Buying molds from LCCs is no way to stimulate the economy

The Original Equipment Supplier Assn. (OESA) held a seminar in Troy, MI in March called “The Smart Approach to Tooling.” According to information released in a letter by the American Mold Builders Assn. and some of its members who attended the OESA seminar, Stuart Spiers, director of global cost engineering for General Motors, made the following statement: “General Motors presently purchases 49% of its vendor tooling from LCCs (low-cost countries, such as China) and if the chairman had his way, it would be 100%.” One estimate puts GM’s tooling purchases between $3 billion and $5 billion annually.

It seems that at first, GM officials denied making this remark, but then apparently backtracked somewhat. GM wouldn’t confirm the remark, but didn’t deny it, either. And according to one source, GM officials then apologized for making the remark. It’s well known in the mold manufacturing industry that GM has been pressuring its mold suppliers for a number of years to purchase molds offshore (primarily from China) in order to reduce GM’s costs.

One Michigan mold company manager said recently that GM has mandated that 70% of all tooling purchased through its U.S. vendors must be bought from LCCs. “GM comes to our shop and says, ‘Yes, this is nice, but what can you do to get tooling from LCCs,’” he said. Ultimately, said this company manager, these cheap tools put U.S. molders for the automotive industry at a competitive disadvantage because many can’t make cycle times or conforming parts.

A tooling study from Harbour-Felax Group released at the OESA seminar showed that the New Domestics (auto makers from Japan, Korea, and Germany) enjoy an 8% cost advantage over the Detroit Three in tooling costs, which Harbour-Felax “largely attributed to payment practices and the positive behaviors that these business terms generate.” Other studies from automotive consulting groups in recent years show the same thing: When it comes to supplier relationships, Toyota rises to the top. Which makes me wonder why anyone would even want to do business with the Detroit Three!

It’s obvious that the Detroit automakers will continue to push their suppliers to the brink, probably because misery loves company. The Detroit Three’s purchasing policies of the past two decades have forced U.S. mold manufacturers to be leaner, smarter, and more savvy when it comes to dealing with these 800-lb gorillas. The result has been that U.S. molds enjoy an enhanced competitive edge over molds coming from LCCs in terms of reducing the price gap. 

We need to put the Detroit Three on notice that buying molds from LCCs won’t be tolerated, especially from GM and Chrysler, who are taking taxpayer dollars to bail them out of their mess. The so-called “stimulus” package is meant to stimulate our economy, not that of the LCCs. [email protected]

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