Study on vendor tooling indicates looming capacity crunch

  • 13-Nov-2013 01:33 EST
Jig Grinder.jpg

A jig grinder is in operation at the Freeman Company in Fremont, Ohio. The North American automotive vendor tooling industry has more than 750 tool shops, employing approximately 75,000 people directly.

North America’s auto industry will have so many redesigns of existing vehicles, brand new models, and vehicle facelifts over the next four years that the tooling capacity needed to make it all happen will be squeezed.

“Capacity is getting really, really tight. All the OEMs have some sense that we’re getting very constrained in the tooling industry,” Laurie Harbour, President and CEO of Harbour Results, Inc., said referring to the 2013 North American Automotive Vendor Tooling Study.

The study’s development team—Harbour Results and OESA (Original Equipment Suppliers Association), with support partners LMC Automotive and Clinton Aluminum—surveyed more than 50 global tooling suppliers, 10 automakers, and nearly 50 Tier 1 suppliers.

Dave Andrea, Senior Vice President of Industry Analysis & Economics at OESA, said that automakers typically own the stamping dies and molding equipment used at their Tier 1 and Tier 2 suppliers’ facilities.

According to the study, the tooling content for each North American vehicle was approximately $550 in 2012. “In North America, the industry produced 15.5 million vehicles in 2012, so that means the cost of tooling tallied $9.25 billion,” said Andrea.

Whether or not more or fewer vehicles are produced in a given year is not what impacts the tooling industry. What affects the tool shops is an increase in the unique types of vehicles being produced.

Jeff Schuster, Senior Vice President of Forecasting for LMC Automotive, said that more than 130 launches encompassing new vehicles and completely redesigned vehicles will occur from 2014 through 2017 at assembly plants in North America.

“The auto industry is adding volume because of new activity at both existing factories and new plants in the southern states and in Mexico. New tooling will be required to handle that increased activity, and new tooling also is needed to handle the various trims that each automaker offers,” Schuster said in an interview with Automotive Engineering International magazine.

In the 2017/2018 time frame, the study predicts, demand for tooling will soar past $15.2 billion—a 64% uptick from the current level.

It typically takes between 2000 and 3000 tools to build just one vehicle model. “And those are distinct, unique tools,” Harbour said. For example, a front fascia tool can range from $500,000 to $1 million apiece with more than 35 tools needed for a complete assembly (excluding lighting).

The tooling industry’s capacity crunch is also hindered by a decline in the number of skilled toolmakers, according to the study.

Although most of the tooling needed for vehicles built in North America is handled by tool shops in North America, in 2012 approximately 20% of tooling work occurred in China and other low-cost countries. Tooling work done in China for export to North America is generally focused on lower-complexity tools that are used to produce non-Class A parts.

The expectation for 2020, according to the study’s findings, is that the amount of simple tooling being done in China for North American export will remain at 2012 levels. “The percentage of complex tooling will drop from 7% in 2012 to 5% in 2020. That’s really because complex tooling requires considerable engineering and problem-solving capability, and that’s one of the areas that China lacks with regard to making tools,” Harbour said.

She identified possible ways to address North America’s looming capacity constraint. One is to focus on total costs rather than the typical practice of setting a price point. Another is working to improve the relationships between tool shops and automakers.

“Right now, there are only a couple of automakers who seek the input of tool suppliers. They collaborate early, usually two to three years before the launch of a vehicle, to get the best product, quality, and price. When a tool supplier has input into how the tools are designed and engineered, the OEM has essentially secured tooling capacity,” Harbour said.

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