Auto tool and die shops face existential threat

Moldmakers need to prepare for a “new normal” as the automotive industry moves from internal combustion engine (ICE) vehicles to electric cars. “Flexibility and the ability to manage their business is the only way tool makers can survive,” stated Laurie Harbour, President and CEO of Harbour Results Inc. (HRI), a Southfield, MI, business and operational consulting firm for manufacturers.

HRI just released the results of the Harbour IQ in-depth study on the current state of the automotive vendor tooling industry. The analysis predicts that 2020 automotive vendor tooling spend in North America will drop to $6.8 billion from an estimated $8.7 billion in 2019.

Declining business

The key factor driving the reduction in tooling spend is the decreased number of North American vehicles sourced for production in 2020—45 total vehicles. The Detroit Three automakers, who source most of their tools in this region, are forecast to source only 13 vehicles in 2020, representing approximately $3.1 billion in tooling spend, notes the HRI report. Further projections from HRI estimate 2021 tooling spend to be $7.3 billion.

“This year—2019—was a culmination of significant change and instability in the automotive marketplace,” Harbour said. “From unique mobility models and new automakers to advancing electrification and autonomous technologies to uncertainty in the economy and the global trade landscape, the only thing we are certain of is that the industry will continue to change at a rapid rate.”

Harbour notes that this is impacting automaker profitability. “Price pressure will be immense as OEMs save every penny to invest in new technology,” she said. “Going forward, the OEMs will have to move toward making more vehicles with common platforms with common parts. We’re starting to see this happen as it saves tremendous dollars in places people don’t see.”

In a webinar on Nov. 5, Harbour noted that Japanese automakers continue to be “heavy users of Chinese tool makers,” which is why most North American tool makers depend on the Detroit Three for work. As backlogs decrease and work slows, larger mold shops (those with more than $50 million in revenue) will begin to claw back more work that they would typically sub-contract to smaller shops.

Harbour said she expects to see more fallout of Tier Two and Three mold shops, as many of these shops have a “lack of discipline for continuous improvement and planning, and not performing as they should.”

China is still a major competitor, Harbour pointed out. On average, winning bids from China were 35% below a North American shop’s break even.

“This forecast is difficult for us to share,” Harbour said. “We are passionate about helping the North American manufacturing industry remain competitive. However, the ongoing marketplace change and competition from low-cost countries—specifically China—has already impacted tool and die makers. In 2019 we saw at least 10 shops close and more than 2,000 workers laid off, and we see this trend continuing. HRI forecasts up to 75 mold and die shops in the region will close over the next three to five years.”

Harbour suggests that, as the tooling market contracts, “it is important that shops position themselves for the future. Leadership needs to push for edginess and eliminate complacency and it also is important that tool shops continue to put plans in place to shore up weaknesses, maximize technology and talent, and control costs.”

Image: S-Decoret/Adobe Stock

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