A prominent mold maker from Germany has launched a spacious tooling and product-development site near Detroit with the hopes of capturing a large share of the automotive tooling business.
PGAM Advanced Technologies AG of Georgsmarienhutte, Germany, wants to duplicate its strategy in Europe, where it works extensively with German carmakers, Christian Gnass, president and chief operating officer, said in an Aug. 19 telephone interview.
That includes overseeing product design with carmakers and suppliers and taking the cost out of tool building, Gnass said.
But toolmakers cannot afford to stick only to mold making, since tooling is the fundamental element in good design, Gnass said.
``It's a good time for a new business model, especially under current circumstances,'' said Gnass, referring to the tight economy. ``The key is technology and having better control to develop products that already reflect that. Not so many companies offer the same package that we supply.''
The company is putting a major investment behind its claims. It recently opened a 120,000-square-foot facility in Auburn Hills, Mich., with about three-fourths of the site devoted to tooling and short-run injection molding and steel stamping. A small PGAM design studio also has opened in Dearborn, Mich., near Ford Motor Co.
PGAM, to date, has invested $28 million in the Auburn Hills building and equipment, much of it raised from PGAM's initial public offering in Germany that closed in late 2000, Gnass said. The U.S. facility opened in February and recently began marketing its services to Tier 1 suppliers and automakers.
The company has seven facilities in Europe, including two production-mold shops in Germany and several design houses.
``Since the early 1990s we've had a one-stop showplace for sheet metal and plastics parts in Europe,'' Gnass said. ``But the automotive industry is controlled by Detroit-based companies. We see the potential for our company to grow faster in the United States than in Europe.''
The investment has made PGAM one of the largest tool shops in the Detroit area, a competitive market where U.S. mold builders must vie with large counterparts in nearby Windsor, Ontario. The tooling market, meanwhile, has suffered through several years of flat car sales and sparse product development.
PGAM already has sparked much talk around the Motor City.
``It is not something that is necessarily going to be a slam-dunk winner,'' said Jeff Mengel, a partner with consulting firm Plante & Moran LLP in Auburn Hills, ``The European approach to mold making is to be more of a mold builder. There's a subtle difference; a mold maker in Europe is much more heavily involved in tinkering with design and engineering integration.''
For the most part, U.S. tool shops separate the design function from the mold function, with a mold maker sticking closer to manufacturing work, Mengel said. Whether the cross-pollination of design and mold building works in America remains to be seen, he said.
Other large tool shops perform a variety of services. For instance, Reko International Group Inc. of Oldcastle, Ontario, has full-scale areas in automation, fixtures, prototypes and gauges for customers, said Chief Operating Officer Gordon Young. But the company prefers to partner with outside design and engineering firms, he said.
``We're not a design house,'' Young said. ``That's a separate business vs. manufacturing in my mind.''
PGAM will provide engineering, prototyping and testing, mold design and other upfront functions, Gnass said.
In addition, the company has purchased 850- and 3,000-ton injection presses and five metal-stamping presses, said Timothy Gallagher, vice president of sales for the U.S. operation.
PGAM's focus will be on production tooling, Gallagher said. It will produce injection molds for interior and exterior auto parts. The company's size will help it succeed in the tough Detroit market, Gallagher said. Few companies can afford to absorb the costs of new automotive programs, which can take several years to complete before a toolmaker is paid for its work.
PGAM recorded about $75 million in sales last year, with average sales growth of 48 percent for the past four to six years, Gnass said. The company claims to be one of the five largest toolmakers in Germany.
PGAM now employs about 90 in Auburn Hills and would like to grow to 150 workers by early next year, Gnass said.
Gallagher's former company, Detroit-based Corver Engineering Co., was one of the victims of the financial struggles for toolmakers. The company, formerly one of the larger automotive injection mold makers, filed for bankruptcy protection in 2001. Corver sold some of its assets to PGAM before going out of business.
But the industry is looking up, Mengel said. A recent molding study by Plante & Moran shows that half of the current production molds used in North America are more than 5 years old. Many of those molds will need to be replaced, he said.
``Molds are starting to shake loose, and smaller mold makers are not getting as much business from traditional sources as the large players,'' Mengel said. ``That's a trend I believe will continue.''