CLEVELAND - Pete Mozer, president of Delta Tooling Co., does not even drink.
But, rhetorically speaking, he offered this advice to automotive mold makers beset right now by arid business conditions and disappearing profit margins: Just sit in the bar and wait for the traffic to clear.
``We have no control over the auto industry,'' said Mozer, speaking June 21 at Plastics Encounter Cleveland, a conference and trade show sponsored by Plastics News. ``We don't have that much control over our customers. In the best of worlds, we love the industry. In other times, we learn how to deal with it.''
A tooling panel at Plastics Encounter at times resembled a group therapy session or a special episode of Oprah. Mold makers from a garden variety of industries shared similar experiences, as they confront increasingly cold-blooded market conditions that do not always value the worth of a tool shop.
The panel responded to what is becoming a tough year for mold makers. Several entrenched U.S. shops already have closed their doors, and others are swimming upstream to gain back the work they had last year.
Some have made major adjustments. For instance, Dynamic Tool & Design Inc., a mold maker based in Menomonee Falls, Wis., shifted from its base electronics and telecommunications work - some of which has moved offshore or been sliced away - to new opportunities in medical and consumer products, said sales manager Matt Hagerman. Hagerman exhibited at the show.
``It was slow for awhile,'' Hagerman said. ``We had to make an extra marketing effort this year. But we couldn't afford to sit still, either.''
Compounding the problems, there might be too many North American tool shops chasing too few dollars.
That should lead to a massive industry consolidation during this decade, where as many as half the estimated 2,000-2,500 mold making companies in the United States are sold off or closed, said panelist Mark Teague, executive vice president of Midwest Tooling Group.
Midwest Tooling, an investment firm that owns four tooling-related companies, is searching for some of those experience-ripened candidates to buy. About half of U.S. toolmakers are what Teague termed ``laggards,'' or those that have not kept up with technology or changing markets.
``Laggards usually have too few profits, too much debt or both,'' said Teague, based in Chagrin Falls, Ohio. ``Business for them will continue to decrease. I'd define that segment as `toast' right now.''
But for other, more-prominent shops such as Auburn Hills, Mich.-based Delta Tooling, the addition of technology or new customers has not stemmed a sinking tide for automotive work. Delta - one of the largest mold companies in North America with 275 employees - has invested in such technology as in-mold lamination, formed partnerships in Germany and Switzerland, and opened a joint-venture facility in Mexico.
But for all its capital outlay, the market has not rewarded them, Mozer said. Customers demand price rebates of between 2-7 percent for tooling projects and do not pay toolmakers until about 270 days after mold delivery, on average, he said.
Meanwhile, virtually every project awarded is based on price, not quality or delivery, he said. And while tool shops undercut each other, they also are expected to shave off a quarter of the program price from the last time they were awarded the job, he said.
``And just when you're ready to start cutting steel, the job has been delayed, canceled or gone off for open bidding again,'' Mozer said.
That ruthless market spin led Delta to start a new strategic planning process last year. The company has reduced overhead costs and cut expenses as much as possible, while looking for new tooling opportunities in interior auto parts and other areas.
But the rebates must end for mold makers to remain profitable, Mozer said. To do that, all the major tool shops must together say no to large parts suppliers when they ask for price breaks, he said.
As chilling as Mozer's comments were, toolmakers in other end markets are stepping in the same quicksand.
``The auto industry can be especially vicious, but a lot of toolmakers seem to be struggling with the same issues,'' said panel moderator Jeffrey Mengel, partner and plastics industry team leader with accounting firm Plante & Moran LLP. ``Some of the same rebate issues are starting to crop up elsewhere.''
But mold shops can find the means to roll with the punches and survive a more-cutthroat industry, according to several panelists. One of those ways is to act globally and avoid a deeper rut of working with a few, local customers, said David Brown, president and chief executive officer of Brampton, Ontario-based StackTeck Systems Inc.
Brown's company operates three shops in Canada and the United States, all of which specialize in unique product areas. That helps the company avoid being trapped by a downturn in one market, he said.
But beyond StackTeck's diversification, a deeper change is facing toolmakers, he said. They must think big when it comes to customers but act like a small shop in efficiency, he said.
``You can't wait for the phone to ring,'' Brown said. ``We work at a high level of artisanship and craftsmanship, but we can't move ahead and do what we need to do by relying on our reputations. You have to act now to take the next step.''
The need to look globally for work is especially true in Canada, a nation of only about 28 million people. ``We have to export or die,'' Brown said. ``We don't have a big market to sell into.''
Many Canadian shops have taken a large swatch of U.S. business. Even so, that is made more difficult by the need to invest in new equipment while keeping costs down, Brown said. ``It's a very lumpy business, where you don't know when the next job is coming,'' he said.
The leaders find a way to confront global competition, said Teague, who estimated that only about 15 percent of North American tool shops fit that `leader' category. Those companies have growing sales and profits, a diverse customer base, new technologies and high productivity levels.
And while low prices drive many sales, leading companies can gain business through improved quality or delivery, Teague said. Those companies can pick and choose their customers, too, and deselect those that cut margins to the bone, he said.
``You have to manage your customer base,'' Teague said. ``Leaders create their own markets. They deliver to those companies that do not greatly lower their prosperity.''