A new survey by the Original Equipment Suppliers Association and Harbour Results Inc. indicates that business for tooling industry linked to the automotive industry is slowing with North American capacity utilization at its lowest mark since 2016 when the data was first collected.
Delays in automotive programs drove work on hold to a record high of more than 20%, according to the Automotive Tooling Barometer Survey for the second quarter of 2019. Based on these factors, tool shop owner sentiment dropped to 61%, indicating that the slowdown in sales of new vehicles is beginning to ripple through the industry.
“The lower sentiments the survey results are showing are no surprise. Our OESA Automotive Supplier Barometer Survey results indicate that sentiment of automotive supplier executives is at the lowest level since 2009,” said Julie A. Fream, president and CEO, OESA.
“Multiple factors are contributing to this and we are working with our members to help them navigate some of the current market uncertainties and mitigate risk wherever possible,” she said.
Automakers generally have grown more cautious as retail sales slow in the U.S. and the uncertainty over trade continues to slow business investment in the global economy.
Meanwhile, utilization in the tooling industry saw a 4% decrease to 74% as compared with first quarter of 2019. Die shop utilization dropped from 74% to 70% in the same timeframe.
“During the first two quarters of 2019 the industry saw a decrease in utilization and a significant increase in work on hold. With this challenging environment, we can expect shops to continue to struggle as the year progresses,” said Laurie Harbour, president and CEO, Harbour Results Inc.
“This coupled with the fact that Chinese tool shops continue to significantly underprice North American shops, we will likely see more layoffs and bankruptcies in the balance of the year,” she added.
The study also looked at the business readiness of shops.
“In my perspective, a robust strategic business plan would include a sales plan, technology plan and specific details for labor and hiring, so it is discouraging that so many shops are not including these specifics as they plan for the future,” commented Harbour.
“With the automotive industry changing so rapidly, it is imperative for the tool and die industry to start preparing for the future today,” Harbour said.
Specifically looking at labor and hiring readiness across the tool and die industry, a majority of those surveyed are experiencing a shortage of qualified talent, with many shops indicating they currently have difficulty filling open positions. Additionally, 67% of die shops and 81% of mold shops indicated they were not prepared, to somewhat prepared, for the next generation workforce.