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U.S ITC report fingers labor costs and global buying trends for moldmaker woes

The final report of the U.S. International Trade Commission on competitive conditions in the tool, die and mold sec...


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October 30, 2002 by Canadian Plastics

The final report of the U.S. International Trade Commission on competitive conditions in the tool, die and mold sector paints a gloomy picture of an industry caught in the grip of global economic forces.
The ITC is an independent, non-partisan factfinding agency of the U.S. federal government. Its report confirms what industry players already know: a slow down in automotive launches and an exodus of manufacturing and tooling contracts to Asia are decimating the U.S. tool, die and mold industry.
However, the report does not support the oft-touted belief that Asian competitors are benefiting from unfair government subsidies or other support measures. And, it does not seem to paint Canadian moldmakers as a threat to the U.S. industry, since manufacturing costs are similar in the two regions.
In spite of modern equipment, labor costs continue to be a significant factor in the cost of tooling, states the report. On this front, the U.S. is at a disadvantage compared with China, Portugal, Hong Kong, Taiwan and Korea. Chinese hourly compensation costs for tool makers and tool designers are said to be one-twelfth of those in the U.S., and those in Taiwan are one-third.
The Commission was also told that as many as 200 firms have left the industry in the past three years, and that one industry representative predicts a further 50% decline in the number of firms in the U.S. TDM industry. According to the ITC, the U.S. TDM industry encompasses about 7000 firms, with more than 90% employing fewer than 50 people.
Looking ahead, the ITC concludes the character of the U.S. industry is likely to change, as smaller businesses exit the sector and the number of larger firms increases.
Suggestions presented to the ITC for improving the sector’s competitiveness include:
– industry-wide consortia for marketing and technical cooperation;
– operational improvements to reduce lead times and provide more value-added service;
– tax credits and changes to the laws regarding depreciation to enhance toolmakers’ ability to purchase new machinery;
– permission for trade associations to offer group healthcare plans to member companies.
Drawing on the examples of other countries, the ITC also offers these potential actions:
– increased use of sub-contracting for precision machining functions;
– formation of buyer groups;
– running design offices in several countries to take advantage of multiple time zones for shorter lead times;
– pursue business with foreign transplant automakers.
The full text of the report will be available at www.usitc.com (Investigation number 332-435, Publication number 3556).