Overseas competition worries U.S. tool, die, mold firms
Pick up almost any toy today and the words "made in China" or some other Asian market send a clear message — more and more products that used to be produced in America are being made cheaper overseas. Now, the tool and die industry, which supplies equipment to manufacturers, is experiencing a similar pinch.
The U.S market has 7,000 tool, die and mold firms, concentrated primarily in the Midwest. But China, a relatively new entrant into the field, has grabbed a serious foothold in the business, a fact that is starting to worry Dayton-area companies. Two hundred U.S. tool, die and mold companies have gone out of business in the past three years.
"The foreign labor issue has had a major negative impact on the industry for the past three years," said Angelia Erbaugh, managing director of the Dayton Tooling & Machining Association.
Nationally, the same statistics bear out. A 2002 report by the U.S. International Trade Commission found that from 1997 to 2001, U.S. tool, die and mold imports from China and Korea rose by 191 percent and 248 percent, respectively. China is now the third-largest die and mold manufacturing company. Nos. 1 and 2 are Japan and Germany, which are facing the same problems as the United States in competing with China, where labor and production costs are lower.
"There is no doubt that the larger international companies have a global reach with regard to their purchasing power," said R.B. Benedict, government relations chair for the DTMA and president of Production Tube Cutting Inc. in Dayton. "However, there are many reasons a purchase may go offshore or out of NAFTA." He cited the strong U.S. dollar, migration of technology and increases in skilled, low-paid workers in foreign countries as some of the factors for foreign growth in the industry.
Matthew Coffey, president of the National Tooling and Machining Association, headquartered in Fort Washington, Md., said China has a number of advantages over the United States: a large population, which equals a large labor force; lower labor costs; less costly restrictions on safety, health and environmental issues; and a 24/7, 365-day-a-year work mentality.
"They're like the old company store in the days of the coal mines," he said. "They live, eat and sleep there. It's impossible to try to compete with that, with eight hours at our wage rate."
The soft U.S. economy hasn't helped anything either.
"(Dayton is) the fourth largest tooling center in the country," Erbaugh said. "Therefore, because of its size, the downturn hits harder economically than maybe it would with smaller centers."
She said Dayton's diversity in both its tooling and machining sectors and its customer base has helped offset some of that economic impact.
The ITC found items for small appliances, electronics and telecommunications products often are bought from overseas markets. Prices for Chinese and Taiwanese imports are 30 percent to 75 percent lower than prices quoted by U.S. manufacturers. However, the report also found Chinese quality, creativity and sophistication were poor, which means U.S. and German manufacturers still have the advantage in high precision and complex tools, dies and molds.
That's not to say Dayton manufacturers aren't concerned about foreign competition. Benedict said Production Tube Cutting has seen business go to competitors in South Korea and South Africa in recent months.
"The price the competitors had was 40 percent below our price. That would make their price lower than our raw material cost," he said. "To me, this type of situation should raise an eyebrow of the folks that thought about putting tariffs on steel projects, just for starters."
Benedict has written to government officials about his concerns and is pleased to see some of the sanctions are going to be lifted.
"I am not in favor of protecting the market, just please make sure the playing field is level for us to compete," he said.
On a local basis, companies are pooling their mental resources to develop strategies for offsetting foreign intrusion. Erbaugh said the DTMA is "focusing on programs to make our companies more competitive in other areas such as management strength, eliminating waste through lean manufacturing techniques, adoption of e-commerce technology, raising the quality bar through ISO and other quality standards."
The solution to keeping tool, die and mold business in the United States is multi-pronged, Coffey said.
"Competing based on price is a losing proposition," he said. "I think there is a need for development of a global consortium. Manufacturers also need to find ways to get costs and prices down. Third, companies need to become more innovative. They should turn their businesses into companies that provide solutions, design and manufacturing. You have to offer more full-service integrated support to the customer to build a more valuable relationship."
Benedict said the U.S. market is filled with skilled people who have expertise that is not found elsewhere. He said the high degree of knowledge found in the Dayton area is an advantage foreign competitors can't match.
Erbaugh said she is hearing optimism from area manufacturers as the economy begins to rebound and demand for experienced, technologically savvy manufacturing workers increases.
"Probably, the industry will never be the same as it used to be," she said. "However, we will always have tooling and machining, which is the foundation for all manufacturing. Everything that is made begins with a tool." |
