Motorized Vehicle Manufacturing
The following are the key assumptions that are included in the $15.2 billion estimate: • Each of the domestic three OEMs indicated that they would continue to spend the same amount on vendor tools for the next five years due to the number of launches. They indicated it would not be more due to capital constraints from the board.
• In North America over the next five years there will be 2.8 million units minimum of new assembly plant capacity that will enter the market. This capacity will be largely in the Southern US and Mexico and primarily from the foreign owned brands such as Honda, Nis- san, Toyota, Audi, Fiat, BMW and others that have not announced to date. These new plants will largely make all new models that were not made in North America previously and each will require new tooling.
• In the next five years the number of launches will reach record levels as each of the OEMs work to cap- ture a portion of the new sales in North America but also work to build models for export to other regions. And this significant number of launches does not even address the complexity of these launches. In other words, LMC counts a vehicle launch as one launch but that vehicle might have five trim levels and three separate tools for things like bumper fascias.
American suppliers to build parts. The Japanese said they are producing approximately 40% of their tools in North America with many still coming from Japan. This made sense when they had only a few models but with the many models now produced in North America and the level of complexity it no longer makes sense to build tools in other countries and bring them to North America for part production.
• Additionally, all OEMs indicated they are adding com- plexity to vehicles, which will increase the number of tools per vehicle 20–25% over previous models.
• Two estimates were impossible to include in this analy- sis: First, any potential reshoring from any OEM due to rising costs in China or lead-time issues. This will oc- cur, but HRI cannot determine to what level. Second, the demand being placed on automotive tool suppliers today from other industries because of their reshoring is significant and many of these shops like this work because it pays higher margins, has progressive pay- ments and gives them diversification.
Tooling Capacity Gap on the Horizon
These estimates by HRI show that an impending $6 billion tooling capacity gap will hit the automotive industry in the next five years. However, HRI’s estimate of $15.2 billion in demand is actually conservative. The OEMs indicated a higher degree of potential resourcing of tools from overseas to North America than HRI actually factored into its calculations and estimates. That said, the industry knows that some programs do not come to bear and the best-laid plans do not always get executed at the OEMs.
• The key change is that European OEMs told HRI that today they are making approximately 20% of their ven- dor tools in North America with suppliers located here but the majority are produced in Germany, with some made in low-cost countries and then shipped to North
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ManufacturingEngineeringMedia.com | April 2014
There will be a gap and HRI believes it is close to $6 bil- lion, but even if slightly less than that, the industry is tighter than ever before. This is a great problem for tool suppliers be- cause it means good demand for a while but a very tough one for OEMs that want to launch new vehicles in North America. So how does the industry close the gap? Let’s assume for a minute that the following occurs: • Tool shops work diligently to improve their business with process improvement and new equipment to drive efficiency improvement. With that we could assume a potential 10% improvement or $1 billion in additional capacity.
• HRI anticipates that new plants will come into North America. Although many investors or entrepreneurs
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