Industry consultant predicts 31% drop in North American tooling spend in 2020

The 2020 automotive vendor tooling spend in North America will be US$6.4 billion, a new report from consulting firm Harbour Results Inc. (HRI) says, which is US$.4 billion less than originally forecasted in 2019 and 31% below 2019 tooling spend of US$9.3 billion.

“The key factor driving reduced tooling spend is the decreased number of North American vehicles that were sourced for tooling in 2020 – 49 total launches,” HRIS said. “Furthermore, the Detroit Three automakers, who source most of their tools in this region, sourced only 14 vehicles in 2020. This, in conjunction with the global economic recession, created a challenging marketplace for the tool and die industry.”

HRI predicts that North America will be in a prolonged recession for the next 12-18 months, which will likely impact manufacturing and business cost structures through 2021.

“We knew this year was going to be challenging for the automotive tooling industry but could never have predicted the effect a global pandemic would have on the health of industry,” said Laurie Harbour, president and CEO of HRI, which is headquartered in Southfield, Mich. “2020 is a turning point for the automotive industry with three key pressures impacting the future tooling demand. First is the financial strain COVID-19 and the global recession has placed on both OEMs and suppliers. This is impacting automaker profitability, which means platforms will be commonized and trim models will be eliminated. Finally, a large number of future vehicle launches in North America will be EVs [electronic vehicles], which are costly to bring to market. These factors are significantly impacting the health of the North American tool and die industry and although spending is forecasted to improve there is still a great deal of instability and uncertainty.”

HRI predicts that automakers are going to be faced with difficult strategic decisions about where to put their money and what vehicles to launch. The current 2021 tool spend forecast is US$7.8 billion as new EV automakers enter the market and existing automakers launch new EV cars and trucks. However, as the industry rebounds many of the planned vehicle launches will be at risk.

Due to financial challenges and the changing manufacturing landscape, HRI predicts that in the next 18 months 30% of all North American manufacturers will close with 10-15% being mold and die shops. In HRI’s most recent Manufacturing Pulse Study, conducted in August, 35% of tool shops indicated they were struggling or concerned, and 10% stated they had tripped a bank covenant, which indicates there is significant stress within the entire supply chain.

“We predict that automakers will be forced to make a series of tough decisions to ensure they have the money to invest in electric and autonomous vehicles while maintaining profits,” Laurie Harbour said. “We suspect that a number of the vehicles planned for future launches may be delayed and that facelifts will likely be cancelled. This will negatively impact tool and die makers that are already feeling the crunch.”

“As the tooling market contracts, it’s important that shops position themselves for the future. Leadership needs to push for edginess and eliminate complacency,” she added. “It’s also important that tool shops continue to put plans in place to shore up weaknesses, maximize technology and talent, and control costs.”