Published in Manufacturing

Tool and die makers brace for busy two years, while analysts urge restraint

BY Sunday, January 22, 2017 11:34am

The next two years are shaping up to be a busy time for tool and die makers in West Michigan and beyond.

That’s according to industry insiders who say an abundance of new vehicle launches between 2018 and 2020 have most tool and die shops running at capacity as they try to keep up with customer demands.

“The industry outlook is very, very strong for the next 18 to 24 months,” said Laurie Harbour, president and CEO of Harbour Results Inc., a Southfield-based firm that tracks the tool and die industry. “We do think there is going to be spillage from year to year because there are just too many launches for anyone to handle. I don’t necessarily mean in tooling, I mean OEMs and Tier 1s that are going to struggle to get it done. It’s a very positive outlook.”

Tool and die shops are expected to work on 70 new vehicle programs that will launch over the next three years, Harbour said.

For Grand Rapids-based AutoDie LLC, the heightened pace of new launches has resulted in the tool and die maker already booking 80 percent of its capacity for the year, said Rodney Brouwer, head of program management, sales and estimating at the company.

“We’re focusing on 2018 right now,” Brouwer said. “We see 2017 being pretty full for us by the second quarter.”

AutoDie employs 297 workers at its facility in Grand Rapids.

Although the pace of new vehicle launches will have most tool and die shops busy over the short term, Harbour urges companies to plan ahead for when the automotive industry inevitably retracts.

“The challenge here is if we just put our heads down and go build tools for the next 24 months and not think about what comes after, we’re going to be in a tough spot because there’s definitely going to be some retraction of the market,” Harbour said.

Harbour notes that much of that retraction in the market could stem from a “bubble” of work in pickup trucks that “tend to pour a lot of tooling into the marketplace.”

“Those trucks will launch by 2019 and you’ll start to see a little bit of a dip,” Harbour said. “Some of the economists are also predicting a minor recession. If it is minor, tooling will still be fine. If it’s a major recession — with lots of loss of vehicle sales — then it’s going to be a tightening of profits at the OEM level.”

To prepare for that retraction in the market, tool and die makers have been putting off investments in large expansion projects. Instead, companies have opted to put their dollars into automation equipment that increases efficiency.

That’s the case for Wayland-based Eclipse Tool & Die Inc. 

Despite being “really busy,” the company opted to make small, yearly investments in automation and equipment upgrades instead of larger expansion projects, said owner Calvin DeGood. 

Eclipse Tool & Die invests approximately $150,000 a year in upgrading equipment, DeGood said, noting that he’s also hesitant to make large investments since automakers have a history of promising orders that never come to fruition.

“When you stick your neck out, like a lot of us do, and then get it chopped off, you’re not so quick to do that again the next time,” he said. “The projects don’t materialize so you can’t pay for the equipment that you invested in and everything else. It’s not the type of industry where you can say, ‘Well, I’ll wait until I get the contract and then I’ll buy the equipment.’ You really need the equipment in place and ready to go to get the contract.”

CONSTRAINED BY TALENT

While tool and die makers have plenty of opportunities to pursue new business, many are constrained by a lack of qualified tool and die makers.

“I just turned down some work because basically you can’t get people,” DeGood said. “I can’t really utilize the capacity capabilities that my building and machinery are capable of. … It’s really hard to have a great growth strategy because you’re too dependent on something that you have no control over. How do you control the employment market?”

To combat the talent shortage, most tool and die makers rely more heavily on internal training programs and incentives, especially as the industry is facing a wave of retirements in coming years.

The average age of tool and die workers nationally is approximately 57 years old, Harbour said.

For its part, Eclipse Tool & Die Inc. has two workers in its apprenticeship program. AutoDie is currently training 29 apprentices and plans to add 10 more apprentices each year for the next two years to stave off constraints related to retirements at the company, Nicholson said.

Despite the trouble recruiting talent, Harbour said the high demand for tooling from automakers will yield better business conditions for tool and die makers as a whole.

“I think everyone is going to be pretty maxed out,” Harbour said. “Frankly, it means better payment terms, it means better pricing because the OEMs are a bit in a bind. They need the tools and people are full and that changes your ability to quote.” 

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