The U.S. industrial tool, die, and mold portion of the industry encompasses the thousands of small and medium-sized businesses that manufacture tools, dies, molds, precision machined parts, and special machines for other manufacturers. The tooling industry is critical to the health of the U.S. economy as it makes possible the existence of virtually every other manufacturing industry. Tooling, such as dies and molds, is custom designed and made to manufacture specific products to desired levels of uniformity, accuracy, interchangeability, and quality.
The industry is classified under NAICS 333511 (Industrial Mold Manufacturing) and 333514 (Special Die, Tool, Die Set, Jig, and Fixture Manufacturing).
Industry Overview and Global Competitiveness
In 2006, U.S. tool, die, and mold shipments remained flat, holding at $13.35 billion ($5.5 billion worth of industrial mold manufacturing and $7.85 billion worth of special die, tool, die set, jig, and fixture manufacturing). The U.S. tool, die, and industrial mold industry is comprised of approximately 6,300 small and medium-sized businesses that manufacture highly customized tools, dies, and molds for use with machine tools and other types of production machinery. Many of these tools and die manufacturers are small mom and pop shops that have been affected by the current economic crisis. 2008 figures should reflect a decline in the number of manufacturers due to business mergers, acquisitions, and bankruptcies.
Exports in 2008 totaled $1.31 billion, an increase of 11.8% from 2007 figures of $1.17 billion. Mexico, Canada, Germany, and China remain the top four markets for U.S. exporters. Brazil and Singapore saw jumps of 54.7% and 40.9% respectively as U.S. manufacturers seek out and capitalize on opportunities in new export markets.
In 2008, imports were valued at $4.78 billion, an 18.6% decrease from 2007 figures of $5.88 billion. Japan holds the top spot with 39% market share, Canada with 18%, the Netherlands with 13% and Germany at a steady 7%.
Since the domestic tooling industry is a collection of very small, often family-owned companies accustomed to servicing nearby manufacturers, they are not particularly well suited for operating in a globalizing marketplace. While U.S. companies supply approximately 70% of the domestic demand for industrial tools, dies, and molds, foreign competition, particularly from Japan, Canada, and Germany as well as China is shrinking the domestic demand for U.S. products.
Tool-making requires extensive collaboration with the customer, due to the high degree of production customization. Because manufacturers typically contract tooling suppliers located in relative proximity to their manufacturing facilities, tooling suppliers are seriously affected when U.S. companies relocate overseas, since rarely do they continue to buy from their U.S. suppliers. Once relocated, the manufacturers typically contract their tooling needs to indigenous tool and die shops in their new location.
Conversely, this scenario is not often the case when foreign companies move to the United States. Many foreign companies, particularly the Japanese manufacturers, have quasi ownership or subsidiary relationships with their suppliers and typically bring them to the United States with them. Thus, there is very little new business for U.S. tool and die shops from foreign companies setting up operations in the United States. U.S. manufacturers are trying to get into the transplant market, particularly to set up automotive transplants and work with the Japanese and other foreign manufacturers, but it may take some time to convince the Japanese and other foreign manufacturers to consider a U.S. supplier.
Without a keen sense of how to locate and work with foreign customers, or how to establish the communication and management systems required to exchange complex information effectively, the average tool maker will find it extremely difficult to transform itself into a competitive company. This is why, in the industry’s view, government programs that provide business consultancy intended to reorient the company and its manufacturing processes, like the Manufacturing Extension Partnership (MEP), the Market Development Cooperator Program (MDCP), the Technology Innovation Program (TIP) and the Trade Adjustment Assistance Program (TAA), are so critical. The industry has consistently called for funds to be increased to support these programs.
Furthermore, this industry is extremely capital intensive. Highly sophisticated machine tools and manufacturing technology are critical for toolmakers to reduce labor costs and to improve efficiency. Such an investment is extremely costly and in the current economy, funds for such investments are difficult to come by. The current dubious financial state of many of these small manufacturers has made most lending institutions reluctant to offer the capital necessary to reorganize operations or to improve efficiencies. Therefore, the tooling industry also supports capital investment tax credits that make acquiring equipment a bit more affordable.
Another large challenge faced by U.S. tooling firms is the continued weakness of U.S. automakers, particularly General Motors and Ford. Around 50 percent of all domestic tooling is produced for the “Big Three.” Foreign auto transplants could offer an important growth opportunity for U.S. tooling firms that are accustomed to producing for automakers, but as mentioned, it has been difficult for U.S. companies to enter the supply chains of these foreign carmakers.
U.S. tooling firms face some of the same issues as machine tool manufacturers, including the high cost of employee health care, energy, and complying with various domestic worker and environmental regulations. The sub-sector cites compliance with burdensome regulations developed by the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA) as obstacles to their competitiveness with foreign firms. U.S. toolmakers are moderately affected by the rules on which MAS regulatory review teams are currently focused (mostly beryllium and definition of solid waste), but the competitiveness of the industry is also undermined by its current structure.
Although the U.S. tooling sub-sector is world-class in terms of skill and ingenuity, it is not particularly competitive in the world market. U.S. producers are at a significant competitive disadvantage as a result of high labor costs and a lack of access to inexpensive capital.
Nevertheless, U.S. tool builders do export products. U.S. tooling shops are most successful in exporting high-end, sophisticated tooling, but the advantage they hold is likely to evaporate as lower cost countries continue to acquire the skills and equipment necessary to compete.
The largest opportunities for U.S. tool and die manufacturers to expand exports are in developing industrial markets, such as China, Brazil, India, and Mexico. U.S. firms have traditionally been quite active in the Mexican market and the domestic capacity for China to service its tooling needs remains insufficient. China can supply its need for low-end tools and dies, but the demand for superior and sophisticated tooling is filled by imports. U.S. tool and die builders could take advantage of this demand.
As the movement of manufacturing facilities from the United States to low-cost foreign locations continues to erode the traditional customer base of U.S. toolmakers, U.S. toolmakers are left with excess capacity and are forced to vie for a dwindling number of available domestic tooling contracts. The industry will continue its painful restructuring to become more dynamic and global in order to compete for business and survive.