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Tuesday, October 8, 2013

Is This Bad "Carma"?

Here's an interesting article from Automotive News, forwarded from a friend who works for GM. Yes, it is a problem. However I have to agree with the first response from Doug Groh. It's a problem that american companies created.

TOOL SHOP SHORTAGE COULD STALL AUTO BIZ

In the little corner of the car business where skilled machinists repair broken dies through the wee hours of the night and perfect the tools that will turn out smooth body panels, an alarm bell is ringing. The American tool and die industry is shrinking. But having adequate tooling support is crucial for the recovering industry to keep production and sales strong. Over the past eight years, one-fifth of North America's tool and die shops have disappeared, according to data from the U.S. Bureau of Labor Statistics. And the sector focused on automotive needs may have declined by as much as a third, according to another estimate. Yet new-car sales are surging. Automakers are expanding model variations and adding 3.5 million units of annual North American vehicle manufacturing capacity, according to a Morgan Stanley study. All of that creates new pressure on the smaller pool of shops.Some industry watchers now wonder if the nation's diminished automotive tool and die infrastructure is a choke point that will disrupt the car business. 

"I honestly don't see a solution to this," said Scot Sharland, executive director of the Automotive Industry Action Group, a Southfield-based problem-solving agency created by automakers and tier-one suppliers. "It's just a matter of time before the repercussions start to show up."

Repercussions? 

"Quality problems," Sharland grimly forecast. "Supplier crashes. Higher prices. Production interruptions. Launch delays. "This is a perfect storm coming together," he said. "Auto plants are running three shifts and weekends now. What do you think is going to happen when a die breaks on a second shift on a Saturday and there's not a shop available to come to the rescue?"

Skilled-worker shortage 

For the past year, to shore up tool and die capacity here, Sharland has been on a shuttle diplomacy mission to find solutions, talking to state officials, tooling companies, educators and automotive companies. He has been promoting the idea in several states of a public-private partnership to steer more young people into tool and die careers. Shop operators say recruiting and training new tradespeople is one of their biggest challenges now. 
This bottleneck didn't catch anyone by surprise. Various efforts have been underway for two decades to foster the industry — but they're going nowhere. Just last month, the state of Michigan suspended itsTool & Die Recovery Zone program, which it has been running for a decade to bolster the local industry. The program provided aggressive tax abatements. The state encouraged competing tool shops to band together into groups to cooperate in marketing and operations — all intended to shore up the companies and help them survive. But in an audit of the program this year, the state concluded there was no clear indication that the effort has helped. At its peak, 340 shops were participating. As it begins to phase the program out, the state estimates there are 300 shops still participating. Their Michigan shops are actually part of the industry's problem. 

Clustered around Detroit 

The auto industry's geography has been changing radically for the past 30 years, but the tool and die sector's has not. In an era of industry globalization, when automakers are growing by leaps and bounds in places like Tennessee, Mississippi and Mexico, when Japanese, German and Korean automakers and suppliers are flourishing in North America, the tool and die industry remains concentrated in Detroit and southern Ontario. Though their numbers are down, hundreds of shops operate in and around Detroit. Many are small, family-owned businesses with deep local roots. And many shop operators don't want to move to unfamiliar places — nor risk the family business investing in expansions there. 

"As things heat back up, there might not be enough tool and die shops to go around," said Gary Kimmen, president of the family-owned Top Craft Tool, a 25-employee shop in Clinton Township that his father started in 1968. "They talk about opening shops down South, but it's just too risky. "After the recession of the past four or five years, nobody wants to stick their neck out. When the bottom falls out on a business plan, it's the little guys who get crushed. When you're owed half a million dollars and can't get paid, it can kill you." 

Automaker pressure 

Yet automakers are now turning up the pressure. Nissan Motor Co., in particular, is beginning to ask many suppliers to its big assembly plants in Smyrna, Tenn., and Canton, Miss., to locate as close as possible to the plants. Nissan is focusing its attention on tier-one suppliers, including plastics makers and metal stampers. But those suppliers are actually where an increasing amount of tool and die business comes from these days. Dan Bednarzyk is looking at the transportation costs, lost time and operating stress of relying on die shops hundreds of miles away. As Nissan's recently named vice president of total delivered cost, Bednarzyk wants to address the costs and risks of shipping tooling work back and forth to Detroit. "When you've got the tooling and you've got to make a change on the fly, it's costly and risky," Bednarzyk said. "Every time you put your tools on a truck, you pray that the truck gets there and gets back without turning over." This disconnect — the strong desires of manufacturers going unmet by Detroit tooling companies that strongly desire new business — has frustrated automakers in the South for years, said Jay Baron, CEO of the Center for Automotive Research in Ann Arbor.
"I began trying to bring together Michigan's tool and die industry with the international automakers 20 years ago," Baron said. "I didn't have much luck." 

A new effort 

Last month, responding to the new sense of urgency, Baron and CAR began trying again. Baron traveled to Atlanta to meet with representatives of automotive trade associations in six states — Alabama, Kentucky, Louisiana, Mississippi, South Carolina and Tennessee — about fostering tool and die investment in the South. 
Baron says the automakers and parts suppliers in those states are desperate to bring tooling and mold work closer to their operations. But he is quick to emphasize that he is not trying to relocate businesses from Detroit. 
"What we want to do is encourage the creation of branch offices in the South," he said. But even that is easier said than done, he admitted. "It will cost maybe $10 million to open a new tool shop," he said. "For a small company to risk that much, they want some assurance that the business is there. And nobody in those states is going to assure them of anything." Baron says various state associations have asked him to survey automakers representing 11 vehicle assembly plants in the region — including Nissan, ToyotaMercedes-Benz and Hyundai — to devise some sort of plan to recruit and maintain tool and die shops. 

But even that has challenges. 

Challenges in the South 

An automaker in Tennessee — Volkswagen in Chattanooga, for example — might not be keen to stand in line at a newly created tooling shop behind a competitor like Toyota's assembly plant in Tupelo, Miss.

It has been tried. 

A decade ago, in hopes of building a book of business in the South, tooling and machinery maker Wright-K Technology of Saginaw opened a branch operation near Huntsville, Ala. But it closed.

Integrity Tool & Mold of Windsor is having better luck with a branch it opened in 2007 in Pulaski, Tenn., just south of auto plants owned by General Motors and Nissan. Integrity is now expanding that plant, said Scott Allen, vice president of Integrity Tennessee, investing $6.3 million on new tooling equipment and adding 45 people to its roster of about 50 employees. 

"The challenge in doing this is that the auto industry in the South is very spread out — Tennessee, Georgia, Alabama," Allen said. "It's not like it is in Detroit, where your customers are just a short drive away." 

The second challenge, Allen said, is the absence of skilled workers for tool and die work. 

"It really takes years and years of training and experience to be able to do this work," he said. "The guy in Detroit who has the skill level doesn't want to move his family to a little town in the South. 

"So we will need to hire people with good attitudes and train them to do the work. And that's going to take a lot of time." 

From Automotive News

Doug Groh 
The big three began creating this shortage when they started outsourcing,The
crash caused by banking and mortgage companies brought about a larger 
hurt, but when small businesses started failing due to slow payments or 
bankrupt business laying burden on stressed and strained business. It 
forced closures. The fact that everybody is trying to get everything for
less caused many trained individuals to seek higher wages elsewhere. 
many people trained in other industries and wont go back. Others that 
remained in the industry will not be able to maintain the increased 
stresses of overtime demands. The young people don't want to train 
either because no solid future is being shown. Trainees get let go after
a short time and are afraid to rely on going back. They accept less pay at other jobs where it appears more secure.
The comment below mentions the short sightedness of automakers to realize a company needs to make a profit to stay in business. 
Many times I would submit a quote and then be told it was the lowest, and that they were going to ask everyone to resubmit quotes and that my quote would be the target to beat. This is predatory pricing at best.
Nobody can remain in business long if they keep making a small percentage on every bid.