Auto Industry May Bottleneck As Suppliers Face a 40 Percent Tooling Shortage

Nov 12, 2013 11:44 AM EST | Jordan Ecarma

The North American auto industry faces an almost 40 percent bottleneck in its ability to build vehicles in the next five years, according to a new study.

Detroit-based consulting firm Harbour Results Inc. found that the North American auto industry will come up almost $6 billion short in "tooling capacity" or building the machines that make auto parts, Bloomberg reported.

The U.S. auto industry has grown recently and is heading toward recovery and its annual record of $17.4 million. But to fill that capacity, auto suppliers will need toolmakers to produce $15.2 billion in tooling each year. The current capacity is only $9.3 billion, according to Laurie Harbour, chief executive officer of Harbour Results.

Harbour called that tooling needs estimate "conservative" and noted that a new vehicle can require as many as 3,000 new tools to be built. North American carmakers are looking to debut more than 40 new models next year and 112 more by 2018, she said.

"The attention has been focused on the suppliers; that's been the most immediate need," said Dave Andrea, a senior vice president with the Original Equipment Suppliers Association trade group. "But this study is really forcing the industry to look out two to three years. Are we going to have the right capacity in place to support the record number of vehicle programs coming into the market? The auto industry is trying to put so much through its current capacity that there's no room for error."

Tooling is facing issues with both fewer tooling shops, fewer skilled workers and more detailed trim and specialty options on new vehicles. Harbour estimated that around 750 tool shops in the U.S. and Canada serve the auto industry; the number is down about a third since the late 1990s due to the recession.

Those shops have to cope with a low supply of skilled labor, since training a new toolmaker takes about five years, Harbour said.

"It's a very difficult industry yet it is very critical to the marketplace," she said. "The complexity is going up and so is the number of tools required," Harbour said. "If you design a vehicle for multiple trim levels to meet multiple customer preferences, that's tooling."

Tool shops also have to face Chinese competitors, who produce tools more cheaply. As the need for tooling increases, foreign businesses may step in. Chinese tool shops are looking to buy U.S. and Canadian shops, while German toolmakers may start operations in America.

"They've been visiting tool shops in the U.S. and Canada and they know there's a capacity shortage," Harbour said. "Somebody's going to fill it. We're not going to not launch vehicles."

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