Lou Kren Lou Kren
Senior Editor

Automotive-Tooling Outlook: Bullish, But…

November 1, 2023
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As of this writing, the Detroit Three—Ford, General Motors and Stellantis—have reached tentative agreements with the United Auto Workers, as union votes to ratify are expected early in November. With labor strife as a backdrop, MetalForming in late October attended the Automotive Tooling Outlook, presented by Harbour Results Inc. at a MEMA-The Vehicle Suppliers Association conference and then in a Harbour Results webcast. 

Given all of the uncertainty around the strike and resulting settlements and what they mean for future success of the Detroit Three amid intense global competition, the outlook for North American die, tooling and mold suppliers to the automotive industry remains “bullish.” This even when accounting for the  effects on labor forces of OEM transplants, unfortunate world events, general economy concerns, a 2024 U.S. presidential election, and the future trajectory of alternative-power vehicles.

That’s the word from Laurie Harbour, president & CEO, Harbour Results Inc., who spoke at both events. 

“A lot of new products are coming, including internal-combustion-engine (ICE) programs such as the new Ram pickup, the new F-Series and the new GM pickups,” Harbour offers. “All of these put hundreds of millions of dollars—probably more than $1 billion—worth of tooling into the market as they enter. These will be launched for start of production sometime in late 2026 and 2027. As a reminder, our tool forecast is based on start of production, less 18 mo., which is when a tool supplier sees the quotes for tooling.”

Harbour explains that OEM-expected tooling orders totaling more than $1 billion have moved out of 2023 and into 2024, driven largely by anticipation of the UAW strike, and the actual strike playing out in late September.

“This makes the softness of Q3 and Q4 2023 much more significant to tool suppliers,” Harbour says. “For 2025, we've heard about some delays in overall electric-vehicle (EV) production, with that tooling moving into 2026.”

Again, these delays relate to the strike impact, according to Harbour, and OEM concerns in committing to new capital investment.
“OEMS are pushing off some EV programs to the balance of the decade,” she says. “Again, we have a very bullish forecast overall, but some shifts definitely have occurred in the last half of 2023.”

 

Near-Term Strike Impact

The affected OEMs obviously see labor impacts, as hourly pay will increase well above the current $64/hr. (wage and benefits) among the Detroit Three, as compared to Japanese OEMS at about $55 and companies such as Tesla at $45-$50, according to Harbour. This will eat into what had been record profits. Consider, too, that the UAW strike resulted in significant unrecoverable lost production volume. Lower-tier suppliers were particularly vulnerable during the strike as some felt impacts within 40 hr. of strikes at specific OEM plants, which points to just how tightly wound low-tier suppliers are to OEM operations.

It remains to be seen if union efforts, upon the successes of this strike, affect transplant OEMs and Tier Ones. Also, to compete with OEM wages, tier suppliers likely will have to increase compensation, with an adverse effect on competing with lower-cost foreign suppliers. These factors represent wildcards in forecasting, and spell uncertainties for these tiers.

 

More Launches Spur Tooling Spend

Tool-Spend-Harbour-Results-Forecast-2023Given all of the above, the current Harbour Results amended forecast sees North American die and mold spend for automotive totaling $5.1 billion in 2023, $7.4 billion in 2024, $6.2 billion in 2025 and $6.3 billion in 2026 (see chart: Significant Changes to Tool Forecast). New launches will drive tooling demand, with 47 launches planned for 2023, 64 for 2024, 48 for 2025 and 63 for 2026, according to Harbour.

“OEMs will conduct product development next year for vehicles that come out in 2025-2027, when the economy should return to a level of robustness,” she says. 

Also, battery electric vehicles (BEVs) will make an increasing impact, Harbour reports, though she envisions some program delays.

“The cost impact, particularly for the Detroit Three, will force the spreading out of some of these BEV programs and continuing renewal of ICE products,” Harbour reasons, “as ICE is where these OEMs make a lot of their margins.”

Nonetheless, expect to see a tremendous amount of tools on the horizon for BEVs (see chart: Like It or Not – BEVs Are Coming).

“Keep in mind that that BEVs require 30 to 40 percent less tooling than ICE products, but we're also seeing some trim levels removed on ICE products,” she says. “Some of this balances out, but we remain very bullish on what’s coming.”

 

Big Wallet for Tooling Spend

“A lot of new products are coming, and over 4 yr. this accounts for $25 billion in tool spend,” Harbour says. “This is similar to what we saw in 2017-18—the largest spends in the history of the automotive tooling business. A significant wallet is available for tool sourcing.”

This introduces a challenge: Where does that wallet get sourced?

Electric-Vehicle-Production-Harbour-Results-Forecast-2023Investment in BEVs and the transitioning of assembly lines to produce these products sets the stage for huge OEM capital expenditures (capex). With material price increases carrying through the pandemic and the massive launching of new products, managing capex is something to be studied closely.

“In 2018, the North American automotive industry consisted of 173 ICE models and two BEVs,” says Harbour. “By 2026, expect about 154 ICE models and 96 BEVs. That’s 43 percent growth in the number of models, and all require tooling.”

OEMs, to combat higher labor costs arising from strike settlements along with all the other stresses, will look to reduce trim levels and possibly outsource tooling to overseas low-cost suppliers.

“This certainly continues to be an issue as OEMs look to balance their capex investments” says Harbour. “I can't project where OEMs will source their tooling, and this is the challenge faced by the North American tooling industry.”

One thing is for sure, though, according to Harbour: If OEMs claim that a lack of tooling capacity drives them to lower-cost overseas suppliers, don’t buy it.

“North America holds $9 to 10 billion of automotive tool capacity,” she says. “We forecast $6 to 7 billion annually in tool spend for the rest of the decade. While capacity has been reduced by 15 percent in the past 20 yr., we clearly still have plenty of capacity.”

Most concerning to Harbour regarding the 15-percent reduction in tool capacity is the share of that represented by producers of large tooling, for parts such as body sides. That’s challenging, but somewhat offset by tariffs on tooling from China.

“Bottom line,” according to Harbour: “We have the tooling capacity.” MF

Industry-Related Terms: Die, Lines, Ram
View Glossary of Metalforming Terms

 

See also: Wipfli LLC

Technologies: Management, Tooling, Training

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