2016 Automotive Tooling Insights

The Original Equipment Suppliers Association (OESA; Southfield, MI) and Harbour Results Inc. (HRI; Southfield, MI) recently completed research for the Automotive Tooling Barometer that shows a positive trend in the amount of work being awarded on progressive payment terms. However, overall tooling sentiment was down seven points from last August, due in part to a significant amount of work on hold as a result of program delays.

Almost 20 percent of business is on hold, corresponding to $2.3 billion in tooling revenue or the equivalent of more than 100 tool shops sitting idle at any given time. This is a five percent increase from the previous Tooling Barometer conducted last summer.

Additionally, overall capacity utilization metrics were flat at around 80 percent based on work hours provided over the last four months by function. Using a typical 50-hour workweek that is standard in most tool shops, most respondents were hovering near 40 hours. The situation may actually be more dismal than the 80 percent alludes to because shops are reluctant to go below 40 hours per week. HRI, having been in more than 30 shops over the last four months, has observed some shops finding ‘other’ work for employees to perform. Labor cost containment can only go on for so long as tool shops gear up for a busy second quarter of 2016.

More than 75 percent of tool shops said they were optimistic about the future. With 2016 being forecast as a heavy sourcing year for automakers, many tool shops are assuming this current downturn is temporary. The Automotive Tooling Barometer also solicited feedback from automakers, Tier One suppliers and tool shops to better understand cost drivers.

“According to an LMC Automotive forecast, the North American light vehicle demand is predicted to plateau at 20 million units through 2020,” said Laurie Harbour, the president and chief executive officer of HRI. “It is critical that the automakers, Tier One suppliers and tool shops improve communication and collaboration to reduce cost and remain profitable during this period.”

There were several common themes that appeared when HRI began to analyze the data. Tool complexity, communication, and engineering changes were main cost drivers. The majority of respondents indicated tools could be simplified to focus on functionality rather than perfection, but that this would require significantly better communication throughout the supply chain.

“We are pleased to release the latest Tooling Barometer, in partnership with Harbour Results,” said Julie A. Fream, the president and chief executive officer of OESA. “It is important that the automotive industry collectively address the tooling industry’s concerns and issues to ensure they are able to support of the upcoming record number of vehicle launches.”

The Tooling Barometer was created by the OESA Tooling Forum with the partnership of Harbour Results to provide an indicator of the current state of the automotive tooling industry, and the perception of the near-term prospects for the industry. The survey captures the sentiment of the major companies in this market.

HRI was established in 2005 to support North American small and medium-sized manufacturers to compete in the global manufacturing environment. It is a strategic and operations advisory firm that helps shops identify performance gaps, implement innovative operational and financial solutions, develop strategic plans that matter and improve profitability.

OESA provides a forum for automotive suppliers by addressing issues of common concern through peer group councils, serving as a reliable source of information and analysis, and providing an industry voice on issues of interest and serving as a positive change agent to the automotive industry. With nearly 450 members, it represents more than 70 percent of North American automotive supplier sales.

www.oesa.org,   www.harbourresults.com