In April, Richard Weaver decided to close his mold-making business in suburban Detroit, making a clean break from the only work he has known.
Instead of battling sleepless nights worrying about keeping his shop busy, Weaver now plans to retire to his vacation home. And instead of turning over his company to his son, Weaver will auction off his entire plant June 5.
Although Weaver is 65, his decision to shut down Promold Tool & Engineering Inc. in Farmington Hills, Mich., was not the result of a desire to retire. Instead, it was a more recent condition that afflicted his 20-person tool shop: The inability to turn a profit. Weaver said tooling prices recently have plummeted unlike anything he has seen in 28 years as a shop owner.
``Plastic mold making is really going down the tubes,'' Weaver said April 17 from his virtually barren office. ``I love the business, and years ago it was a fun business where you could make a good profit. It was a gut-wrenching decision to close the company, but there's no money in toolmaking anymore.''
If government statistics can be believed, others face the same bumpy ride.
Recent pricing data from the Bureau of Labor Statistics shows that tooling prices have sunk to early-1990s levels, back when Bill Clinton was a first-term president. Under the bureau's category ``metal industrial molds for molding plastic,'' the price index for the year 2001 was estimated at 127.7.
The last year prices were that low was in 1993. The price index peaked at 133.7 in 2000, when times were better both for the economy and for mold makers.
Some toolmakers say the profit margin on a typical mold is now 4-5 percent. Some say that spells disaster, even more than competition from China.
``That's no way to compete,'' said Steve Schler, president of Cuyahoga Falls, Ohio-based ProMold Inc., no relation to Weaver's shop. ``You can't survive with 4-5 percent profit, or have any money left to reinvest in the business.''
The number of shops closing bears out those indications of rougher times. In the Chicago area, where several larger shops have shut during the past 18 months, many mold makers have not been able to survive pricing hits, said Bruce Braker, president of the Park Ridge, Ill.-based Tooling & Manufacturing Association.
``The worldwide problem with overcapacity in manufacturing is depressing prices and sending companies out of business,'' Braker said. ``It's a fact. The recession has been unforgiving at weeding out companies.''
One company, Northwestern Tool & Die Manufacturing Corp. of Vernon Hills, Ill., has kept track of mold shops going out of business around the Windy City. Since January 2001, 92 mold-making companies have closed, said Northwestern Tool President Shirley Maier.
In the Erie and Meadville area of northwest Pennsylvania, a regional pocket known for its toolmaking, several hundred tooling employees are out of work, said John Hilbert, president of Erie-based Reddog Industries Inc.
Some tooling executives wonder whether prices will bounce back when the economy starts its upturn.
``If volumes do come back, pricing won't come back with it,'' said J. Daniel Hess, president of Paragon Die & Engineering Co. in Grand Rapids, Mich. ``There's a new level of expectations out there now.''
A deadly combination of global competition, companies bidding low on jobs to keep machines running and cash rebates given to some customers could keep prices low for years, said Peter Mozer, president of Auburn Hills, Mich.-based Delta Tooling Co.
Add to that the industry's notoriously poor payment terms - where toolmakers must wait more than six months at times to get paid - and toolmaking becomes an industry that is not for the faint of heart, Mozer said.
At Delta, the company is seeking more work outside of toolmaking. The 250-employee company has started product development for specialty vehicles and ramped up more short-run molding production, Mozer said.
``Right now a huge part of our plans for growth are outside toolmaking,'' Mozer said. ``You can't make any money just being a mold maker. You're better off committing resources to something that adds more customer value. It's just brutal being a toolmaker.''
Mozer cited figures from Philadelphia investment-banking group Risk Management Association. They show toolmakers' profit before taxes declined nationwide to 2.7 percent of sales for the fiscal year ended March 31, 2001. That is down considerably from previous years.
Tooling companies are attempting to remain competitive through a variety of countermeasures. Some go against the grain of traditional tooling companies.
At Northwestern, a $10 million injection mold maker, an air of conservatism helps the company control costs. In February 2000 the firm consolidated plants in Skokie and Elgin, Ill., into one facility in Vernon Hills that is more than twice the size of the other two plants combined. The shift helped Northwestern streamline operations and gain economies of scale, Maier said.
``We did that in the nick of time,'' Maier said in an April 25 interview at the new facility. ``The economy took a turn for the worse just after that.''
The company has shied away from the big-spending, high-debt mentality of some of its peers. Equipment purchases, some costing more than $1 million, are made outright when the business can afford it, and bank loans are out of the question, Maier said.
Typically, those purchases are made based on the amount of equipment depreciation recorded each year, she said.
``Toolmaking used to be regarded as a very secure profession,'' Maier said. ``Now, we're more challenged to keep it that way.''
The company also keeps close tabs on the cost to run each project. Each day by 10 a.m. the company can cite in detail the costs recorded for specific machines for the previous day, Maier said. The rate of return expected for each job - including such fixed outgoing expenses as insurance and utility payments - also are scrutinized, she said.
That dedication to detail extends to time management. The company refuses to bid on jobs proffered by Tier 1 suppliers. Instead, it only works directly with end users. That way it spends less time bidding on projects that it has a low probability of winning.
``Some [original equipment manufacturers] might take bids from three molders, each of whom has a separate list of toolmakers that it wants bids from,'' Maier said. ``The odds of getting those jobs are not in our favor.''
Many toolmakers are in survival mode right now, said Bill Kushmaul, president of toolmaker Tech Mold Inc. of Tempe, Ariz. With prices down, Tech Mold has cut expenses by freezing the purchase of replacement equipment for six months, he said.
While equipment eventually will need to be purchased, reducing costs short-term at least protects the labor force from cutbacks, he said.
But even if some work returns, mold prices might not, Kushmaul said. On some jobs, mold prices have been cut industrywide 30-40 percent since early in 2001, he said.
``It's an absolute buyer's market,'' Kushmaul said. ``That has put tool shops into animated suspension. We'll ride it out and keep expenses down, but we know it can't stay this way forever. We have to buy equipment to stay competitive, too.''
Eventually, survival of the fittest will help toolmakers and pricing, said Jeff Mengel, a partner with consulting firm Plante & Moran LLP of Auburn Hills, Mich. The glut of toolmakers will go away as weaker competitors continue to liquidate, Mengel said.
Meanwhile, toolmakers are competing with Asian companies by shortening project time lines by two to three weeks, Mengel said. That is amplifying the pricing problem, he said.
``It means throwing more people at a job or bumping other jobs out of the way,'' Mengel said. ``That has caused compression of profitability for a tool shop. The goal of many of them is to weather the storm; if they can get through this, margins will go back up.''
For Weaver's shop in Michigan, the storm already has done its damage. For the past two years, Promold Tool could barely keep its doors open, Weaver said. Promised jobs for automotive tooling were canceled, and prices kept plummeting. That made the decision to close much easier, Weaver said.
``I knew nothing but constant worry,'' Weaver said. ``I have no worries anymore.''