The road ahead - mold, tool and die making a comeback?

Remember that famous line, “It was the best of times, it was the worst of times”? With apologies to its author, Charles Dickens, for most moldmakers the past few years were just been the worst of times, period.

But that was then: the automotive sector in a tailspin followed by the worst recession since Warren Buffett was in nursery school. Cut to today, and everything heard about what a good year 2012 was for mold manufacturers — especially those that service the recovering automakers — seems to be doubly true.

“The industry in Canada is definitely healthier than two years ago,” said David Palmer, president and CEO of the Windsor, Ont.-based Canadian Association of Mold Makers (CAMM).

“Our industry is driven predominantly by the automotive OEMs, and in 2008-2009 the automotive OEMs were starting to reevaluate how they were going to market, and what kind of platforms they were going to use. We’ve seen rejuvenation, and although the economy hasn’t given us the mandate that it’s all good, we’re seeing good growth again that relates to new OEM platforms and vehicles.”

Down south, meanwhile, over 89 per cent of respondents to a recent American Mold Builders Association survey reported business conditions as being either good or excellent, with not a single shop — zilch — describing business as bad.

Automotive in the driver's seat:

It’s hard to overstate the importance of the automotive sector for Canada’s moldmakers — particularly in Ontario, which is home to 90 per cent of the country’s mold, tool, and die shops. According to Ontario’s Ministry of Economic Development and Innovation, the auto sector currently accounts for about 60 per cent of sales within the mold, tool and die industry. Call it the Ground Zero of Canada’s automotive sector.

And as at the other Ground Zero, the rebuilding is going strong. Canadians and Americans are flocking to dealerships across North America at levels not seen since the global economic meltdown gutted the industry in 2008. Led by strong demand in resource-rich Alberta, Canadian auto sales will rise to 1.69 million units this year; just short of a Canadian record set in 2002 but up from last year’s levels, which were six per cent above 2011.

Small wonder, then, that a lot of Canadian mold shops are continuing to be very busy, if not quite as swamped with work as many reported this time last year.

“Earlier in the year, some of the bigger shops in the Windsor, Ont., area were so busy they had teams of people on the road looking for other moldmakers to whom they could subcontract work,” said Tom Meisels, president of Toronto-based FGL Precision Works. “The workload has dried up somewhat since then and become more manageable, but the shops are still busy.”

All in all, it’s been a remarkable renaissance. “Automotive OEMs are showing record sales, changing their platforms and putting a lot of new vehicles on the road, which is great not only for Tier One and Tier Two businesses but for those of us on the moldmaking side of things,” Palmer said. “Once again, there’s now a huge demand for new tooling.”

Automotive manufacturing renaissance or not, some long-standing problems still linger.

“Payment terms from the Big Three automakers have not drastically improved; it can still take one to two years before we see our money,” says Palmer. “The OEMs have stringent requirements for their production part approval processes, and they continue to use them to their own advantages.”

Wind power overblown?

It wasn’t that long ago that a lot of shops in the industry were looking to transition away from auto parts. CAMM, for one, encouraged its members to seek out new toolmaking opportunities for sectors like aerospace and wind turbines. So how’s that working out?

“There’s business available in the wind turbine sector, but the manufacturing that we can contribute is not at the same high level as in automotive,” David Palmer said. “We’ve seen some successes but also some failures in some of the new companies that we were relying on. There’s some demand for it at present, but I think we’re approaching the saturation point until the infrastructure is more firmly in place.”

One Toronto-area shop that is travelling down the aerospace road, meanwhile, is FGL Precision Works. “For us, it seemed like a good way to utilize machine downtime,” Tom Meisels said. “Currently we’re in an in-between stage: there’s a lot of development and prototyping going on, but the work is sporadic. It hasn’t quite been the revolution we were hoping for.”

In short, as David Palmer put it, “The reality is that neither the aerospace nor the wind turbine sectors are going to replace the volumes we get out of the automotive industry.”

Slow boat back from China:

It’s no secret that the worries about foreign competition kept most moldmakers up at night long before the financial troubles of the Big Three. But as long as Chinese suppliers were unable to meet international quality standards or to satisfy delivery schedules for North American-based customers, Canadian die/mold shops enjoyed a measure of protection.

Then came the recession, and an increased concern for the bottom line that convinced many customers to move their tooling contracts overseas, even those in high-end markets that required complex, precision tooling.

A number of Canadian shops have closed their doors during the past decade as a result, but the dark cloud has had a proverbial silver lining for the survivors, forcing them to adopt new technologies and process improvements to maintain profitability. Now, as business picks up, there may be signs of a substantial amount of reshoring underway.

“North American mold shops are getting back some of the business lost to China, in large part because we have the high-speed equipment to make us competitive again,” Palmer said. “Also, we’re dropping our prices because of these better efficiencies and better machining capabilities. If we can close that gap, a lot of customers would rather avoid the headaches of doing business in China, which includes the big risk of losing control of proprietary information. In short, China just isn’t as attractive as it was two or three years ago.”

The old youth problem:

Another commonly-cited business problem shows no signs of abating, however — if anything, it seems to be getting worse, and fast: the shortage of skilled personnel.

The root of the problem is easy to identify: fewer qualified young Canadians are opting to become skilled craftsmen, as the emphasis placed on entering college continues to increase. And as shops that are suddenly busy again scramble to find qualified workers, and as older moldmakers retire from the workforce, the issue has suddenly become acute.

“Finding good workers has always been an issue, but it’s even more problematic now that the recession is over,” says Meisels. “Ideally, the solution is to market ourselves to kids when they’re at the high school level but, unfortunately, Canadian colleges have shut down their plastics and mold, tool and die trade programs, so it’s becoming very hard to reach them.”

There are still college-level apprenticeship programs out there — Conestoga College, in Kitchener, Ont., offers a two-year tool and die maker apprenticeship course, for example — but they’re not producing enough graduates to plug the manpower leak. What else can the industry do to recruit fresh faces?

“One of our CAMM board members is a director at St. Clair College; he’s pushing for newer programs, and talking about boosting our presence in high schools,” said  Palmer.

“We want to be able to make students aware of opportunities, and to let them know that today’s mold shops aren’t the tool shops that their fathers might have talked about; they’re clean, high-tech, climate-controlled, and everything is computer-generated. The problem is, companies are very aware now of their labor costs, and when things slow down they’re not afraid to lay workers off. This lack of job security is playing a big role in scaring people away from our industry, and countering it is probably our biggest ongoing challenge right now.”

Proceed with caution: 

So, peering out through our windshield at the road ahead, what do we see?

The consensus seems to be that the mold, tool and die industry will indeed enjoy a period of strong business but that, for most, the good times might not last. “The automotive OEMs are changing over their platforms, which is good for us in the short term,” Palmer says.

“After that, though, they’re not going to want to change over their platforms again for several years at the least. This is a slowdown we see happening on the other side of 2015.”

And it’s a projected slowdown that speaks volumes about the new reality that moldmakers have to face.

“Years ago, if you’re business slowed down, you could give your workers a rest because you knew new orders would come in soon; now there’s too much uncertainty,” said Meisels.

“In today’s world, if we get swamped with work for a few weeks, we know we have to face the problem of finding work after that. It’s not a pleasant reality, but I believe it’s the new normal.”

Mark Stephen is the editor of Canadian Plastics magazine. This feature first appeared as part of a supplement in the April issue of Canadian Metalworking.