Automotive Tooling Keeps Foot on the Accelerator

Over the past 12 months, both die and mold shops have experienced strong capacity utilization (90% and 81% respectively), according to a first quarter survey by the Original Equipment Suppliers Association (OESA) and Harbour Results, Inc., (HRI). In the Automotive Tooling Barometer, Laurie Harbour, president and CEO of HRI, is bullish on 2018 but sees a correction forthcoming.

“Although we believe 2018 will be a strong sourcing year for the automotive tooling market, we are seeing some indications of a return to more normal sourcing levels in the near future,” Harbour said.

Sentiment was strong (80%) in the first quarter and actually up  compared to Q4 2017. Work on hold jumped to 11% (from 8.4%), but the overall downward trend continues and is expected to remain relatively flat throughout the remainder of the year.

Average throughput was slightly higher at die shops compared to mold shops, and for the first time the study looked at die and mold shop liquidity. That data show that a shop’s liquidity is linked directly to payment terms and accounts receivable (AR) paid on time. The trend for both of these factors continues to drift down with progressive payments terms dropping from 55% in Q4 2017 to 51% in Q1 2018, while AR paid on time dipped one percentage point during the same timeframe.

“First, the industry is starting to normalize, with supply out pacing demand,” Harbour said. “Second, the industry is coming off an unprecedented 18-months of tool spend—nearly $15 billion in tools—which has cash tight across the automakers and Tier 1 suppliers.”

Survey respondents were comprised of mold shops (69%), die shops (18%) and other (14%), located in the U.S. (56%), Canada (37%), Europe (5%) and Asia (2%). Revenue ranged from less than $5 million to greater than $40 million, with the largest percentage (25%) coming from the $5 to $10 million range.