As the auto market in North America sinks more due to the economic slowdown, foreign competition and gas price hikes, injection molders that supply the industry are losing margin, being pushed to the edge, and, in some cases, out of business.
The solution for them may be to switch to the medical-molding business, a high-margin, economic-downturn-insulated and outsourcing-proof sector. With that in mind, about 100 attendees mostly molders gathered June 18-19 at press maker Engel Holding GmbH's North American headquarters in York for the company's symposium on medical molding.
Steve Braig, president and chief executive officer of Engel North America, pointed out the looming trend of auto molders moving into the medical sector.
``A lot of contract molders, who are a good base of our customers, are looking to diversify and move away from automotive, appliances and consumer goods,'' he said in a June 19 interview. ``Medical devices and health-care products are growing and less cyclical. We clearly see a trend there.''
So does Robert Carpenter, a first-time attendee at Engel Machinery Inc.'s Medical Day symposium. Carpenter is the president and CEO of second-tier auto supplier Infinity Molding & Assembly Inc. of Mt. Vernon, Ind.
``We must upgrade technology and the business,'' he said. A former employee of Guardian Automotive Corp., he understands the hardship associated with today's auto molding and already has set up some medical-molding business.
The $15 million company makes casing, plugs and test strips for medical devices such as the home-use blood-glucose-monitoring system Accu-Chek.
But Carpenter is considering expanding the medical division to balance its main business in auto. He hopes to make higher-level medical parts and products that require Food and Drug Administration approvals and stringent control.
Strict regulations and high standards will certainly deter competition from overseas.
The FDA is paying close attention to the medical-device molding industry, said Costas Chantzis, president of Stewartsville, N.J-based consultancy TechnoBusiness Solutions. ``You either go for FDA compliance or suffer great pain,'' he said in a presentation.
European molders fear FDA regulations and feel that the U.S. market is hard to break into, according to Christoph Lhota, vice president of the medical business unit at Engel Austria GmbH. Asia, on the other hand, is making commodity medical products but won't be on par with the West for high-end medical business any time soon.
``High-end medical molding will stay in America for quite some time,'' Braig said.
Another speaker, Andrew Sargisson, also expressed optimistic views of medical molding in North America. ``I see massive potential in the U.S. market. I've seen dramatic change in the last two years molders are bigger, smarter, working more efficiently, and looking for better ways to do it. The potential is staggering.'' Sargisson is export sales director with Waldorf Technik GmbH & Co. KG, an automation equipment supplier in Engen, Germany.
But entering medical molding is not easy.
``People are typically very concerned with regulatory issues,'' Braig said.
Once in compliance with industry standards, quality control is more important than ever in medical molding. Lives depend on the parts to be accurate and repeatable, Donna Bibber told the audience. She is a technical partner of microPEP, a subsidiary of Precision Engineered Products Inc. of Charlton City, Mass.
Molding microparts for the medical industry, she said, requires unconventional tooling tolerances as well as special inspection techniques and equipment. Her company uses tools from both in-house production and outsourcing.
Sargisson also warned about the risk of over-investment in medical molding. ``Europe has gone through this change,'' he said. ``The U.K. market, for example, is a disaster. Every week you open the newspaper, there's [medical] companies closing.''
Sargisson advised companies to ``take a hard look and the right steps.''
What Europe went through intense competition reshaping the market is perhaps not a bad thing, he added. The quality of products and customers has increased. Businesses that have survived the shrink are left in a strong core market. ``I think the same will happen in the U.S.''