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Tooling sector under pressure to meet automakers' growing demand

By: Rhoda Miel

October 31, 2013

NOVI, MICH. — The North American tool and die industry supporting the auto industry is made up of about 750 individual shops, mostly in the U.S. and Canada, which produced a combined $9.25 billion worth of tooling in 2012.

But with the North American auto industry ramping up for new products and more vehicles, those shops will soon have to support an estimated $15.2 billion worth of tooling demands, a new survey notes.

That means increased pressure on tooling firms, suppliers and automakers alike.

"That's a huge gap," said Laurie Harbour during an Oct. 31 press briefing in Novi on the result of a 10-month study conducted by Harbour Results Inc. "You're looking at a $6 billion capacity gap, and that's serious for everyone."

Concerns about tooling capacity have prompted automakers and suppliers to take a closer look at the industry, said Harbour, who also called the $15.2 billion estimate "conservative."

The Original Equipment Suppliers Association, based in Troy, Mich., launched a tooling group last year, and the group conducted the study with Harbour Results, auto industry forecasters LMC Automotive of Troy and Clinton Aluminum & Stainless Steel of Clinton, Ohio, to try and get a stronger view of the region's vendor tooling business.

The study focused on molds and dies made for both plastic and metal production by suppliers. It excluded tooling used by carmakers' in-house die stamping and molding.

Seven automakers participated fully in the study and another three provided partial data. The study also surveyed major Tier 1 suppliers and 50 tooling suppliers.

The typical car uses up to 3,000 tools for production and those tools may range from small components which require a $5,000 tool to more than $1 million for a complex mold for a part such as a front fascia. A complete fascia itself may consist not only of the main plastic part but also 35 additional tools for fog lamps, grilles and other components, noted Harbour, CEO of Harbour Results.

The survey focused on toolmakers supplying directly into the auto industry, excluding support businesses such as texture or heat-treating specialists. It identified about 125 shops in Canada – primarily near Windsor with a few near Toronto – and 625 in the U.S. Mexico has about 100 toolmakers, but almost none dedicated to the auto industry, and the bulk of those that are working in automotive are primarily focused on tool maintenance rather than new mold production, she said.

The average automotive tool shop has annual revenue of $15 million and has about 100 employees. Only 15 percent to 20 percent have more than $50 million in revenue annually.

"So you have these large, publicly-owned automakers worth billions of dollars, and their Tier 1 suppliers – many of them publicly owned and worth billions of dollars – and at the bottom, you have 750 shops worth an average of $15 million," Harbour said. "That's the food chain. [Toolmakers] are at the bottom of it, but you can't make a car without them."

If all of the existing toolmakers were operating at 100 percent of capacity, they could produce $11.2 billion worth of molds and dies, but because of the nature of the industry, with production peaking when new models are prepared for launch, then dropping off during other parts of the year, Harbour said it is more likely to expect a healthy industry to run at closer to 80 percent of full capacity.

And it is capacity that has companies concerned.

The auto industry as a whole in North America is on a rapid growth curve coming out of the recession. Production that dipped below 9 million vehicles during the slowdown is now expected to pass 15 million vehicles this year on its way to a forecast of 18 million vehicles annually, said Jeff Schuster, senior vice president of forecasting for LMC.

Watch PlasticsNews.com for more coverage from the 2013 Vendor Tooling Study.