Times to Get Tougher for Tooling Firms

Laurie Harbour sees tough times ahead for North American tooling industry. (Image: Harbour Results Inc.)

This is what you don’t necessarily want to hear when the subject is how well things are going in the world of tooling vendors to the North American auto industry: “This forecast is difficult for us to share.”

That’s Laurie Harbour, president and CEO of Harbour Results, Inc. (HRI), which has just released the results of the Harbour IQ in-depth study of the current state of the automotive vendor tooling industry.

A Big Decline.

Harbour estimates the whereas the tooling spend in North America will be on the order of $8.7-billion in 2019, it will drop to $6.8-billion in 2020.

How Come?

She explains, “This year – 2019 – was a culmination of significant change and instability in the automotive marketplace. From unique mobility models and new automakers to advancing electrification and autonomous technologies to uncertainty in the economy and global trade landscape, the only thing we are certain of is that the industry will continue to change at a rapid rate. This is impacting automaker profitability, which means platforms will be commonized, trim models will be eliminated, and OEMs will be leveraging reductive design to save money.”

All of which adds up to less tooling spending by the OEMs.

Vehicle Launches.

A couple other data points from HRI: (1) the number of North American vehicles that will be sourced for production overall in 2020 is 45 vehicles; (2) the number of those vehicles coming from the Detroit Three, which, the research firm points out, sources most of its tooling in the North American region, will be just 13 vehicles in 2020—which in itself accounts for about $3.1-billion.

Things look a bit better for 2021 (compared to 2020), when the amount of spending is to go to $7.3 billion, but that’s still lower than this year’s $8.7 billion.

Lights Going Out.

This is—and is going to be—tough on the North American tool and die industry. According to Laurie Harbour, “In 2019 we saw at least 10 shops close and more than 2,000 workers laid off and we see this trend continuing.”

That is the research indicates that as many as 75 mold and die shops will close in the North American region within the next five years, as the annual average of tooling spend in the region will go from $8-10 billion to $6.5-8 billion within that timeframe.

Be Prepared. And Edgy.

So what is a shop to do?

Laurie Harbour suggests, “As the tooling market contracts, it is important that shops position themselves for the future. Leadership needs to push for edginess and eliminate complacency and it also is important that tool shops continue to put plans in place to shore up weaknesses, maximize technology and talent, and control costs.”

While it certainly is not the case that the auto industry is going back to where it was about 10 years ago, it is the case that the OEMs are becoming more strategic with their capital investments as they need to be spending more money on things that they weren’t thinking at all—or much—about 10 years ago, such as autonomy and electrification, neither of which is inexpensive.

As HRI does work with improving the operational efficiencies of organizations and isn’t just a research firm, Harbour’s suggestions are based on much more than supposition.