Tooling companies brace for a crash

Segment poised to ‘fall through the floor,’ consultant warns

TRAVERSE CITY, Mich. -- North American tool-and-die makers are facing a business downturn in three to four years that will be severe enough to put many of them out of business, one of the segment’s leading consultants forecasts.
“After 2020, the tooling business is going to fall through the floor,” warns Laurie Harbour, CEO of the suburban Detroit auto manufacturing consultancy Harbour Results. Harbour works closely with tool-and-die companies and monitors their business conditions.
Harbour bases her dire outlook on the flow of orders for new North American vehicle models, which she said is about to plummet by half.
“The average age of tool shop owners in North America is now over 60,” Harbour said Tuesday in an interview on the sidelines of the CAR Management Briefing Seminars. “They barely got through the 2008-2009 economic crash. When this next trough hits, they’re not going to want to go through it again, and they will just close or sell out.”
Orders for new tooling and dies run 18 to 20 months ahead of new model launches, as tool shops produce the hardware to make new or redesigned auto parts. Harbour cites industry forecasts that automakers are about to wind down a huge multiyear campaign to redesign their platform architectures and powertrains to meet 2025 fuel-economy goals.
As automakers complete that wave of vehicle redesigns, Harbour forecasts, the need for new tooling will drop to lower levels for several years.
“We are at the top of the bubble right now on model launches,” Harbour said. “It’s about to fall off a cliff.”
Harbour said the North American tooling industry has about $13.5 billion a year in revenues. That is far above its normal volumes of the past, which averaged between $9 billion and $10 billion, she said.
“We’re forecasting that in 2020 to 2021, the volume is going to fall to less than $7 billion.”
Harbour said that because most North American tool-and-die shops are small, privately owned companies, many of the proprietors will simply sell their companies or close and retire. In many cases, she adds, there is no clear family or management succession plan in place.

You can reach Lindsay Chappell at lchappell@crain.com