Three years ago, the National Tooling & Machining Association had about 3,000 member companies, with about a quarter of the industry's business devoted to making tools and dies for the auto industry. Today there are 1,800 members, survivors of the double hit of a recession and a structural change that is pushing more work to low-cost countries.
Association President Matt Coffey attends the Management Briefing Seminar each year from the group's base in Fort Washington, Md., to better advise the small business on strategies. The vast majority of these companies have fewer than 100 employees. He spoke Monday with Plastics News Staff Reporter Rhoda Miel.
Global sourcing isn't new, so why is it getting more attention now?
The structural change in the marketplace has been going on for 10 years, but all of a sudden in the last three years it has accelerated. Either the corporate attitude is that X percent of our tooling is going to be made in China or it's going to be in Mexico, or in Europe, and therefore, the people handing out contracts are only quoting in those markets.
One observation I've had, is that I had a 2002 Suburban, and I just got a 2004 Suburban. It's still assembled in Janesville, Wis., which I'm thankful for, but the foreign content in my car in those two years went from, I believe, it was 18 percent in 2002 to 35 percent in 2004. Bang, there it is, in two years.
What kind of a pressure does that place the U.S. toolmaker in with those contracts he can still bid on?
You place the domestic competitor in a head to head competition with a competitor whose cost structure is radically different, and whose government is intervening in the currency market to give him a cost advantage. I'm in the hole 60 percent before I ever open up the books to quote the steel to put in the job, and then I've got a steel market where raw materials prices have increased 100 percent.
Are automakers any different than any other industry?
Not really. It's being driven by the financial markets placing these quarterly profit pressures on all public companies. The management of the public companies is put in the position where they've got to return this quarterly profit. They feel they've got to squeeze cost out at any direction they can. They do that by offshoring, They do that by trying to push the prices down domestically and to that extent they use either auctioning or foreign pricing. They feel they've got to do that, and don't really care what it costs the domestic industry at the end of the day.
What is that tradeoff for lower prices in the short term?
It's a short sightedness that is going to come and bite (automakers). They're going to be looking around for domestic sources some day and they're not going to be able to find them. The industry is disappearing from underneath them, and one of these days, they're gong to turn around looking for domestic sources and not be able to find them. I think that's a very dangerous competitive position to be in for them.