For Moldmakers, Auto Industry Forecast Means Diversification is Key

Harbour Results Inc. unveiled its forecast for automotive vendor tooling based on the results of its annual study of the current state of the industry. In a nutshell, HRI president, Laurie Harbour, had good news for North American moldmakers that serve automotive OEMs, especially if those toolmakers are Tier 1 suppliers, because the study shows automotive vendor tooling spend will reach a record high of $11 billion in 2018. That bodes well for all levels of the tooling supply chain, she says, since primary tooling suppliers typically outsource between 10 percent to 30 percent of their capacity to smaller, or secondary, tooling suppliers who, in turn, outsource as much as 10 percent of their work to other suppliers that can provide capabilities the secondary shops may not have, such as gundrilling, as well as overflow machining. Harbour says that between $1 billion to $1.5 billion in tooling was outsourced during 2017, and it is expected that this trend will continue in the near-term.

Harbour tempered the excitement a bit by saying that spend levels will most likely reduce by about 40 percent to around $6.7 billion by 2020. “Our team looked at a number of factors and issues impacting the automotive industry in addition to vehicle launches - including the elimination of vehicle models, new foreign owned plants and products, OEM profitability, political and economic climate and the changing consumer landscape,” Harbour explains in a press release issued after the forecast presentation. “We developed an automotive vendor tooling spend forecast of $50 billion from 2016-2021 with 2020 being the lowest spend year during that time.”

Harbour added, “The market is shifting more toward sport utility vehicles (SUV), which are just as fuel efficient [as cars] and offer consumers the features they are looking for such as room, features and that type of thing.” On the positive side, she said, having more, larger vehicles in production, including trucks, means a lot more parts for each platform launched and that means more tooling will be needed.

MMT shared the Harbour forecast with a few North American mold manufacturers who supply the automotive industry and asked them for their reaction.

Steve Rotman, president of Ameritech Die and Mold responded by saying, “I’m not exactly sure how to give feedback when the subject is so far in the future. Our crystal ball gets cloudy in 3-5 months, typically. That said, it is good to understand or be aware that [another dip] might be coming, but with the way the current economy is heading, along with the value of the stock market climbing, reinvesting in the U.S. economy continues to drive the engine. It just continues to verify the diversification theory to stay strong.”

Rotman says that at their Mooresville, North Carolina, facility the work is approximately 55 percent automotive, 30 percent appliances, and 10 percent consumer goods, while Ameritech Florida’s work breaks down to 40 percent military and aerospace, 25 percent automotive and 25 percent a mix of appliance/medical/consumer goods.

Diversification seems to be the key for many shops that count automotive as a market focus. West Stephens, account manager for Industrial Molds in Rockford, Illinois, told me that they do not disagree with what Harbour is predicting. “We do try and educate ourselves about the trends in our industry, at multiple levels of our organization, by hearing from HRI, as well as other inputs, at conferences and other events,” he said. “We talk internally about what we hear and then create our business plan. We have a marketing plan which includes diversification. We are keeping our course for the diversification and staying positive.” This latest forecast was not a surprise to Industrial Molds, Stephens said, and perhaps that’s a good thing. “Nothing exceptionally stood out, that we didn’t hear previously,” he added. “We do try and keep ourselves informed of industry standards.”

View the news release Harbour results issued for more details on coming trends and influencers.