Setting aside all the turbulence from the UAW strike and ongoing macroeconomic factors, automotive analysts say there’s reason to remain optimistic for one sector of the industry that’s heavily concentrated in West Michigan.
Southfield-based industry consulting firm Harbour Results Inc. noted in its most recent survey that tooling slowed in the third quarter of this year as quote activity declined and backlogs stood at more than three months.
However, President and CEO Laurie Harbour sees new tooling opportunities on the horizon and particularly strong demand because of the shift to EVs, specifically the multitude of new EV models that automakers expect to introduce in the next three to five years.
“From the perspective of tooling itself … I can’t build the car without a tool for all the parts that it has, so I have to launch new tools for those while I’m also launching all of these ICE products that all the OEMs have,” Harbour told Crain’s Grand Rapids Business in a recent interview. “So, in a sense, it’s very good for the tool industry.”
The outlook comes amid a frothy time for the automotive industry, although the sector appears to be returning to some sense of normalcy after UAW members ratified their contracts following a prolonged strike against the Detroit 3.
With the high-profile contract dispute behind it, the automotive industry will finally gain some clarity about the future, which should reverberate through sectors like tool and die, said Mike Wall, executive director of automotive analysis at S&P Global Mobility in Grand Rapids.
“Once we do get the union negotiations in the rearview mirror, it’s going to be all eyes forward on all of these vehicle launches and, in particular, this EV migration,” he said.
Tool and die makers have dealt with supply chain disruptions, inflation and labor shortages like the rest of the manufacturing industry, and they face unique challenges such as price pressures that frequently have them competing with producers in China. But the dozens of new EV launches in the coming years could provide a massive lift for the firms that are positioning to capitalize on the market, Harbour said.
Harbour noted that some vehicle components currently stay the same between internal combustion engine (ICE) and EV models, contributing to the overall availability of work for tool and die makers and her firm’s favorable outlook. Additionally, Harbour believes the broader North American tooling industry has the strength and capacity to compete with China for tooling jobs.
“The shops have to fight for their own viability by improving their business. And the data shows us that they have not done everything that they can to improve their business,” Harbour said during a recent webinar. “Once they can do that, they can show data to the OEMs and their customers about why we should make tools here.”
“I’ve been saying for over a year now: I’m very bullish about the tool forecast for the automotive industry, and I’ll tell you I’m still very bullish,” Harbour added.