What began as a hiccup last fall in the toolmaking business has turned into a sonic boom.
Since December, many shops have been hit by an economic downturn the likes of which has not been seen in decades. For many, business seemed to fall off a cliff instead of gradually declining, as it had in other slowdowns.
The impact has been as sudden as that of a hit-and-run driver.
It has contributed to the sudden liquidation of several well-regarded, old-line toolmakers - the latest casualty being 59-year-old Richard O. Schulz Co. of Elmwood Park, Ill. - and has led others to scrum for repair work or scraps of business, lay off employees or redefine their businesses.
Even larger companies, such as Dayton, Ohio-based Minco Tool & Mold Inc., have had to turn up the afterburners to sell to customers that once could be taken for granted, said Vice President and General Manager Joe Kavalauskas.
``You have to stay in front of people now,'' Kavalauskas said. ``And once you get an opening in the door, you have to make sure you keep the crack open. Customers will always find someone with a cheaper price, and they're not going to stay with you because you're a nice guy, buy them lunch or play golf.''
New data from industry associations confirms the pressures facing many mold shops in 2001. In a May survey of 117 member companies by the Roselle, Ill.-based American Mold Builders Association, 62 percent said business was fair to poor. Shipments were down for 39 percent of those companies compared with last year.
Meanwhile, 51 percent of those companies said profit and margins have slipped this year.
AMBA President Olav Bradley, a toolmaker for 39 years, said 2001 is absolutely the worst year he has seen in business.
``I've never seen anything close,'' Bradley said. ``It's been horrible.''
The National Tooling and Machining Association, based in Fort Washington, Md., reported similar sad tidings. The decline in tool and mold markets is the sharpest the association has observed, according to its first-quarter 2001 report. Mold sales are down 12 percent from the benchmark year of 1990, the biggest fallout in the past 11 years.
NTMA President Matthew Coffey said he expects U.S. tooling sales to decline overall by about 60 percent this year compared with 2000.
``It's the worst in probably 20 years,'' Coffey said. ``The thing that's different about this [downturn] is how quickly work shut down. Instead of easing into it, it seems like the switch was suddenly turned off around Nov. 1, especially for automotive work. Everybody got scared at once.''
The three roughest end markets, according to Coffey, were automotive, heavy trucks and semiconductors. The business-machine and telecommunications industries also faced severe falloffs, he said.
Some companies serving those markets have made sharp detours. Until this year, telecommunications accounted for about 40 percent of the injection mold work performed by Creative Die Mold of Glendale Heights, Ill. Then, several cell-phone makers announced plans to move business offshore, downsize or outsource work to contract manufacturers.
``About 40 percent of our business will not return,'' said Creative President James Glatczak, who added that the industry is the slowest he has seen since he started in 1959. ``We have to rethink how we're going to do business and ride another horse. Work will come back, but it's not going to be the same.''
For the first time since Creative was formed 24 years ago, the company has laid off employees. However, by going after new, nontelecommunications business in higher cavitation and stack molds, some of the 13 laid-off workers have been rehired, Glatczak said.
``We're seeing a little upturn,'' he said.
Other Chicago-area mold makers have not been as fortunate. On May 30, Richard O. Schulz closed its doors and laid off more than 60 employees. The maker of injection and compression molds and steel dies had been in business since 1942 and recorded $8 million to $10 million in sales last year, said Pat Cavanaugh, principal of Chicago-based liquidation firm High Ridge Partners.
The company's assets were assigned to the company by a creditors' committee under a state-sponsored article of liquidation. The mold maker's largest creditor, Scottsdale, Ariz.-based Finova Group Inc., was owed about $2.5 million, according to a source close to the company. The company's building and equipment is to be auctioned off by mid-August, Cavanaugh said.
Company President Greg Slyman could not be reached. His family had purchased the mold shop 10 years ago. In a March interview, Slyman said new automotive business had declined to a trickle, but his company was pursuing other markets.
Two other long-time Illinois mold shops, Delta Tech Mold Inc. of Arlington Heights and Atols Tool & Mold Corp. of Schiller Park, both closed in April. And blow mold maker Hobson Mould Works Inc. of Shell Rock, Iowa, will have its assets auctioned off June 28.
For those still working, automotive projects seem to be sliding backward this year, said William Mach, president of Mach Mold Inc. of Benton Harbor, Mich. Mach, which has 48 employees, cut 10 jobs in August in anticipation of a soft economy, Mach said.
Yet, the current state of business could not have been expected, Mach said. Every time the company bids on a project, the launch date is pushed back and new bids are needed he said.
``It feels like we're on a treadmill trying to catch that order,'' Mach said. ``And after all the rounds, you might be asked to bid at an auction for the same project and chase a new target figure. At the moment, there seems to be a lot of price pressure, and few shops are very busy.''
The lack of orders has caused some smaller shops to make more dramatic changes. Former plant employee Joe Heckman and a partner bought Willoughby, Ohio-based Hi-Tek Mold Development Co. two years ago. In February, they were forced to sell the injection mold-building company to another tool-shop owner, who did not want to be identified.
Now, Heckman is working in the plant once again.
``We bought it with the hopes of the economy picking up,'' he said. ``But we went from about $2 million a year [in sales] to $500,000 a year. It's still pretty dry out there.''
Even supply companies are facing rougher times. Mold vendor D-M-E Co. has reduced employee work hours to cope with a tooling industry facing a severe slump said North American sales manager Cy McGrath of the Madison Heights, Mich., based company.
``Right across the board, most markets are not very good,'' McGrath said. ``We can only hope the dam will burst soon. The big danger is to panic. When all is said and done, we'll still be here.''
Some companies have seen increases, albeit in fits and starts. Blow molding toolmaker Fremont Plastic Molds Inc. of Fremont, Ohio, has seen months where molds have been put on hold and others where the firm has hit home runs with orders, said President Martin Cass.
``Right now, everyone is kicking away like they would on a foggy London day,'' Cass said.
A few companies seem to be holding steady, if not thriving, in a threadbare market. Ryka Blow Molds Ltd. of Mississauga, Ontario, claims to have picked up business this year in its core packaging and automotive markets, said President Michael Ryan. Last year was more difficult.
The company's niche blow mold products, and the addition of a testing and prototyping facility, has helped win customers, Ryan said. But the industry has changed.
``No doubt, it is a bleak picture in general, but you have to work that much harder to find customers,'' Ryan said. ``We have been accustomed to the phone ringing off the hook seven days a week. Now, you have to hustle to be first or second in line for the business or you won't get it.''
It is not only Canadian shops that have made adjustments. Pleasant Precision Inc. has seen mold sales increase, even in the automotive market. At the same time, the Kenton, Ohio-based company employs 10 fewer people than it did a year ago, said President Ron Pleasant.
``And we're doing more with less people by focusing on lean manufacturing,'' Pleasant said. ``You have to live and breathe it every day. If you don't have cultural acceptance of a lean concept, you won't have the successes.''
Mold shops must learn to compete globally now both in lead times and quality, said Peter Veighey, vice president and chief operating officer of injection mold maker Active Burgess Mold & Design of Windsor, Ontario. His company's automotive-based business has remained steady while adopting a lean-manufacturing approach to cut delivery times.
Meanwhile, mold makers now face ``targeted pricing,'' where customers keep a lid on how much they will pay.
``Targeted prices are here to stay,'' Veighey said. ``We seem to do a lot of quoting, but we have to fight over every package.''