High demand for tooling among shops supplying the major carmakers is creating a new tooling model whereby more tooling dollars are being outsourced. Large toolmakers will spend a total of $1 billion to $1.5 billion to source tooling services from smaller shops or overseas.
Primary tool shops tend to outsource services that exceed their capacity. Outsourcing amounts to 10 to 30 percent of their revenue as they look to outside shops to handle multiple tools, machining, design and assembly.
For secondary tool shops, usually smaller companies, only 5 to 10 percent of their revenue relates to outsourcing. They tend to outsource special capabilities such as machining and gun drilling.
Outsourcing indicates high capacity utilization. In 2017, mold building shops are running at about 81 percent of capacity, compared with 88 percent capacity utilization for die builders.
Another trend in North American vehicle production is the appearance of new foreign vehicle-oriented assembly and parts factories. Much of the new production is locating to Mexico because of that country's low manufacturing costs. Southern U.S. states like South Carolina are also attracting investment because of modest wage costs and business-friendly governments.
The Harbour Results study identified big differences in where vehicle OEMs in North America source their tooling. Not surprisingly, Detroit's Big Three source about 80 percent of their tooling within North America and only 20 percent in China and elsewhere in Asia.
The dominant Asian OEMs in North America get 40 to 50 percent of their tooling needs in North America and the rest in China, Japan and elsewhere in Asia. European major OEMs get 20 to 30 percent of their tooling within North America, with the rest from Europe and Asia.
"European OEMs lack some trust in North American shops," Harbour noted in the webinar. Somewhat offsetting that wariness is that European firms are setting up new technical centers in North America.
Increasingly, the tooling market is moving toward face-lifts of current models.
"If mold makers don't do fascia and grilles, there isn't a lot of activity," Harbour said.
The future beyond 2022 will see more electric and autonomous vehicle development and launches, and that will place new demands on tool builders, Harbour predicted. Tesla and other new entrants will be looking for innovative tooling, including projects in which there is no precedent.
And as always, manufacturing costs will be a force in tooling strategies.
"Mold makers will need to think more about building low-cost tooling," Harbour said in the webinar.
"It is important that tool shops continue to focus on improving operations and investing in technology during the good times to remain competitive during the dip," Harbour said.
Harbour Results in Southfield, Mich., studies and advises the manufacturing industry. Special focus is given to small and midsized businesses.