011 with $10/barrel price swings over just a few days not uncommon. Oil is expected to remain volatile in 2012 due to the uncertain ramifications of the “Arab Spring” and Iranian sabre rattling. Other commodity prices are seen to be easing. With respect to energy demand, 90% of the growth in same is projected to come from the non-Western economies with 30% of that from China. CY-2011 ended with oil prices just over $100/bbl but expected to initially fall in early 2012. It is the current absolute production capacity in N. Africa and the Middle East, that once these are topped out, will drive oil prices higher again as would a conflict in the Persian Gulf. Until alternative new sources of hydrocarbons – shale oil and gas from Arctic, offshore Brazilian discoveries and new North American shale gas – or Saudi willingness to push production higher that will relieve cost pressure. Accepting a lower value for how oil is used now for fuel vs. its use as chemical feed stocks and high end refined products that will determine oil’s value at a future time which will ultimately determine the timing of significantly higher prices. We are entering an era of macroeconomic volatility vs. the era we are emerging from of steady strong growth and stability. As we so often hear China, China….China, we should note that China’s GDP growth dropped out of the double digits to 9.3% in 2011 and is projected to slow further to 7.7% in 2012. China’s government policy is largely driven by the desire to ensure domestic tranquility, so what actions they may take to handle that slow down are uncertain, but probably are not good for other economies. Just to urge your careful consideration when evaluating when and how much to expand capacity, we do enclose three graphs which deserve review:

Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model Real GDP is expected to grow an average of 2.6% in 2012, but will slow

in the 2/Q and going into the 3/Q.

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Source: U.S. Census Bureau Durable goods projected new orders is really a fairly flat line that just

keeps pace with projected shipments, while unfilled orders have continued to rise going into the new year, but are still well below inventories.

Source: Federal Reserve Board Manufacturing production – the users of fasteners – show as many

segments decreasing as increasing, so it depends on what segments you serve whether you can expect continued slow growth or a

softening in demand.

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The Industry

New studies on the fastener industry have not been published since 2010. Therefore, our best available data keeps U.S. fastener projection in the $11 – 12 B range and U.S. consumption at $12 – 13 B. Imports were roughly $4 B and exports increased significantly to over $3 B, largely due to the weak dollar versus the euro. Freedonia’s projection that world consumption would exceed $80 B by 2014 has gone unchanged, but that growth will be largely in emerging economies. Plant utilization has been projected to be 73%, up nearly 10% from 2010, and would be higher if there was trained labor available to make that happen. The fastener industry in N. America was almost universally profitable running as close to flat out as resources allowed. With a few very notable exceptions, not a lot of new capacity was added. Inventory turns were 4.4 continuing to tie up a lot of cash in the industry. Raw material prices stabilized in the second half of the year at moderate prices, well below the highs seen in March, as did the price of heavy melting and busheling scrap ($402 and $486 per ton in late December 2011). We are told that the “wild cards” in the steel price and availability for 2012 are if there is any unexpected high buying of U.S. scrap by China or Turkey and the ceiling on wire processing capacity which will exist in the immediate future. Probably the most repeated concern which really got attention in 2011 was the impact of the “Boomers” retiring and the lack of trained, or even interested, new labor to replace them, even with the sustained high unemployment rate. The term “skills gap,” and the uncertainty as to what to do about it, became a focus throughout the manufacturing industry. The IFI did succeed in addressing this with the Aerospace Division opening an aerospace fastener manufacturing training program at El Camino College in California and with IFI hosting week long fastener specialist training classes with the Fastener Training Institute in Cleveland and Detroit. Both programs will continue in 2012 and an LA IFI/FTI program will be added. The seriousness of this issue is seen in the estimated 600,000 unfilled manufacturing jobs in the U.S. alone. It’s not just “shop training” that’s missing, it’s the basic attitude and aptitude to enter manufacturing and the fact that in recent OECD studies American 15 year olds ranked 25th of 34 in math and 17th of 34 in science for students from developed countries. We aren’t building a skilled manufacturing workforce. Some companies are hitting this head on, as it was recently reported that The Boeing Company spends an average of $80 M per year on basic introductory and advancement training for their employees. There is a very compelling correlation between dollars spent on training and long term company success. The IFI Board of Directors made the introduction of students to manufacturing as a good career choice and basic shop floor skills development a key focus for the Institute in 2012. Fastener industry sales projections for 2012 have been forecasted to be:

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Aerospace

As noted, U.S. aerospace sales were $218 B in 2011 up 35% (AIA) and aerospace fastener sales probably reflected that trend plus some possible buffer inventory build by the OEMs who are trying to be careful about production interruptions due to supply chain issues. Raw material lead times still existed, but were not as bad as in previous years. Of those sales, $49.68 B was for civilian aircraft; $66.51 B for military aircraft; $25.57 for missiles; $46.36 B for space and $29.96 B for MRO and other. Deliveries in 2011 total $184,185 M; new orders $204,809 M leaving a backlog of $462,727 M, meaning a requirement for lots of aerospace fasteners for several years to come, pending unexpected market interruptions. Interestingly, aerospace industry profitability in 2011 averaged only 7.6% versus 9.7% for all U.S. manufacturing. CY-2012 aerospace sales are expected to decline to $217.65 B with a $1.4 B decline in U.S. military sales which at year end was offset by a several year $29.4 B arms sale to Saudi Arabia composed of 84 new F-15s and a further rehab of 70 F-15s already in use. The decline in U.S. military sales had been expected to eliminate over one million aerospace industry jobs, but now we’ll have to see how export sales balance that out. Major news stories in the aerospace industry in 2011 were the last space shuttle flight; the NLRB ruling trying to stop Boeing from opening their new 787 assembly plant in South Carolina (later resolved) and that Airbus outsold and out delivered Boeing in aircraft orders for the year. Boeing sold 778 net aircraft and delivered 426 while Airbus sold 1,378 and delivered 477. Airbus’s new A-320, which burns 15% less fuel gets the credit, and what moves Boeing makes to counter that with the 737 is a topic of serious speculation.

YEAR 2012

U.S. Total $13.200 M

OEM Total 10.200 M

Motor Vehicles 3.350 M

Electrical/Electronic 1.050 M

Industrial Machinery 1.730 M

Fabricated Metal Products 1.310 M

Aerospace 1.900 M

Other 0.860 M

Construction/MRO/Other 3.000 M

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Boeing’s announced intention is to re-engine the 737 for which they expect 1,500 new orders in 2012. Embraer delivered 204 aircraft in 2011 versus the 220 projected and down from the 246 delivered in 2010. Their current backlog is 249 jets. Getting platform specific with respect to Boeing commercial aircraft, in 2011 the ending backlogs for both domestic and foreign carriers were as follows, with a total backlog of 3,520 aircraft valued at $282.881 M:

Aircraft Total Domestic Foreign B-737 2215 755 1460 B-747 111 11 100 B-767 49 19 30 B-777 325 59 266 B-787 820 157 663

Of particular interest, and telling where air travel is growing and probably where aircraft maintenance will occur, is that 71.6% of the number of aircraft sold and 76.7% of their value rests with foreign buyers. As noted last year, studies by both Boeing and Airbus project 25,000 – 30,000 new aircraft will be needed over the next 20 years. Automotive

CY-2011 was a year of unexpectedly strong growth in the automotive sector, with the exception of the Japanese OEMs where the tsunami had a devastating effect. GM’s sales grew 13%, Ford’s 11% and Chrysler’s 26% during the year. The Detroit-3’s market share also increased in 2011 from 45.2% to 47.1% of the U.S. market. Low interest rates and increased consumer confidence – or weariness from being super cautious – helped the situation. Interestingly, GM’s sales in China also rose 8.3% in 2011 to 2.5 M vehicles and Ford’s Chinese sales grew 7% to 519,390 vehicles. China has since slapped tariffs on imported cars an action to be challenged in the WTO. For 2012, most auto economists are projecting sales in the 13.7 – 13.8 M units range with GM expected to barely beat out Toyota and VW (with GM’s global total auto sales of about 9 M units) for the top sales spot, though most expect VW to take the top spot sometime in the next two years. VW’s 2011 sales grew 14% to 8.16 M units worldwide and grew 21.5% in N. America. VW’s extensive line of vehicle types puts them in almost every market – VW, Audi, Porsche, Lamborghini, Bugatti, Bently, Scania, SEAT, Skoda and MAN trucks. Wards details of manufacturers’ cars sales show the following:

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Calendar Year-to-Date January - December Volume

2011 2010 % Change Chrysler Ford GM International (Navistar)*

1,361,587 2,110,832 2,503,797

877

1,079,734 1,905,310 2,211,262

1,008

26.1 10.8 13.2 -13.0

North America Total 5,977,093 5,197,314 15.0 Honda Hyundai Isuzu Kia Mazda Mitsubishi Nissan Subaru Suzuki Toyota

1,147,285 645,691

1,750 485,492 250,426 79,020

1,042,534 266,989 26,619

1,644,660

1,230,480 538,228

1,690 356,268 229,566 55,683

908,570 263,820 23,994

1,763,595

-6.8 20.0 3.6

36.3 9.1

41.9 14.7 1.2

10.9 -6.7

Asia/Pacific Total 5,590,466 5,371,894 4.1 Audi BMW Daimler Jaguar Land Rover Porsche Saab Volkswagen Volvo

117,561 305,418 267,169 50,375 29,023 5,610

324,401 67,240

101,629 265,757 231,176 45,204 25,320 5,446

256,830 53,948

15.7 14.9 15.6 11.4 14.6 3.0

26.3 24.6

Europe Total 1,166,797 985,310 18.4 Total Light Vehicles 12,734,356 11,554,518 10.2

When looking at what types of vehicles propelled the growth in 2011, domestic car sales increased 11.8% versus import cars up only 0.3% and domestic light trucks sales grew 12.8% versus import light truck up 9.3%. Contrary to what many had projected, truck sales did not disappear, but increased by 12.3% to 6,644,935 units versus an 8.1% increase for cars to 6,089,421 units. The best selling models in 2011 were the Camry followed by the Altima, Fusion, Corolla and Accord for cars, and the F-series, then Silverado, Escape and RAM for light trucks. The overall winner by a significant margin was the F-Series with 584,917 units sold. Some further automotive tidbits of interest helping to foretell what’s in store for 2012, are that Saab is gone and the European car market, which fell 1% in 2011, is projected to fall a further 3% in 2012. Auto makers

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mostly dependent on W. European sales – think PSA Peugeot Citroën who are not going to have a good year. The Germans, with about 50% of their sales in the U.S. and the emerging economies, should be fine. Fiat now has a 58.5% stake in Chrysler with the UAW Veba owning the other 41.5%. That could get interesting depending on their sales success. Fiats share prices fell from a high of 8 Euros in January 2011 to just under 3 Euros as the year ended. American Honda did not have a good year, as its sales dropped 7%, with a couple of months of production shut down due to the tsunami. All this while the total U.S. market had actually grown 10%. Their pickup truck sales in U.S. were down 40% to just over 10,000 units sold. Honda’s sales in Europe were also worse, down 19%. The 2011 winner was probably Hyundai/Kia where its U.S. plants are approaching 100% of capacity and those plants produced 2/3 of all their U.S. sales. The Alabama plant turned out 338,000 units with U.S. sales up 20% in 2011 versus a 10% increase for them worldwide turning out 6.6 M units. CY-2012 sales are projected to be 7.0 M units. Their design, warranty and styling allowed them to average less than $650/car in incentives versus about $2,000/car for Toyota and $3,200/car for Ford and GM. Hyundai/Kia’s U.S. market share is now 5.1% and new capacity will come on line in either the U.S. or Mexico. Hyundai reported a record $7.2 B profit – up 35% in 2011. Industrial Products

Many of the industries in this segment did very well in 2011 with the exception of products going into residential construction and commercial construction, though as the year ended commercial was improving in some geographical areas. CY-2011 for industrial products could perhaps best be thought of as a search for the new normal level of demand in each segment as it will take some time to return to the 2006-08 levels. The exceptions might be sales of off road construction and agricultural equipment, which really grew. In many of the other segments though, the projected slow economic growth going into 2012 equals slow growth for most industrial markets. Residential housing is going nowhere yet as there is an eight months supply of existing housing for sale. New building in 2011 was 593,000 units, well below the old norm of 1.3 M – 1.6 M units. Expectations for 2012 are about 730,000 units. This steers directly into appliance where the market is outfitting new homes, replacements and home improvement. Unit sales of all types of appliances was 34 M units in 2011 down from the 2006 peak of 50 M units. For 2012, the industry is projecting a 3% growth in sales based on the housing market, current backlog, low interest rates but high unemployment. Credit turndowns for new homes was 33% of those applying in 2011 versus 8% in 2010. That’s how tight credit is!

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For agricultural equipment sales are driven by food commodity prices (which ending 2011 were almost double the middle of 2010) weather, population growth and poor farm output in some parts of the world. CY-2012 agricultural equipment sales growth is projected to be in the 3-6% range. John Deere’s sales were up 14% in N. America and 31% in the rest of the world, to $3.2 B. Power generation equipment sales mirrors electricity use which was +2.0% in 2011 with 2.5% growth projected for 2012. Slow economic growth is again the culprit. A majority of electrical power generation capacity will again be coal and gas powered with the alternatives continuing to grow largely as incentivized by government policy. On-highway trucks grew 4.4% in 2011 and is projected to grow a further 4.0% in 2012. Reduced allowable driver hours will equal more trucks. By types of trucks, Class 8 (freight hauling) production was 260,000 units in 2011/projecting 270–290,000 in 2012; medium sized delivery trucks were 147,000 units in 2011/projecting 170-190,000 in 2012 and trailers were 190,000 units in 2011/projecting 210-250,000 in 2012. For rail cars, orders were high in 2011 at 57,000 units and there is a backlog in demand for 2012. Rolling stock replacement is in the cards going forward. Machine tools sales were surprisingly strong in 2011 with a 47% increase in sales over 2010 but are expected to soften to only 7% growth in 2012. These are metal cutting and metal forming machine tools. Construction equipment is differentiated as light and heavy. Light grew 25-30% in 2011 in the U.S. and heavy grew about the same. CY-2012 is expected to soften significantly due to the loss of tax incentives and is projected to be in about the 6% range. Caterpillar reported a sales increase of 35% worldwide to $17.24 B generating a net income $1.55 B. This included both their construction and mining equipment segments. Most of the growth was in Latin America, Asia and the Middle East. New Commercial construction – manufacturing facilities, warehouses, hotels and motels, business offices, schools, government buildings and apartments – remained very slow in 2011 except for in a few geographical locations. The American Institute for Steel Construction says that GDP must grow 3% or greater or construction will remain flat. It was down 16% in 2010, and fell only another 2% in 2011, but is still way below the old norm. New project starts in 2011 were up 11% but the starts are very slow to develop. For reference, the total number of square feet under construction was only about 1/3 of what was being built in 2005-07. A little good news is that for 2012 a 3.7% increase is projected. Bridges, highways,

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airports, etc. all have projects on the drawing boards or underway but at a slow pace and the lack of funds to continue stimulus spending will not help the situation, although $1.58 B in DOT funds are available for bridge and road repair. Highway, bridge and road construction in 2011 was expected to fall 4.4% to about $78.5 B. Imports/Exports

IFI’s 2011 Import/Export Report will show a continuing shift in import totals and their country of origin.

• Fastener Imports totaled $4,353.786 in value or 2,924,744,764 pounds in weight.

• Fastener Exports totaled $2,938.510 in value or 1,505,273,662 pounds in weight.

• The top export countries of origin were:

Country Value ($M) % of Total % Change vs. 2010 $/Lb. World 4,353.786 100 21.1 1.49 Taiwan 1,373.423 32 19.4 1.31 China 1,019.457 23 27.9 1.03 Japan 560.275 13 5.4 3.81 Canada 294.007 7 11.2 1.74 Germany 232.153 5 44.0 1.16 S. Korea 142.151 3 28.3 1.87 Italy 101.690 2 27.7 1.99 India 95.857 2 41.3 1.33 UK 78.831 2 3.5 10.59 Mexico 76.403 2 34.6 3.35

Raw Materials Raw materials and energy costs have somewhat leveled out, but have a lot of volatility. Oil prices fluctuated $10 a barrel in December alone. At year end oil traded for $100/bbl with $120/bbl prices not unexpected in late 2012 basis the unrest in the Middle East. Ending 2011 HRB steel U.S. FOB mill ended at $702/net ton vs. $637/net ton ending 2010 and well below the November 2010 high of $880/net ton. That, of course, is still well down from its mid-2008 high in the $1,100/net ton range. CHQ ended the year pretty flat for both carbon and alloy wire rod. Scrap volatility is creeping back in and busheling composite prices were up about 29% vs. 2010. Raw material may not become a major issue in 2012, as many fastener manufacturers have factored material pricing clauses into their contracts to protect margins. In the non-ferrous materials, aluminum was down 11% ($1.12/lb), brass down 11% ($3.50/lb), copper down 11%

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($3.60/lb), nickel scrap down 12% ($7.10/lb) and stainless down 3% ($2.00/lb) but with some real availability issues. Government Affairs

Our Washington representatives, The Laurin Baker Group provided good support in the legislative and regulatory areas of concern to the membership. Their report on Government Affairs activities in 2011 follows: “Political theater or a Comedy of Errors is more like it. We had a bruising battle over raising the debt ceiling, which has been raised without incident 10 times in the last decade. And depending on who you believe, we came within 24 hours of defaulting on our debt for the first time in our history. But after looking at the deal Congress and the Administration finally passed to avoid default, Standard and Poor’s, one of the cabals that rate creditworthiness for everybody, including governments, just downgraded the U.S. debt from AAA to AA+. That puts the U.S. on the same level as Belgium and just one notch above Chile and Spain. Of course, this is the same Standard and Poor’s that in 2008 rated Fannie Mae, Freddie Mac, Lehman Brothers and others as solid right up until Lehman Brothers disintegrated and precipitated the 2008 financial crisis. In fact, the only guy in town with less credibility than S&P may be the Treasury Secretary! But we digress. It doesn’t really matter how we got here, because no matter where you wind up, there you are. What’s important is where we are going from here. So, at the risk of being proven wrong before we get to Dallas in March, here are a couple of thoughts on what this all means. First, the debt ceiling debate wasn’t really about the debt ceiling—it was about the size and scope of government. The Republicans who swept into office in 2010 arrived with no intention of “going along to get along”, but rather with a clear purpose of forcing a meaningful discussion about reducing the size and cost of government, and they are willing to bring the process to a screeching halt if necessary to accomplish that purpose. The debt ceiling debate was their vehicle, and they took full advantage of it. The question is whether they accomplished anything meaningful. That’s because the compromise that Congress and the Administration came up with didn’t solve the problem, it just created a mechanism for addressing it. The Budget Control Act of 2011 contains a number of elements that are designed to force Congress to control spending or face mandatory across-the-board cuts in all government agencies. Here’s how it works:

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The debt ceiling will be raised in two steps, unless Congress specifically acts to disapprove either of the increases. The first increase of $900 billion, which was enacted as part of the Budget Control Act, will remain in place unless Congress votes to disapprove it by September 22. When that borrowing limit is reached (expected in February 2012), the President may increase the debt ceiling again by up to $1.5 trillion, and that increase will be in place unless Congress votes to disapprove it within 15 days.

The legislation created a Joint Select Committee on Deficit Reduction (the “Super Committee” or

the “Divine Dozen”) to develop a plan for $1.5 trillion in deficit reduction over ten years which failed.

If Congress has not passed a $1.5 trillion deficit reduction plan by sometime early in 2012, an automatic “trigger” goes into effect, leading to $1.2 trillion in future spending cuts. To accomplish those cuts, the Office of Management and Budget will order sequestrations of funds for both defense and non-defensive spending categories beginning January 2, 2013.

As you can see, the time is short and the lift is hard—but at least the discussion is not about whether, but how to reduce our long-term budget deficit and debt. This process will consume most of the available oxygen in Washington, but there are still a number of issues of concern to IFI members in which we are very much engaged. Here’s a run-down of those: I. NLRB and DoL Rules: Card Check by the Back Door As expected and feared, the Obama Administration has engaged in a flurry of activity designed to appease their union allies. Taken together, these actions and proposals have the potential to be as bad or worse than the Employee Free Choice Act (“card check”), which has been stymied in Congress due to a concerted effort by business interests, including IFI. First, the National Labor Relations Board (NLRB) sued Boeing, alleging that the company’s decision to locate a manufacturing facility in South Carolina was a violation of the National Labor Relations Act because it was done to “punish” the company’s union workers in Washington State. The NLRB’s suggested remedy: close the South Carolina facility and move the work to Washington. In other words, “we’ll tell you where you can locate”. This was resolved by a Boeing-Union deal.

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Second, the NLRB published a proposed rule on June 21 that would cut the time between a union petition and an election to determine if the union will be recognized to as little as 10 days. Currently, the median time between petition and election is 38 days. The reduced time frame creates the opportunity for “ambush elections”, where employers have little or no time to respond to union organizing efforts. Third, the Department of Labor released a so-called “gag rule” on June 20, which would reverse 50 years of established law and require employers to disclose otherwise confidential agreements with consultants, lawyers, associations or others who provide the employer with materials used for communicating with their employees about unions. This proposed rule seems clearly designed to intimidate and discourage businesses from seeking outside counsel in communicating with employees about unions. This continues to be contested. Finally, a pending case before the NLRB (Specialty Healthcare) could have a particularly profound effect on employers who face union organizing efforts. In this case, the NLRB is considering reversing decades of established law and allowing unions to “cherry-pick” the employee groups they wish to organize—only the operators of one machine on one shift in a factory, for example. This could lead to multiple small bargaining units within a single factory, with increased chances of work stoppages and other inefficiencies. These actions have been and are being vigorously opposed by the Coalition for a Democratic Workplace, the same broad coalition of business interests that has been fighting Card Check. The Coalition has submitted comments to both NLRB and the Department of Labor, and is urging Congress to take whatever steps are available to stop these actions. As an active member of the CDW, IFI is submitting its own comments for each of the above mentioned proposed rules, signing onto CDW comments along with other associations, and participating in congressional meetings where IFI members have a presence. In addition, a grassroots alert was provided to IFI members to facilitate individual companies’ submissions of comments on the proposed rules, and letters to Members of Congress. We will continue to be engaged in the CDW’s efforts. II. Taxes Normally at this time in an election cycle—roughly a year before a Presidential election—nobody wants to talk about taxes. However, taxes have been pushed back to the forefront as a result of the budget deficit issue.

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President Obama and Democrats insist that additional revenues are essential to solve the crisis, and Republicans say that raising taxes during an economic downturn is folly. Republicans are interested in comprehensive tax reform, including simplification of the tax code, broadening the base and lowering overall tax rates, but they are very leery of doing it piecemeal. All the tax issues IFI is concerned about—LIFO, Business Activity Taxes, Research and Development tax credits—you name it, it will be on the table. We are monitoring this issue closely and will keep you informed, but in the meantime we’re actively engaged in efforts to oppose the repeal of LIFO, and we’re part of a coalition supporting HR 1439, the Business Activity Tax Simplification Act of 2011. III. Trade On the trade front, we expect action on Trade Adjustment Assistance (TAA), which should pave the way for Congress to act on three pending Free Trade Agreements with Columbia, Panama and Korea. Not much else is likely to happen on trade issues. IV. Conflict Minerals As you know, IFI has been monitoring the proposed SEC reporting requirements for conflict minerals (defined as “gold (Au), tantalum (Ta), tin (Sn), and tungsten (W) derived from ores which have been mined in the Democratic Republic of the Congo or adjoining countries.”) While the original legislation passed last year applies only to publicly-traded companies that report to the SEC, OEMs have begun to push the reporting requirement down their supply chains, which has raised concerns among IFI members. We are working with NAM to urge the Administration to revisit the proposed requirements and make sure they are implemented in the least burdensome way. V. Fuel Economy Standards President Obama recently proposed to raise the Corporate Average Fuel Economy standard to 56 miles per gallon by 2025, with most of the auto industry executives sitting on the podium. While we don’t have any specific examples of potential impacts on IFI members, we assume that meeting such a standard will require substantial weight reduction in autos, among other design changes. That could lead to more composite or ultra high strength fasteners, which may or may not be an issue, but it’s worth mentioning.”

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INSTITUTE OPERATIONS

The Institute again did well this year with the previously noted positive balances both from Operations alone and including special projects. Reserves continued to build and were valued at $1,374,170 at year end. Ending 2011 we did another $10,534 non-cash write down to continue the Balance Sheet clean up and write off the IFFI trade show trademark. Sales of the Inch Fastener Standards, 8th Edition commenced in January and this project generated $340,628 in new revenue in 2011. Selling the desktop printed version of this book and the Metric Fastener

Standards, 3rd Edition, we will no longer face the excess inventory problem encountered with earlier editions. The IFI Technology Connection subscription service sales continued to grow, and this is a sale that keeps on generating new revenue on a yearly basis. The new IFI Fastener Technology Handbook which compliments the 8th Edition saw sales continue. Net non-dues income for 2011 was $239,830. The Institute’s Annual Meeting at the St. Regis, Monarch Beach, CA and the Fall Meeting at Disney’s Grand Floridian, Orlando, FL were both very good events, rich in take home value, and offered great networking opportunities. The Disney adventure added a stronger family flavor than we have seen in many years. The blend of technical, business, government affairs and economic forecasts were part of both programs and very favorable comments were received from many attendees. These meetings together were subsidized to the tune of $29,680 against a Board pre-approved subsidy of $25,000 to maintain meeting content in tough economic times. We continued our coordination with other associations both in similar industries and those representing key customer segments. Our office co-location with the Precision Metalforming Association (PMA) and the National Tooling & Manufacturing Association (NTMA) – the CNC guys – continued to produce cost savings and joint activity opportunities. With Mrs. Jennifer Johns Friel serving as our first woman Chairperson, there was much interest in her and her role and she made key presentations at both the Las Vegas Women in the Fastener Industry (WIFI) and the PMA sponsored Women in Manufacturing events. Our information exchange program with the Original Equipment Suppliers Association (OESA) continues as does the co-location of our Aerospace Division meetings with the Aerospace Locknut Manufacturers Association (ALMA) and our support provided to the Aerospace Industries Association (AIA). Our participation with the National Association of Manufacturers (NAM) has diminished somewhat, though on a variety of industry and government affairs initiatives this relationship continues to expand the depth and breadth of our influence with the Laurin Baker Group attending rather than staff. Within the fastener industry, our coordination with the NFDA, MWFA, Pac-West Distributors Association and the Fastener Industry Coalition

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(FIC) continued when common cause was identified. We teamed up with Pac-West to develop the Fastener Training Institute – hosting a Cleveland 2011 week long “fastener specialist” training program and a two-day Auto Fasteners training program in Detroit which netted IFI just over $20,000 and which will again be held plus a February 27 – March 2, 2012 program in LA, April 18-19 in Detroit and July 23-27, 2012 at IFI in Cleveland. Educational involvement became a key theme in 2011, as Division II continued to work with the State of California Community College system on the Aerospace Fastener Manufacturing curriculum at El Camino College under the auspices of the California Center for Applied Competitive Technologies, where actual fastener manufacturing equipment has been installed and the FTI classes. These efforts remain a huge step forward for IFI in formalizing the fastener training aspects of our fastener industry mission and at the Board’s direction, will be further enhanced in 2012.

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MEMBERSHIP SERVICES

Trade associations exist to afford collective representation of an industry’s interests that individual companies cannot do sufficiently on their own to influence their industry’s customers, the government or the public. Today trade associations are almost a necessity in a globally competitive business world, and almost all governments recognize them as institutions that advance the nation’s industries in ways no other organization could. Members and non-members contemplating IFI membership frequently ask, can I afford to be a member of a trade association? Is the money I pay worth the investment? By joining this association will I gain opportunities and information to better run my business? These are the key questions as to why companies join associations. IFI’s challenge remains to provide a value proposition which the reward consistently exceeds the cost. This is particularly true when confronted with difficult times, customers who don’t want to understand the industry and its issues and government decisions that directly impact the association’s members. The association is the venue where ideas and information can be exchanged to the benefit of all. What, therefore, is it that IFI strives to provide its members?

1) Networking opportunities with peers and key suppliers to the industry is almost everyone’s first consideration.

2) A voice and source of advocacy for the industry which is recognized by the public, the industry’s customers, and the government.

3) A forum to collectively develop and share the cost of information gathering, training, carrying out industry specific technical and business oriented projects, and as a vehicle to coordinate projects of joint interest to the industry and with the key customers of and the suppliers to the industry.

4) A mechanism by which to represent the industry on technical and standards-based issues nationally and internationally in the interest of the member companies and their supply base.

5) The vehicle to coordinate with other associations in N. American manufacturing’s best interest.

These are the functions performed by IFI’s Divisions, Committees, Working Groups and by the Staff of the Institute, under the supervision of the Board of Directors. For 2011, the scope these activities took on is briefly summarized below. IFI provided qualified staff to attend industry and government meetings requiring more than 60 meeting days per year, plus travel time on behalf of our Members. This shared representation is a cost saving as Members do not all have to attend all these meetings themselves. This unified representation also allows for coordination amongst and between the various bodies and activities

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rationalizing the decisions being reached by the industry. Over the course of a year IFI staff and/or designated Company members will attend multiple meetings of the following:

• ASTM – F-16 • ASME – B-18 and B-1 • SAE – Fastener Committee and E-25 • International Standards Organization (ISO) – TC2 • Aerospace Industries Association working group and regular NASC meetings • The Aerospace Government/Industries Working Group (GIFWG) on fasteners • At the National Association of Manufacturers (NAM)

- International Economic Policy Committee and the Subcommittee on China - Coalition for a Sound Dollar - Coalition for the Future of Manufacturing - Associations Council - OSHA Policy Group - NLRB Working Group

• Selected consortium dealing with issues of importance to the industry • The Research Council on Bolted Joints • The Metalworking Industries Associations Executive Committee • The Automotive Industries Action Group (AIAG) – Packaging & Logistics and Quality Committees • The Metalworking Manufacturing Coalition • The Original Equipment Suppliers Association (OESA) meetings, workshops and seminars on the

automotive supply chain. The Institute thus provides the vehicle by which Member companies can gain the advantage of coordination with other like-minded organizations on issues of direct concern to the Members. These relationships leverage the political reach of the Membership on government affairs and issues of business concerns where common interest exists. This spreads the cost of such activities over a broader base and makes accessible to IFI’s Members the best thinking of the combined groups without the cost burden of having to belong to multiple organizations, or of trying to house all such expertise in the IFI, or in the individual companies. Key groups the IFI regularly coordinates with include:

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Fastener Organizations: Other Metalworking Organizations:

• European Industrial Fastener Institute (EIFI) • Precision Metalforming Association (PMA) – stamping & pressing

• Fastener Institute of Japan (FIJ) • Precision Machined Parts Association (PMPA) – screw machine

• Brazilian Fastener Institute (SINPA) • Spring Manufacturers Institute (SMI) – spring making

• Taiwan Industrial Fasteners Institute (TIFI) • Forging Industry Association (FIA) – forging

• Chinese Fastener Association • Tooling & Manufacturing Association (TMA)

• National Fastener Distributors Association (NFDA) • American Bearing Manufacturing Association (ABMA)

• Pac-West Distributors Association • American Gear Manufacturing Association (AGMA)

• Midwest Fastener Distributors Association • American Iron & Steel Institute (AISI)

• Other Distributor organizations • Metal Treating Institute (MTI)

• National Association of Manufacturers (NAM)

• National Tooling & Manufacturing Association (NTMA)

Other Institute activities include developing and/or acquiring and disseminating industry information. These surveys and studies are able to be done on a shared cost basis and would possibly not be done at all if left to individual companies. Included are:

• IFI “Import/Export Report”

• Reports on the global steel and other raw materials markets

• Benchmarking Surveys

• Washington newsletters from a variety of Association sources (NAM, AIA, Credit-Suisse, etc.)

• Periodic e-mails, broadcast faxes and website updates on critical issues impacting the industry.

• Regular economic updates. Finally, at our Annual Spring, Fall, and periodic Divisional meetings, critical issues speakers and presentations are hosted on a shared cost basis. In 2011 these included:

• Alan Beaulieu’s and Clare Zempel’s U.S. Economic Forecasts

• Laurin and Jennifer Baker’s IFI Government Affairs Briefings

• Current Issues in Supplier Contracts by Dan Sharkey

• Metallurgical Implications of Heat Treat Strategy Changes by Salim Brahimi

• Winning Business Strategies in Tough Economic Times and the Coming China Wars by Dr. Peter Navarro

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• The Arab Spring and its Implications for America by Dr. Bard O’Neill

• Fastener Plant Safety Program by Kevin Johnson

• A variety of experts on how suppliers can deal with customers under financial stress

Developing common opportunities and dealing with common problems, along with networking, are what drives most memberships in trade associations. Your participation in the IFI is always appreciated and gives you a voice in deciding what those issues will be and how they will be dealt with. Perhaps most important, it is an insurance policy providing you a seat at the table and your entrée to proactively help in shaping the future your business will exist in. ENGINEERING TECHNOLOGY ACTIVITIES IN 2011

The mission of the IFI technical staff is to protect the technical interests of IFI members by actively participating in all major organizations that create U.S. and international fastener standards; provide technical support to members in terms of manufacturing, applications engineering, and technical issue dispute resolution; and keep members abreast of critical issues that may impact them presently or in the future. The major objectives for the IFI Technical staff in standards activities are to:

1. Protect IFI members against the creation of new standards or the revision of existing standards that might be unnecessarily burdensome.

2. Facilitate the creation of new standards requested by IFI members. 3. Reduce the number of standards IFI members must comply with by eliminating standards that are

in conflict with or a near duplicate of a more widely used standard. 4. Move the U.S. fastener industry more deeply into the international fastener markets by the

systematic withdrawal of U.S. metric fastener standards where ISO fastener standards are more widely used around the world.

IFI Standards Activities:

• NEW IFI Standard: IFI-158, Standard for Bulbing Structural Blind Rivets Blind rivet producers in Division I requested the creation of an IFI standard that will cover bulbing type blind rivets for structural applications in construction projects. Key technical personnel from Alcoa Industrial Products, Infastech-Avdel, and Emhart–POP participated in an IFI working group

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to create IFI-158. The project officially started on September 15, 2011 and the standard will be published before the end of 2011. All work was conducted via one-hour web conferences held approximately every two weeks.

• Possible USCAR Project: USCAR has an interest in developing a fastener standard to cover ultra-high strength fasteners 1400 – 1600 MPa (220 – 280 ksi). The objective for the car companies is to use smaller, stronger screws and bolts that will help them lower weight in an attempt to achieve the required improvement in future gas mileage. IFI technical staff has volunteered to coordinate such a project by assembling car company engineering representatives plus members of Division III, and other related technical resources. This is not yet officially started, but it will likely start in either the fourth quarter of 2011 or the first quarter of 2012.

SAE Standards Activities:

• SAE J429, Mechanical and Material Requirements for Externally Threaded Fasteners (inch) was published in early 2010. The major change was the addition of several allowable carbon and alloy types of steel to bring this document in line with the international equivalent of this standard, ISO 898-1. Also, all test methods were removed from the standard and replaced by references to the appropriate ASTM standards. This will make the job of testing bolts more uniform and less confusing in the future.

• SAE J995, Mechanical and Material Requirements for Steel Nuts (inch) is in the publishing

process. The major changes to this standard were the addition of several nut styles for the Grade 2 strength level and all test methods were removed and replaced by references to the applicable ASTM standards.

• SAE J81, Thread Rolling Screw Standard has been “stabilized” meaning that it will no longer be

revised since inch thread rolling screws are now covered by ASME B18.6.3 the tapping screw and machine screw standard.

• SAE J1061 and J123 are in the process of being withdrawn. Current SAE standards will then refer

to the applicable ISO standard for metric products and the ASTM standards for inch fasteners.

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ASME Standards Activities:

• ASME B18.2.6M, Metric Structural Fasteners is in the publishing process. Members of ASTM F16 and the RCSC requested a metric standard that parallels the inch standard B18.6.2. This new metric standard contains dimensional requirements for hex head structural bolts, heavy hex nuts, structural washers, and direct load-indicating washers. USA structural steel requirements are different from those in Europe, thus a U.S. metric standard was required since no suitable ISO standards exist.

• ASME B18.16.5, Lock Nuts (Inch) standard is being expanded from covering just one style of

nylon insert lock nut to include several additional styles of nylon insert lock nuts, plus a full range of all-metal lock nuts. Once this is published, the IFI-100/107 and IFI-100 will be withdrawn.

• ASME B18.5, Round Head Bolts standard is in the process of being balloted for revision. The

primary changes are the addition of more detail on the configuration of the square neck to make it easier to determine the acceptability of the length and degree of fill of the neck. It is anticipated that this will be in the publishing process before the end of 2011.

• ASTM B18.9, Plow Bolts standard is in the revision process at the request of an IFI member.

Certain non-functional dimensions are being altered to make the product easier to produce without sacrificing any of the performance of the parts. This should be completed in the first quarter of 2012.

ASTM Standards Activities:

• The standard for the approval of finishes on A490/A490M bolts to replace the IFI-144 standard is in the final balloting cycle and should be approved at the November 2011 ASTM F16 meeting. A standards number has not yet been assigned.

• A490/A490M Structural Bolt (150 ksi) was revised to correct the disconnect between the

specified hardness and the maximum allowable tensile strength. This was approved earlier in 2011.

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• ASTM F606/F606M Testing Standard was revised at the request of an IFI member to add more details to the procedure for doing bolt proof load testing to eliminate disputes between bolt suppliers and purchasers. This was approved earlier in 2011.

• ASTM A325/A325M, A354, A449, A490/A490M hardened bolt standards have been revised to

allow a wider range of materials to match those found in the comparable strength levels in ISO 898-1. These additional materials enhance formability and hardenability, making it easier and more cost effective for IFI members.

• ASTM F959/F959M direct load-indicating (DTI) washer standards are under review and an in-

depth study has been sponsored by TurnaSure on the long term relaxation performance of DTIs which are manufactured by various processes. The results of this research will be reviewed at the November 2011 F16 meetings which may result in future changes to these standards.

ISO Standards Activities:

ISO metric fastener standards are dominant in the worldwide fastener markets. The U.S. has participated in the TC2 subcommittee since the mid-1970s, but during most of that time unique metric standards were also created through ASME, ASTM, and SAE. Close scrutiny of the U.S. metric standards versus the ISO fastener standards reveal that the U.S. standards provide no engineering superiority to the comparable ISO standards. In the past five years the U.S. delegation to the ISO TC2 has been completely restructured and re-oriented to start to take a more active role in the development and maintenance of ISO fastener standards to deepen and broaden the U.S. influence in the metric fastener standards used by the rest of the world. For the past 40 years the German and French delegations have been the major contributors to the work of TC2 resulting in them having the greatest influence. The current U.S. delegation is comprised of Chris Williamson, Director of Quality and Engineering at FASTENAL, Don George the retired Worldwide Manager of FORD Fastener Quality, Ron Strong the retired Manager of GM Fastener Engineering, and Joe Greenslade the current Director of Engineering Technology for the IFI. All of these people have extensive experience in international standards, engineering, and quality and have an ongoing deep interest in these activities.

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• ISO 10683, Zinc Flake Finishes for Fasteners is being prepared for a final round of ballots within the next few months. Several of the IFI Associate members are developers and/or major applicators of these finishes commonly referred to as “dip-spin” finishes. The series of finishes represented by this standard account for 80% or more of the coatings applied on fasteners today that are going into the production of automobiles worldwide.

• ISO 4042, Electroplated Finishes for Fasteners is in the revision process to bring it up to

date with the current state of the art regarding the application of non-hexavalent chrome surface treatments, and the incorporation of sealers that greatly improve corrosion resistance, and friction modifiers to improve the torque-tension characteristics of plated fasteners. This will probably be finished in 2013.

• U.S. delegation takes on its first TC2 Project Leader roles:

o ISO 6157 Parts 1, 2, and 3 the fastener discontinuity standards will begin the

revision process by mid-2012. Some of the planned changes are to help resolve some issues frequently dealt with by IFI members and the movement away from AQL quality sampling to C = 0 sampling.

o ISO 3269 the fastener acceptance standard will begin revision by mid-2012 to

convert the quality system methodology from AQL sampling to C = 0 sampling to bring this document into alignment with the ASME and ASTM quality approaches.

o ISO 1891, Part 3 is the standard for terminology and vocabulary for mechanical

and physical properties. The first draft of this standard will be reviewed at the October 2012 TC2 meeting. This will be patterned after ASTM F1789.

OUR DIVISIONS

DIVISION I: INDUSTRIAL PRODUCTS

Division I is those manufacturers who supply fasteners and formed parts to the makers of industrial products, the construction industry and to distribution. Most of our fastener standards are developed for this segment of the industry. The Division meets twice yearly and often hosts speakers on topics of timely interest to the whole membership. Many of our technical special projects are triggered by the needs of this

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segment. This Division provides support to our technical engineering activities, to the Research Council on Structural Connections and to the Bolting Technology Council. Our activities with ASTM, ASME and ISO are largely driven by Division I. The Division was very ably chaired by Preston Boyd, TRAMEC HILL FASTENER and Nilo Urbani, NYLOK LLC. The Division joined the Aerospace and Automotive Divisions with the addition of Bob Hill as Division Manager. Bob is focused on membership development and membership retention in equal parts. DIVISION II: AEROSPACE PRODUCTS

Division II manufacturers supply very specialized products to the aerospace industry and the Department of Defense. Their products are frequently made from the more exotic materials and often have complex geometry in their design. Their supply to the government means they must comply with defense procurement agency constraints. This Division has an Affiliate Member category which are those key distributors in the supply chain to the major aerospace airframe, engine and flight component OEMs. The Division tends to be quite active in government affairs due to the many regulations governing the sale and use of the products their fasteners go into. This Division has been the fastest growing in the IFI, has an extremely capable Division Manager in Pat Meade. The Division successfully participated in the start up of a community college program to train machinery operators for the industry and graduates are being hired into industry. The Division was very ably chaired by Pat Wells, THE YOUNG ENGINEERS, INC. and Donny Autry, MACLEAN ESNA. The Technical Chairman is Owe Carlsson, ALCOA FASTENING SYSTEMS. DIVISION III: AUTOMOTIVE INDUSTRY FASTENER GROUP (AIFG)

Division III represents those manufacturers supplying product to the automotive OEMs and the Tiers that supply the OEMs. It meets bimonthly, frequently in the Detroit area to facilitate participation. Because of the nature of the automotive industry – frequently confrontational and always price and volume driven – the Division never lacks for projects to undertake, new business and legal issues to learn and best practices lessons from which all can benefit. The Division coordinates activities with USCAR, AIAG and OESA. This Division also has a very able and experienced Division Manager in John O’Brien. The Division hosts the annual “John D. Fischer” Memorial Golf Tournament in which Division members, the Institute’s current and past officers and Associate Division members participate. The 2011 winning team for the golf tournament was Steve Paddock, Andrew Blazar, Scott Brown-Borden and Mike Schultz. The group was very ably chaired by Pete Baenen, KAMAX L.P. and David Hebert, SFS INTECH, INC.

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ASSOCIATE SUPPLIERS’ DIVISION

The Associate Division members are the key suppliers of the raw material, machinery, equipment and services used in the production of fasteners/formed parts. They provide the Institute expertise in their particular area and brief Members on new technology, operational practices, business developments and trade issues impacting their ability to supply the fastener manufacturing market. Without the associate suppliers, there would be no industry. Twice a year they provide very focused briefings on one of their particular areas of expertise, a unique value to the Members. This group was very ably chaired by Bruce Smith, CARPENTER TECHNOLOGY CORPORATION and Alan Hariton, HARITON MACHINERY COMPANY, INC.

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Industrial Fasteners Institute

2010 - 2015 Strategic Plan

Approved: 12/7/09 / 9/18/11 Review

And 4th Quarter 2011 Update Vision: To be the globally recognized, North American focused, leading association representing the interests of the manufacturers of mechanical fasteners and formed parts, and the key suppliers to the industry, fostering their working together to shape the future of the industry. Mission: To represent the industry to its suppliers, customers, the government, and the public at large to advance the competitiveness, products, and innovative technology of the Member Companies in a global marketplace. Operational Values: To be Member driven, Board led, focused on continuous improvement in the process of serving our members in their voluntary participation in the development of business, technical and government affairs programs, and issues important to the industry’s success. Original Strategic Plan Committee Members: Ed Plomer – Illinois Tool Works, Larry Valeriano – California Screw Products Corporation, Karl Hutter – Click Bond, Inc., John Grabner – Cardinal Fastener & Specialty Co., Inc., Herman van Maaran – Kamax L.P., Don George – ND Industries, Inc., Rob Harris – IFI Update Committee: Dave Monti, Chairman; Ed Plomer; Larry Valeriano; Mark Quebbeman; Dave Lomasney; Rob Harris; Joe Greenslade

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GOAL 1: Maintain Financial Stability of the Institute

Objectives Strategies Responsibility Evidence/Timeline Status 1. Prepare and report to the

board the level of IFI Reserves as managed by CCAM, Capital Asset Management, LLC

• Managing Director

• Quarterly report to the Board • Give early notice to the Board of any

unplanned possible requirement to draw on reserves

• Done • Done $37K used on 8th Edition

and subsequently deposited $160,000 new funds to Reserves

2. Review performance of IFI Reserves

• Treasurer • Managing Dir.

• Quarterly and at the annual Finance Committee Meeting

• Done with Jim Pease, Carnegie

3. Schedule CCM to present to the Board at the Annual Meeting


• At the Fall Meeting of the Board • CCM to attend Finance Committee Meeting in Cleveland

A. Maintain a minimum of one (1) year of budgeted operational expenses in the IFI Reserves

4. Establish annual ROI objectives and investment guidelines for CCM

• Board of Directors

• At the Fall Meeting of the Board • Guideline 30% Equities 70% Fixed of which 10% Cash Actuals: 6.7% cash / 71.0% FE/22.3% E yield thru 6/30 = 2.9% $37,771 9.6% return

1. Forecast projected revenue & expenses


• In preparation for the annual Finance Committee Meeting

• Done for 2012

2. Establish a 12 month budget that balances with expected revenues

• Finance Committee

• For approval by the Board and IFI Membership at the Fall Meeting

• Done for 2012

B. Develop annual budgets that balance with revenue

3. Reforecast revenue and expenses quarterly and explain variances


• Quarterly • Done basis 6/30/11 statements

1. Maintain operating expenses in line with the annual budget


• Monthly budget reviews

• Tracking in line with Division expenses adjusted per BOD suggestion

2. Identify areas to reduce expenses


• At quarterly reviews with the Treasurer and in year end projections for the Board

• Nothing recommended at this time

C. Manage Operating Budget Expenses as budgeted

3. Identify revenue shortfall and report to Executive Committee in a timely manner

• At quarterly reviews with the Treasurer and in year end projections for the Board – TO DO

• In Treasurer’s Report 9/18/11 BOD meeting

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Objectives Strategies Responsibility Evidence/Timeline Status D. Manage

Annual & Fall Meeting Expenses in line with direction of the Board

1. Plan meeting and budget in line with direction set by the Board based on the “breakeven principal”

• Managing Director and Chairman with Meeting Planner

• Managing Director and Meeting Planner

• Pre-Annual and Fall Meeting projection to the Executive Committee

• Post meeting report out to the Board

• Meeting Budgets prepared – 2011 Annual Meeting exceeded planned subsidy to be discussed

1. Track non-dues revenue from current sources. i.e. P&I


• Quarterly reviews with updated year-end projections

• In P & I Report and on Financials

2. Analyze and report out other new non-revenue options as they become known

• Technical Director

• By submission of Non-Dues Revenues Program Approval Request form

• Being presented at Board Meeting, including new proposed projects. 8th Edition selling well

3. Approve new non-dues projects

• P&I Committee • Recommend approval and funding to the Board and Membership via Project Approval Process and Annual Budgets when submitted

• Pending P & I review and Board recommendations

• New engineering applications guide approved

E. Look at options to maintain revenues from non-dues sources at “20%” each year.

4. Benchmark like organizations for new ideas


• Measure ideas brought forth and performance to maintain non-dues revenue at “20%” or more annually for review at Annual Meeting

• Currently at 27% with 8th Edition with all non-dues sales

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GOAL 2: Have a Clear Value Proposition and Communicate Effectively

Objectives Strategies Responsibility Evidence/Timeline Status A. Develop and

implement communication tools to inform the members and the industry on relevant matters

1. Identify methods to communicate effectively with all members


• Technical Director • P&I Committee

Establish a process to start with an agenda item at the Annual Mtg.

• Define initial deliverables to accomplish objective at the 2010 Annual Meeting

- IFI Annual Report and a focused abstract

- Other (to be defined) – “State of the Industry” periodically, quarterly? Semi-annual?

• Define schedules for other deliverables

• Done • New projects to be defined

B. Provide annual reviews and bi-annual updates of the Strategic Plan

1. Review Plan for accuracy and alignment with goals

2. Make adjustments when necessary

• Strategic Plan Committee

• Acceptance of proposed changes at the Annual Meeting by the Board

• Provided for review with these comments

C. Define the value proposition to be clear to all current and prospective members

1. Provide a one-page summary of what the IFI is, does, and stands for, for current and prospective members (see Goal 2A)


• For approval by the Board at the 2010 Annual Meeting and delivered to the Membership and prospective new members thereafter

• Completed by Jennifer Johns Friel and John O’Brien

• Technical Director • Attend, and when possible, lead technical organizations of concern: ASME, ASTM, ISO, SAE, SCBT

• Being done with ASME, ASTM, ISO, SAE, & SCBT-ISO TC2 hosted at IFI HQ 2010

D. As the technical voice of the industry, implement tools to maintain the IFI as the leading fastener

1. Have representation in all key industry related organizations

• Division Managers

• Gain access to key customer and supplier groups representing industries of concern to us

• In process. Particularly strong in the automotive and aerospace business areas

34

Objectives Strategies Responsibility Evidence/Timeline Status association in the eyes of the fastener community

2. Identify key industry markets: i.e. aerospace & automotive, and have IFI attendance and representation at those industries’ gatherings


• Attend key industry organizations’ meetings and committees: MMC, NAM/CMA, OESA, USCAR In 2010 create a list of key customer groups and/or associations that can improve IFI visibility for divisions?

• List prepared – J. O’Brien attending OESA, P. Meade GIFWG/NASC, R. Harris NAM & selected Member USCAR R. Harris @ 2010 & 2011 AWPA Wire Rod Conference – Rob Harris with EIFI personnel in June 2011

• Board

• Board members to selectively send personal invitations to the Annual and Fall Meetings to Senior Officers with whom they have a personal/business relationship

• Personal correspondence from the Chairperson being used and IFI 80th Anniversary special meeting announcements produced

E. Promote involvement of the highest level management personnel from member companies at IFI meetings and activities

1. Develop program for outreach to Senior Officer level personnel • IFI Chairman • Send periodic letter to top executives

of member companies to encourage their involvement in IFI meetings and activities.

• Will follow to all Principal Delegates with encouragement for Annual/Fall Meeting attendance

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GOAL 3: Maintain Position as the Industry’s Top Technical Resource and Facilitator

Objectives Strategies Responsibility Evidence/Timeline Status 1. Maintain a Technical Director

as a key employee of the Institute

2. Review job description to maintain role in line with the IFI mission


• Technical Director on staff at all times and jointly ID potential protégés

• Written job description review annually

• Done • Distributed & reviewed

A. Staff IFI appropriately to support a strong technical presence

3. Promote a web-based technical database (ITC)


• IFI Technology Connection • Completed and earning revenue

B. Maintain participation in key industry standards and technical committees

1. Identify and participate in national and international committees and organizations that promote fastener standards, manufacturing, and technology


• Annual report of committees’ work to the Board at the Annual and Fall Meetings

• List of IFI staff and company participants on various standards organizations. (web site, annual report, membership directory?)

• In Board Notebooks and IFI Annual Report

• Provided

• Technical Director and Division Managers

• Report to Board at Annual and Fall Meetings IFI’s participation in educational groups of interest—target would be one group per Division over the five-year period

• IFI/FTI one week fastener training at IFI July 2011

• IFI/FTI auto fastener training in Detroit April 2011

1. Recognizing the need to promote fastener manufacturing excellence, methods, new developments, and applications, create training resources through alignment with relevant organizations to advance such education such as the Fastener Training Institute and El Camino College


• To solicit interest in IFI as a participant in the educational arena, submit not less than three articles for publication in technical magazines annually

• Completed in 2010 by Joe Greenslade & Pat Meade and in process 2011 and for 2012

• Summary in BOD Notebooks

C. Expand training options for fastening, fastener manufacturing, and other processes associated with same, i.e., heat treat, plating & coating, etc.

2. Evaluate developing an annual IFI Scholarship program with a key educational institution or organization

• Managing Director and Technical Director

• Introduce concept for discussion at the 2010 Annual Meeting

• Put on hold

36

Objectives Strategies Responsibility Evidence/Timeline Status D. Expand the use of

former industry executives to represent and promote IFI to members, prospective members, and their customers

1. Pattern this development on Division II success with Pat Meade and new Division III initiative with John O’Brien


• Survey industry segments / groups of segments for a potential nucleus for an Industrial Products Division Manager and present at the Fall 2010 Board Meeting – allow time for new Division III initiative to resolve itself

• Bob Hill retained for Industrial Products Division

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GOAL 4: Promote the Best Interest of North American-Based Fastener Manufacturing

Objectives Strategies Responsibility Evidence/Timeline Status A. Provide

awareness of, and interaction with, global fastener associations, companies, and user industries

• Engage with fastener associations nationally and globally in order to promote awareness of IFI and educate our members of global activities.


• Invite attendance at selected IFI meetings and reciprocate by attending theirs – CFA, EIFI, JIFI, SINPA, MWFA, NFDA, PWFA, etc. – Supply tentative schedule for same at 2010 Annual Board Meeting

• R. Harris, J. Greenslade & R. Hill met with NFDA, PAC-WEST & MWFA Exec’s in Chicago at the trade show & RJH met with EIFI, TIFI & CFA principals too.

B. Explore export opportunities and the development of those opportunities for domestic manufacturers

• Explore U.S. Dept. of Commerce export assistance programs

• Managing Director • Division Managers

• Identify Export Assistance Programs presentations and training

• Export assistance programs identified to Members – speaker will be booked

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GOAL 5: Identify Growth Opportunities for the Institute Membership

Objectives Strategies Responsibility Evidence/Timeline Status • Managing

Director

• Monthly tracking of new membership development status - MSDR

• Quarterly report to Board on new membership development activities

• MSDR implemented • Reporting Annual Mtg. –

8% net growth between 2010-11 Annual Mtgs. – 5 Co. and 3 Assoc. new members – 2 Assoc. & 1 Co. members added Annual to Fall 2011 Mtgs.

• Division Chairmen

• Division Managers to have potential new members attend next scheduled meetings

• Targeted potential new members being visited all Divisions

A. Expand the membership by 10% annually.

1. Expand the potential new member list and develop an “active” marketing campaign to attract new members.


• Review at every Board Meeting as a priority

• To be reviewed Annual Board Meeting

• Schedule CLE then CGO/ RKF & DET non-member lunches/dinners still to be done


• Division Managers to invite potential new members attend scheduled meetings

B. Member retention program

2. Engage with all current members and encourage an active participation in IFI activities. • Division

Chairmen • Reference Goal 2E • Annual Meeting had 3

guests – none for the Fall Meeting

1. Review key markets in which to expand the IFI influence


• Develop “new membership” options and alternatives list for Board discussion

• Survey Membership for new “end use” market segments they believe might be sustainable as focus for discrete meeting(s) and present at 2010 Spring Board Meeting

• Pending • Done – suggestions all

followed up

2. Meet with key manufactures in these potential new markets to gauge interest in joining IFI and what IFI can bring to the table

• Managing and Technical Directors

• Provide Board preliminary list of proposed meetings and factors supporting their inclusion on list for same

• Have discussed with construction fastener companies – ITW facilitated

C. (Revisit in the future Strategic Planning Reviews)

Evaluate adding new fastener Divisions, i.e., construction, medical devices, plastic fasteners, alternative energy special applications

3. Evaluate horizontal expansion of existing Divisions, i.e., DoD Land & Sea vs. just Aerospace

• Division Managers

• Discuss at Division Meetings when this goal is accepted by Board for action

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GOAL 6: Have an Effective Government Affairs (GA) Program and Washington Presence

Objectives Strategies Responsibility Evidence/Timeline Status • Managing Director • Reviewed at the 2010 Annual and Fall

Meetings and Budget adjustments made • GA role expanded

for 2011 at 2010 Fall Board Meeting

• Review current Institute level GA issues – legislative & regulatory – and define the industry’s specific interest in each • Laurin Baker Group • Review in the 2010 Membership Meeting

GA presentation focusing on pending key issues that impact the industry

• Scheduled for 2011 Annual & Fall Meetings

A. Define the proposed focus, intent, and level of GA representation the Institute is recommended to support

• Each Division should identify Division specific GA issues – legislative & regulatory – it has an interest in and is willing to independently fund

• Division Managers • Review at the next scheduled Division meetings and list any Division targets for action

• Done at Division II & III

B. Create an effective line item budget for government affairs

• Review anticipated expense and value expected from this program

• Separate lobbying from other GA activities and maintain < 10% of Member dues budgeted


• To be approved annually at the IFI Finance Committee and Board Fall Meetings

• In 2012 Budget

• Gauge the member’s satisfaction with the level and scope of representation?

• Managing Director • Survey Membership prior to the Fall Finance Committee and Membership Meetings to guide the GA budget

• Done C. Review effectiveness of current represen-tation

• Communicate regularly with Membership

• Laurin Baker Group • Quarterly article from Jennifer Reid in the “What’s Happening at IFI” columns in FTI and LINK

• Being done

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Calendar of Meetings and Events

2 0 1 2 JAN 19 Auto Division III Meeting BCC - Birmingham, MI FEB 27 – MAR 2 IFI / FTI Fastener Training Classes La Mirada, CA MAR 7 Aerospace Division II Meeting Santa Ana, CA MAR 17 – 21 IFI ANNUAL MEETING Four Seasons Resort Dallas, TX (Rate $235) APR 7 Passover APR 8 Easter APR 17 – 18 ASME Committee B1 and B18 San Antonio, TX APR 18 – 19 IFI/FTI Auto Fasteners Training Class Troy, MI MAY 2 – 4 NFDA Annual Meeting Atlanta, GA MAY 17 Auto Division III Meeting BCC – Birmingham, MI MAY 17 All American Fastener Show Branson, MO JUN 25 Mid-West Fastener Tabletop Show Chicago, IL JUL TBD Auto Division III / J. D. Fischer Golf Outing TBD JUL 23 – 27 IFI / FTI Fastener Training Classes Independence, OH SEPT 26 ASME Committee B1 and B18 Independence, OH SEPT 26 Yom Kippur SEPT 29 – IFI FALL MEETING Omni Parker House OCT 3 Boston, MA (Rate $269) OCT TBD Aerospace Division II Meeting Los Angeles, CA OCT 10 – 12 National Industrial Fastener Show / West Las Vegas, NV NOV 15 Auto Division III Meeting BCC – Birmingham, MI NOV 22 Thanksgiving DEC 25 Christmas

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2 0 1 3 MAR 9 – 12 IFI ANNUAL MEETING Marriott Marco Island Marco Island, FL (Rate $280)

Industrial Fasteners Institute6363 Oak Tree Boulevard • Independence, Ohio 44131-2500

216.241.1482 • F: 216.241.5901www.indfast.org

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1 •

2011

Celebrating 80 years of service to the fastener industry

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