Automotive tooling demand looked strong through the first quarter of 2018, although payment times are getting longer, according to the Q1 Tooling Barometer, published by Harbour Results Inc. and the Original Equipment Suppliers Association.
"Although we believe 2018 will be a strong sourcing year for the automotive tooling market, we are seeing some indications of a return to more normal sourcing levels in the near future," said Laurie Harbour, president and CEO of Harbour Results in Southfield, Mich.
"Automakers are continuously making product changes in response to market forces, which makes this industry difficult to predict. It is important that shops stay vigilant, monitor industry data and be prepared to make quick decisions to stay profitable," she said.
The survey included mold shops, die shops and other related companies in the United States, Canada, Europe and Asia. The size of tooling operations ranged from sales of less than $5 million to more than $40 million, with the largest grouping — 25 percent — coming from the $5 million to $10 million range.
Over the past 12 months, both die and mold shops have enjoyed strong capacity utilization, at 90 percent for die shops and 81 percent for mold shops. However, die shops showed a slighter higher level of efficiency than mold shops, which is strongly correlated to profitability, Harbour Results said.
For the first time, the study examined the liquidity of die and mold operations. The data shows liquidity is directly linked to payment terms and accounts receivable paid on time. Harbour said the trend for both factors continues to move down, with progressive payment terms dropping from 55 percent in the fourth quarter of 2017 to 51 percent in the first quarter of 2018. Accounts receivable paid on time dropped 1 percentage point during the same period.
"We feel the reason these two factors continue to trend down is two-fold," Harbour said. "First, the industry is starting to normalize, with supply outpacing demand. Second, the industry is coming off an unprecedented 18 months of tool spend — nearly $15 billion in tools — which has cash tight across the automakers and Tier 1 suppliers.
"If payment terms and AR paid on time continue to decrease, this adds risk for the tool and die industry. Additional, if there is a small dip in the automotive market, it could put many shops, particularly the small shops, in a challenging financial situation."
The Tooling Barometer was created by the Original Equipment Suppliers Association's Tooling Council with the partnership of Harbour Results.