This is article is part of a series of monthly articles produced by Harbour Results for PMA’s MetalForming Business Edge e-newsletter. Click here to view the full collection of articles.

An Outlook of Opportunity, but No Less Chaotic

Regardless of what the economic and industry experts predicted or forecasted, after a very difficult 2020 the manufacturing industry rebounded quickly, and today, chaos seems to be the best word to describe what many businesses are experiencing. Numerous headwinds, including supply chain shortages; increased cost of business – corporate tax rate, minimum wage and raw material prices; uncertainty with tariffs; and talent shortages have created challenges.

The truth is…chaos will likely be the norm in the manufacturing industry. In the near- and mid-term the industry will experience highs and lows that impact the entire supply chain. And, the North American automotive industry is not immune to these ebbs and flows.

The Good News

In the U.S., automakers are seeing unprecedented profits. The average transaction cost of a vehicle has soared by $6,000 since 2016, while incentives are almost at record lows. New vehicle inventories are at an all-time low and the demand for used cars is up 34% over the past year.

So what does this all mean? The low inventory levels have not hurt the automakers bottom line because the higher profit per vehicle has made up the lost volume, and they have the money needed to invest into new technologies and launching new battery electric vehicles (BEVs) in the near future.

The Bad News

North American automotive plants continue to be hampered by the semiconductor shortage. The production disruption has trickled through the vehicle line up and is now impacting high-profit models like pickup trucks. According to the AutoForecast Solution (AFS) weekly semiconductor report, plants across the United States, Canada, and Mexico are losing about 90,000 vehicles from their production plans each week. As of the end of September, about 2.9 million vehicles had been removed from the 2021 plans with about 2.2 million of that total lost for this year. Those totals are expected to increase as the issue continues to linger and will push losses well into 2022. In North America production forecast for 2021 is about 14 million units, an increase from 2020, but not at pre-COVID levels.

More Mix, More Models

Despite the headwinds the automotive industry in planning many new vehicle launches – 64 vehicles in 2022 and 50 in 2023. Additionally, the industry continues down the path of introducing more nameplates – both internal combustion engine (ICE) and battery-electric vehicles (BEV). In 2028 the industry will support more than 500 different nameplates compared to 380 in 2019.

Additionally, there are more automakers entering the marketplace. BEV start-ups like Rivian, Lucid, Bollinger, Canoo and others are in various stages of vehicle development. Although it is a safe bet that not all of them will survive. Those that do have an opportunity to disrupt the market like Tesla. It is important to note that new BEV vehicles will be different and require many different parts and components as well as source new materials for light weighting, which is an important consideration for vehicle range.

So How to Deal With It

All manufacturers, not just stampers, cannot keep using the excuse “we don’t have enough people,” because people didn’t line up at your door for applications once the federal stimulus ended.  Stampers are complaining that young people don’t want to be in manufacturing, but very few stampers are making the necessary investments to address the talent gap. The PMA Metalforming Insights Study showed that there are stampers with younger workforces and their best practices, include; investing in marketing to attract new workers, creating onboarding and training programs to engage new hires on day one, and really taking seriously their 5S programs to create a more attractive and safer workplace. The study also indicated that metalformers, as an industry, have been slower to adopt automation than other manufacturers, such as plastics processors. Rethinking the job-task design throughout the shop floor and finding ways to adopt automation ranging from simple part queues to collaborative robots can further enable stampers to do more with the people you have.

The new vehicles and nameplates outlook brings new opportunities for many, but not all. Those who supply the body-in-white, chassis/suspension, and interior systems will see new designs driving new parts and new tools as the ICE-driven vehicles are updated and new BEV platforms generate nameplate variants to achieve scale. The metalformers participating in the ICE-driven powertrains won’t see an end to demand for parts produced, but will also not see many new product opportunities as the automakers have shifted engineering resources to powertrain electrification. Some metalformers may find new components to manufacture within those new vehicle systems, while others may be less applicable. 

To manage the chaos the best-in-class will need to have a clear strategic plan and understand what their company does well. Businesses will need to be able to quickly react to marketplace increases or decreases, so flexibility is the key. The past 18 months have revealed that business leaders need to focus on the items that they can control and drive accountability throughout the organization. Now is the time to be taking steps to prepare for that demand shift.

About the author: 

Jason C. Brewer, a Director at Harbour Results, helps clients develop business strategy and assists them with improving their operations and sales processes to achieve their strategic objectives.  In addition to over a decade of experience consulting manufacturers, Jason has held engineering positions in manufacturers, management and executive positions in business development and strategy.  He is a licensed Professional Engineer and certified Strategic Management Professional by the Association of Strategic Planning.