Record Low Sourcing Levels Challenge Tool and Die Industry
Tooling orders continue to slow as North American capacity utilization hits a low mark.
Posted: August 16, 2019
The Original Equipment Suppliers Association (OESA; Washington, DC) and Harbour Results, Inc. (HRI; Southfield, MI) released the results of their Q2 2019 Automotive Tooling Barometer Survey that show how the tooling industry continues to slow, with North American capacity utilization at its lowest mark since 2016, when the metric first started being collected. In Q2 2019, mold shop utilization saw a 4 percent decrease to 74 percent as compared to Q1 2019. Die shop utilization dropped from 74 percent to 70 percent in the same time frame. Additionally, automotive program delays drove work on hold to a record high of more than 20 percent. Based on these factors, tool shop owner sentiment dropped to 61 percent.
“During the first two quarters of 2019 the industry saw a decrease in utilization and a significant increase in work on hold. With this challenging environment, we can expect shops to continue to struggle as the year progresses,” explained Laurie Harbour, the president and chief executive officer of HRI. “Because of this, coupled with the fact that Chinese tool shops continue to significantly underprice North American shops, we will likely see more layoffs and bankruptcies in the balance of the year.”
“The lower sentiments that the survey results are showing are no surprise. Our OESA Automotive Supplier Barometer Survey results indicate that sentiment of automotive supplier executives is at the lowest level since 2009,” added Julie A. Fream, the president and chief executive officer of OESA. “Multiple factors are contributing to this and we are working with our members to help them navigate some of the current market uncertainties and mitigate risk wherever possible.”
The study also looked at the business readiness of shops. A majority of both mold and die shops (79 percent and 86 percent, respectively) who responded to the survey indicated they had a three- to five-year strategic plan. However, when pressed, these same companies did not have the same level of plans in place for the adoption of technology, sales process or labor and hiring. “From my perspective, a robust strategic business plan would include a sales plan, technology plan and specific details for labor and hiring, so it is discouraging that so many shops are not including these specifics as they plan for the future,” noted Harbour. “With the automotive industry changing so rapidly, it is imperative for the tool and die industry to start preparing for the future today.”
Specifically looking at labor and hiring readiness across the tool and die industry, a majority of those surveyed are experiencing a shortage of qualified talent, with many shops indicating they currently have difficulty filling open positions. Additionally, 67 percent of die shops and 81 percent of mold shops indicated they were not prepared, to somewhat prepared, for the next generation workforce. “By 2020 millennials will make up 50 percent of the U.S. workforce. Shops need to adjust the way they are recruiting talent, as well as their internal culture, to attract and retain an efficient workforce,” said Harbour.
The survey population was comprised of mold shops (63 percent) and die shops (22 percent) in the U.S. (56 percent), Canada (34 percent) and International (10 percent). Shops with revenue ranges less than $5 million up to greater than $40 million were represented, with the largest percentage of shops coming from the $10 million to $20 million (29 percent) range.
harbourresults.co, www.oesa.org
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