Bryan Hansel first noticed the shift while bidding for new projects this year.
Since January, Hansel's Bloomington, Minn.-based rapid product development company has competed against production mold makers for business. Those companies — which had concentrated on higher-volume production — now want to make prototype tools from aluminum molds, Hansel said.
That set off warning bells with Hansel.
``If they were busy, they wouldn't consider quoting for short-run prototype jobs,'' said Hansel, president of PSI Alliance. ``A lot of smaller mold makers must be getting very hungry.''
Unfortunately for many toolmakers, Hansel's instincts seem correct. Across many regions and industries, U.S. mold makers are feeling a pinch in business this year.
That can be a troubling sign in an economy that supposedly is bubbling at high boil.
``I really don't understand it,'' said Joe Kavalauskas, vice president of Minco Tool & Mold Inc. of Dayton, Ohio. ``We had a great year last year, so this is a shock. Business is as bad as it has been in 30 years.''
The reasons for the downturn are as puzzling as the unexpected drop in sales. Explanations range scattershot across the board, from foreign competition to U.S. companies protecting cash flow to mold makers becoming too efficient for their own good.
Whatever the driving forces, many mold shops have seen business dip by more than 20 percent this year, according to many tooling companies interviewed.
Industry watchdog the National Tooling & Machining Association of Fort Washington, Md., predicts the U.S. tooling market overall could be down as much as 10 percent next year after turning in flat sales for 1998.
The association numbers are based on molds for plastic parts and dies for steel stampings.
``Molds are particularly off,'' said NTMA President Matthew Coffey. ``We're finding a lack of investment by customers and a general slowing down of the domestic economy. Mold makers are always the first to be hit.''
Gerald Hobson, president of the American Mold Builders Association, said an informal survey of his members showed quite a few facing a difficult spring and summer. His firm, Hobson Mould Works Inc. of Shell Rock, Iowa, has faced the cancellation of several large automotive programs this year, Hobson said.
The customers gave no reason for the sudden delays, said Hobson, president of the blow mold tooling firm. He said he has yet to see large automotive orders for new vehicles due in the year 2000.
``My best guess is that [chief executive officers] are keeping stock prices up to get a better return on investment,'' he said. ``To do that, they're basically telling people not to buy tools for a while. That way, they milk the maximum profit. But that makes for a papier-mache economy.''
Holding off on a tooling purchase could delay an investment of several hundred thousand dollars to more than $1 million on a single program.
Hobson believes the dam will break later this year, when new products must get off the drawing board. Many toolmakers could go from famine to feast, he said.
Toolmakers generally experience periodic peaks and valleys, said Jeff Billingsley, general manager of Enterprise Die & Mold Inc. in Grandville, Mich. The concern comes from the duration of the valley that began last fall, he said.
But Billingsley, who said his company has suffered a significant drop in mold business, could not put his finger on a single reason.
``All we hear is that programs are being pushed out to some degree,'' he said.
Suppliers to mold makers are feeling the effects. D-M-E Co. of Madison Heights, Mich., has had a flat sales year compared with close to double-digit growth in 1997, said David Skala, vice president of marketing. He expects sales to perk up later this year when new orders start coming in.
The automotive industry has been hit especially hard, Skala said.
``We don't see a lot of new automotive projects in the works,'' he said. ``Now, with the [General Motors Corp.] strike, people are more tentative. But our quoting activity still remains fairly firm, and I think that's a positive sign.''
New automotive programs have dropped off by more than 15 percent from a year ago, said David Rasmussen, president of Quality Die & Mold Inc. of Grand Rapids, Mich. Some of that business has gone offshore, but not a large amount, he said.
The real problem might be the overcapacity for shops that have become much more efficient in speed and delivery, he said.
``Everybody is very efficient when you have something to work on,'' Rasmussen said. ``But when the shop gets emptied out of business, you can't use your manpower and machine power. The mold business is at the lowest point I've seen in more than two years.''
Progressive Components Inc. of Wauconda, Ill., also has watched its customer base struggle with a down sales year, said President Glenn Starkey. On plant tours, Starkey said he has seen tooling companies operate at a slower pace than a year ago.
With the Dow Jones Industrial stock index near record highs, customers could be delaying projects due out several years from now, Starkey said.
``They might be thinking that it's better to be more conservative,'' he said.
Starkey, who recently returned from a trip to Taiwan, said overseas mold makers cannot be blamed for the sales dip.
``Our location and capabilities are still the envy of overseas toolmakers,'' he said. ``Over time, we'll see some of them duplicate what we have. But the mind-set is that we have an advantage here.''
Foreign competition or the drop in the Japanese yen could be an easy explanation. Yet many toolmakers said that, in talking with competitors overseas, they have found them facing the same difficulties. The offshore companies are not terribly active here, Billingsley said.
Kavalauskas said that he saw a surprising number of Asian and Portuguese toolmakers at Plastics Fair Cleveland two weeks ago. That tells him they are as hungry for business as U.S. toolmakers.
``They wouldn't be here otherwise,'' he said.
Yet, competition — from an assortment of regions — could play a factor, other sources said. Coffey at NTMA said both Eastern Europe and Ireland have made a series of investments in mold-making equipment, while the devaluation of Asian currencies has created a better bed for export.
Jeff Mengel, an equity analyst with Plante & Moran LLP in Southfield, Mich., said customers are sourcing more tools overseas, especially in Europe and South America.
Mengel, who covers the tooling industry, said some answers for the downturn lie closer to home. Mold makers could be a bit ahead of the curve for a U.S. economy that is softening, he said.
And with tooling firms cracking the whip to make molds in shorter times — with 16-18 weeks the norm — they might have priced themselves out of some potential profit, Mengel said.
The slowdown has not affected all toolmakers. Shops like Century Die Co. in Fremont, Ohio, are having good sales years. But even that shop is looking over its shoulder.
`We haven't seen a real downturn,'' said sales manager Bruce Bille. ``But we have had a lot of delays in new projects that were pushed back for an indefinite period. We don't know the reasons for that.''