Motorized Vehicle Manufacturing
in North America are not looking to jump into the tooling industry at a high rate, there are tool shops in Europe and China that want to enter this market. Ger- man OEMs would like to see their tool shops in North America and will work hard to accomplish that. It’s not clear how many new plants will be built in five years, but let’s assume another $1 billion in capacity, which is probably very high for such a short period of time.
• Then let’s assume China or other low-cost countries grow their production of tools for export to North America and add another $1 billion of capacity to this market. This is probably the maximum that can be expected in the next five years due to dramatically rising costs in China, the significant lead time issues that North American OEMs have (making it tough to manage the tools’ transportation time) and the huge demand from Chinese automotive OEMs on their own tool shops in China to build for internal consumption as production volume grows from 16 million units to nearly 30 million units by 2020.
• There will be some sourcing of tools from European tool shops that will build in Europe and ship to North Ameri- ca, particularly on global programs where appropriate.
• One thing that will negatively affect capacity is the lack of skilled trades in North America. With an average worker age of 56 in tool shops many people will be exiting this industry in the next five years and there is a definite challenge to replace these people at the pace they exit.
With this analysis and all the potential ways to close the gap HRI believes that there is still a $2–2.5 billion gap in ca- pacity going forward, and even if this analysis is high and you cut it 50% there is a $1–1.5 billion gap.
Seeking Solutions Collectively HRI knows that each of the stakeholders
(OEMs, Tier 1s and tool suppliers) have a critical role to play. Tool suppliers must work on efficiency and reinvent the way they build tools to make more capacity available. Additionally, they have to continue to invest in the right resources, new technology and the next generation of toolmakers. Tier 1 suppliers need to work more collaboratively with the OEMs and the tool suppliers. They are the critical glue that keeps the three stakeholders together. Their role is transpar- ency through the value stream with the tool shops and OEMs
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Things like program delays, incomplete data at kickoff of the tool program, inaccurate target setting when the program is put together, lack of commonization, engineering changes and poor design requirements are stealing massive amounts of capacity from tool suppliers on a daily basis. The graph be- low highlights the life of a tool supplier in a typical 18-month period. Their schedule can range from 55% utilization to over 100% as programs get delayed and pile up on top of each other. This makes for tough business conditions for a tool sup- plier, and they really have no awareness (visibility) of future
and contributing their engineering capability to support the OEMs in reducing total cost, not just of tools but the parts as well. It is true that Tier 1 has been squeezed for many years as OEMs have gone after material cost reduction and this has created some challenges to Tier 1 profitability. That said it is critical for suppliers to partner with the OEMs and openly share the challenges while working together so both succeed. This makes it sound easy and it is not, but on the flip side the Tier 1s can also cause significant negative challenges if they do not play their role productively. Lastly, the OEM has probably the most critical role in closing the capacity gap. Many may not think the OEM could have this critical of a role given that they don’t run the tool build plant. However, the decisions they make upstream and the downstream impact steals capacity from tool shops and is magnified across 10 North American OEMs.
Better to Look Upstream
The following graphic illustrates that many OEMs, particu- larly the Detroit Three, are still focused on those traditional elements above the water level that drive price. However, the OEMs that performed the best in the study were those that put their focus further upstream on the elements below the surface that are truly driving the waste or added cost to vendor tooling.
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