Automotive tooling suppliers expect growing business in 2019

The North American automotive tooling sector had a soft start in the first quarter, but business should pick up in the second half of 2019, according to a report from Harbour Results Inc. and the Original Equipment Suppliers Association.

Consultant Laurie Harbour expects the North American auto industry will spend will be about $8 billion on tooling this year.

"However, there are a number of factors, including tariffs and automaker restructuring, that could significantly impact the industry and tooling spend," she said. "As a whole, the tooling industry is slow, but we are seeing some shops that remain busy — primarily because they have diversified their customer base."

The Q1 2019 Automotive Tooling Barometer conducted by Southfield, Mich.-based Harbour Results surveyed companies producing both plastics molds and stamping dies. Washington-based OESA represents automotive original equipment suppliers.

The report, issued April 10, said mold shops saw a slight increase, 2 percent, in utilization rates in the first quarter over the fourth quarter of 2018, growing to 79 percent from 77 percent. Utilization at die shops dropped drastically to 74 percent, from 85 percent in the fourth quarter.

Harbour said that drop could be an indicator that mold shop utilization could dip in the near future, because dies require a longer lead time than molds.

Work-on-hold continues its upward trend, with an average of 12.6 percent, driven by several automotive program delays, the report said. Based on those factors, tool shop owner sentiment dipped to 62 percent, the lowest point recorded since that measurement started in 2016.

The survey also looked at investment strategies.

"Across the tooling industry, we expect investment from 2018 to 2019 to remain relatively flat," Harbour said. "Shops are investing money in improving their business, but much of the focus is on process improvement and software purchases such as CAM, scheduling and machine monitoring tools."

Profitability is still within the "good range," but on average, because of the industry slowdown, tool shop profitability is down, the survey said.

Efforts also are continuing in worker hiring. Despite decreased sales from 2017 to 2018 at mold and die shops, both parts of the tooling sector made solid efforts to invest in design talent in 2018, the report said. In 2019, mold builders are planning to contribute 5.2 percent of revenue toward capital expenditures, compared to 5.6 percent in 2018. Die builders expect to invest 4 percent, up from 3.9 percent.

The survey includes mold shops (68 percent) and die shops (20 percent), with 87 percent of respondents coming from the United States and Canada. A small number are from Europe and Asia. Shops with annual sales ranging from less than $5 million to more than $40 million were represented, with the largest percent from the $10 million to $20 million range.

"With continued uncertainty throughout the automotive industry due to trade concerns, tariffs and program delays, we anticipated there would be a Tooling Barometer sentiment dip," said Julie Fream, president and CEO of the Original Equipment Suppliers Association, a division of the Motor & Equipment Manufacturers Association.