DETROIT — After an unexpected lull in business during the first half of the year, North American mold makers are seeing a big push from automakers that likely is just the first wave in demand that will stress capacity during the coming years.
“I was at a mold builder [last month] in Windsor [Ontario], and he's already got $50 million plus in business on the books for next year,” said Laurie Harbour, a consultant whose company, Harbour Results Inc., has been surveying the tool and die industry serving automakers and their suppliers.
The crush is a combination of the upswing in production previously expected from a recovering auto industry in North America, combined with some key projects that had been delayed.
“Now they're all super, super busy and now [the automakers] are starting to feel some crunch on future programs,” she said. “They really are falling on top of each other now and the next six months will be showing some capacity issues.”
That crunch has every North American automaker, along with the bulk of their Asian and European counterparts and some major suppliers, studying and changing their tooling strategy to try and set themselves up for future production.
Last year, Harbour Results' initial study on tool and die suppliers to the auto industry predicted a $6 billion shortfall between the existing capacity at North American tooling shops' present capacity and the expected demand from the industry.
Since then, the Troy, Mich.-based company has been drilling down further into the numbers, updating data and helping lead a tooling study group through the Original Equipment Suppliers Association that has met both with automakers and top suppliers.
One early finding from the additional research is that there are even fewer active toolmakers than the groups previously thought. While there are about 750 individual tool and die shops officially in North America, some of those shops exist only on paper. Some shop owners quietly shut down during the recession, but kept the business' tax status officially open on the books, Harbour said.
The gap between existing production capacity and demand comes after a slowdown for mold and die makers — caused both by outsourcing to lower cost countries in the early 2000s and the 2008-2009 recession — which has been followed by a fast recovery by the auto industry.
The North American auto industry, which had seen production fall to less than 10 million vehicles during the recession, has now added more than 5 million new vehicles per year, and that number is growing.
In addition, automakers are adding more differentiation to various models produced on the same vehicle platform, which means that rather than building one car and selling 300,000 units of that car each year, they are creating flexible variations on that car and selling perhaps 60,000 to 90,000 copies of each particular version.
Each new version, though, requires a different set of molds, rather than one set of molds for higher production.
As a result, Harbour said during a Sept. 25 interview in Detroit, the number of tools ordered by the automakers has increased.
Between 2000 and 2012, the number of tools purchased by automakers grew by 20 percent, and they're expected to grow another 25 percent by 2020. There are some automakers who are spending 30 percent to 40 percent more on tooling now than they did just a few years ago, she said.
“So now one of the things that's becoming a hot topic is the utilization of tools,” she said. “When you build up a door panel mold, it's built by a toolmaker to run 300,000 to 400,000 parts per year. Because that's what the engineering is. To get the quality and robustness they want, they've got to make it in a certain engineered fashion, even if you're only going to need 90,000 door panels.”
So automakers and top suppliers have started talking about trying to find a way to develop a “mid-range” and mid-priced tool, looking at potential savings in material choice or multi-shot tools — not just two-shot tools, she said, but up to five-shot tools. That adds complexity, but could reduce costs in other ways.
The biggest complication into moving forward, Harbour said, remains an old one: payment terms for toolmakers.
Traditionally, mold makers are not paid until the tool is completed and fully tested out, which could be more than a year after the mold shop begins working on it. That requires mold makers, most of which see less than $20 million in annual sales, to cover the bulk of the costs up front.
“So if you're the toolmaker, you've got to ask, ‘How do I do any [research and development] with you on what a mid-ranged tool price could be or how you could reduce cost when you don't value me, you don't pay me on time, I have to fight to get my money and you won't bring me in early on that design. Why should I help you now?'”
As capacity begins to tighten, mold and die shops may be able to begin to change payment terms in their favor, Harbour said.
Some companies already are beginning to win contracts with “progressive” payments, in which they receive a percentage of their fee throughout tooling production, rather than solely at the end. Other tooling buyers may be willing to set up a preferred supplier contract which guarantees a certain percentage of work going to a specific shop each year.
Those preferred arrangements allow mold shop owners to better predict their work flow and income each year, which reduces overhead costs in engineering and sales.
“This is the biggest complaint beyond the payment terms,” Harbour said. “They say that, ‘You guys force waste into my business. If we could just have a partnership, get a guaranteed level of business, we can plan.'”
For their part, mold maker also have been putting in a lot of effort to improve their own work flow and capacity issues, she said. They have not only invested in 5-axis and 6-axis machining equipment for more automation, they have also developed new production systems which tap into lean manufacturing techniques to speed up mold building, rather than relying on one person to build an entire tool.
“What they've started to do is evaluate people's abilities and say, ‘You're great at building up the core, and you're great at building the cavities. Why don't we almost assembly line it? We can team up and double our efficiency.'”
In North America during the past year, the mold industry alone saw its throughout — or sales per employee — climb 37 percent. At the same time, the die industry saw it drop by 6 percent, Harbour's report notes.
Now the question will be if those improvements on the ground, combined with a squeeze on capacity for tool shops' customers, will lead to real changes that will benefit the industry.
“In the next six to 12 months, there will be some very interesting things going on,” she said.