Results of Tooling Barometer Points to a Strong 2018
Positive results point to a strong 2018 for the tooling industry.
The Original Equipment Suppliers Association (OESA) and Harbour Results (HRI) recently released the results of their Q1 2018 Automotive Tooling Barometer. The study results show that the tooling industry is looking strong throughout 2018 with key indicators–sentiment, back logs and utilization–all positive.
Sentiment remains strong (80 percent) with a slight increase over Q4 2017. Additionally, the cyclical nature of work on hold continues as it jumps to 11 percent (from 8.4 percent); however, the overall downward trend continues and is expected to remain relatively flat throughout the remainder of the year.
Over the past 12 months, both die and mold shops have experienced strong capacity utilization (90 percent and 81 percent respectively). However, average throughput, a sign of efficiency which is strongly correlated to profitability, shows die shops are experiencing slightly higher efficiency levels than mold shops. According to Harbour, levels of efficiency are all over the map independent of shop size—some of the best being larger than $40M as well as smaller than $5M. This is likely the result of how busy a shop is as well as its commitment to improve operations, making them profitable regardless of market forces.
For the first time the study looked at die and mold shop liquidity, and the data shows that a shop’s liquidity is linked directly to payment terms and accounts receivable (AR) paid on time. The trend for both of these factors continues to trend down with progressive payments terms dropping from 55 percent in Q4 2017 to 51 percent in Q1 2018, while AR paid on time dipped one percentage point during the same timeframe.
The reason these two factors continue to trend down is twofold. First, the industry is trying to normalize, with supply out pacing demand. Second, the industry is coming off an unprecedented 18-months of tool spend, which has cash tight for the automakers and Tier 1 suppliers. If terms and AR paid on time continue to decrease, this will put a risk on the tool and die industry.
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