Where has all the mold work gone?

The nation's moldmakers are beginning to wonder as business slowed to a crawl during the first two quarters of this year. RFQs are coming "in spurts." Shops nationwide report moldmaker layoffs and a reduction in hours to as low as 34 hours per week for the moldmakers they do retain. "I haven't seen it this bad in 30 years," laments one moldmaker.

Jim Meinert of Snider Mold in Mequon, WI agrees. Although Snider is busy because of its foreign customers, Meinert is worried about the "soft" conditions in the U.S. "I'm concerned about the short-term problem," he says. "We're like a pack of dogs fighting over a bone, but there's no meat on it."

Southern California sources say that the drop in the level of business at mold shops in that area is "dramatic." Several shops in the usually stable southern California mold industry report layoffs in response to the business slowdown in that state.

What's going on here? Is it just a down cycle? A typical summer slump coming early? Or is the work going offshore? One indication that the business is variable by region is shown in the graph above. While the data isn't about completed molds, the sales of mold bases, components, and hot runner manifolds must mirror molds quite closely.

Molds as Barometer

Typically, the moldmaking industry has been a good barometer for the economy in general. When the moldmakers are running flat out and lead times lengthen, it's because OEMs are letting many new programs for new product introductions. However, when moldmakers are hungry it's usually a sign that OEMs aren't letting programs.

"Everybody that's closely tied to new product introduction says that nothing is being let," comments Joe Kavalauskas, president of Minco Tool & Mold in Dayton, OH. "OEMs are sitting on new projects and are slower getting them kicked off. It's the worst I've seen it." Kavalauskas, like his fellow moldmakers, hopes it's just a blip on the charts, that OEMs are spending the first two quarters of this year taking profits and will open up new programs during the last two quarters. But it's anybody's guess.

A survey of moldmakers in four regions of the country reveals that this isn't an isolated event, the result of a downturn in only one region or market. Even some of the large mold shops are scrambling for work to keep moldmakers busy. For small to medium-sized shops, the slowdown seems to have had less impact but is still noticeable.

Andrew Rosenholm, president of Oar Mold Works, a 35-person mold shop in Providence, RI, says that the volume of RFQs through his shop has been high, however, "people aren't buying like they did during the last quarter of last year." At that time, Rosenholm's shop was pushed to the wall with work, but as those jobs reach completion, nothing really big looms on the horizon. "We're still busy but not breaking any records," Rosenholm adds.

That's the standard scenario across the country. Alpha Mold Inc. is headquartered in Huber Heights, OH and also has a plant in Broomfield, CO. Dane Whittington, vice president and general manager of Alpha Mold West, said the parent plant is busy, and that he's "comfortable, but I don't see anything major coming up. It's like people are holding back right now." Moldmakers experienced such good years in 1996 and 1997 that perhaps the so-called "slowdown" is simply a return to normalcy. Rosenholm agrees with that. "This is more normal, but it feels different," he says.

And slower isn't always bad. When shops are running flat out to get work finished within quoted lead times, costs go up tremendously in terms of overtime hours and additional manpower employed. Although business was booming in 1996 and 1997, profit margins were basically staying even, say mold shop owners.

Bidding Activity Up

RFQs are coming in, but from different customers. Several people interviewed stated that OEMs are beginning to go directly to moldmakers, cutting out the molder as middleman in purchasing molds in an effort to reduce costs. That, they say, could be a contributing factor to moldmakers receiving more RFQs from a greater variety of OEMs and fewer from molders. But moldmakers also say they'd like to see some work from these RFQs to help maintain the employee level of their shops. Many moldmakers expanded their shops with equipment and manpower during the past two years, and now find that this added capacity is leaving holes that are much more noticeable when business backs off.

In attempting to find a root cause, many mold shop owners believe that OEMs sourcing more tooling from offshore suppliers has something to do with it. "Is offshore a factor? I believe it is," says Alpha Mold West's Whittington. Others agree with this. "Asia has bombed the U.S. on mold pricing," comments one observer.

That may be true in one sense, comments Kavalauskas,

but he believes there's a "definite disconnect between price and cost" in buying offshore molds, and reminds his fellow moldmakers not to be too quick to become victims of the idea that U.S. moldmakers can't be competitive. Still, one mold shop manager in the Southwest says the big, multitool programs he's quoted have gone to Asia, leaving him with mostly "onesy-twosy" types of molds and jobs that don't utilize his resources efficiently, resulting in thinner profit margins.

The irony here is that RFQs continue to pour into most shops. Dave Brown, president of Tradesco Mold Ltd. in Rexdale, ON, says his company is "quoting at a heavier rate than in the past." He points out however, "that's a two-edged sword. It can be a sign of a turndown and people are outbidding in response to more business, or they're doing really well. We feel it's the latter," says Brown. "There are a lot of active projects right now demanding the high-cavitation molds we specialize in."

Some moldmakers believe many programs are on hold or at least being pushed back until later in the year. This is giving OEMs time to shop. Alpha's Whittington says his customers are "going to lots more moldmakers," getting eight to 10 bids rather than the more typical three or four bids.

"It's a buyer's market out there right now," says one moldmaker. "OEMs know the environment and they're out there shopping. It drives the prices for molds down even further, hurting the whole industry."

Can being global offset the ups and downs of moldmaking?

Although there's still much resistance among moldmakers when anyone speaks of the "global" marketplace, some have found that being global can actually offset the ups and downs of the moldmaking business.

Dave Brown of Tradesco says that being global in nature provides his company with a more even workload as the different geographic zones tend to balance things out. "Canada is flat right now and so is Europe," says Brown. "But South America is gangbusters, and we've begun to make inroads into Asia."

Although the exchange rates nearly tripled the cost of Tradesco's molds in Asia, several companies maintained their relationship with the moldmaker, known for its precision, high-cavity production molds for the packaging and container industry.

Jim Meinert recently returned from a trip to Mexico where he reports that his export business to Mexico and Brazil is strong. Meinert also attended the recent Tool & Die show in Shanghai, China where the exhibits "knocked my socks off." Meinert believes that tremendous opportunities for exports of U.S. molds exist in many areas of the world, and that working to enter these markets globally will help ease the pressures of doing business solely in the U.S. It's still the norm, however, that most moldmakers don't look beyond their own borders for work for various reasons, such as lack of resources or conventional thinking that keeps them home.

Tradesco has grown at a rate of 33 percent per year for the past two years, reports Brown, and now has 160 employees, up from 100 two years ago. That's in large part due to the company's entree into global markets. Adds Brown, "Going global has been the big secret of getting us out of the box."