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Tool-and-die makers cut new path to stay alive(Chicago Tribune (KRT) Via Thomson Dialog NewsEdge) LANSING, Mich. _ The idea seems guaranteed to generate FBI subpoenas: Gather a bunch of traditional competitors in a conference room and ask them to hammer out ways to chase new business as a group. But desperate times lead to unusual measures. So on a recent morning, representatives from 17 tool-and-die makers scattered across Michigan filed into a room provided by the Michigan Manufacturing Association here. The idea was to share "lean" operating tactics, arrange visits to each others' plants and devise joint approaches to winning orders from Toyota Motor Corp. and other customers. "Are you ready to collaborate?" asked Kirstin Dziczek, a researcher at the nonprofit Center for Automotive Research in Ann Arbor, Mich., which brought the group together. "Or are you more interested in the status quo?" For the past five years, the status quo has delivered nothing but grief for the embattled tool-and-die industry. Dropping production at ailing manufacturers like General Motors Corp. and pressure from foreign competition capable of delivering cheaper molds and dies has driven 30 percent of U.S. tooling companies out of business, according to Jay Baron, president of the center. It's an ominous trend. As domestic tooling producers continue to go under, an essential cornerstone of the nation's manufacturing prowess is at risk. "We've been humbled," said Dave Martin, the founder of Accu-Mold Inc., a small die shop in Portage, Mich. "We can't just sit here and get beaten up." What Martin and other members of the three-year-old United Tooling Coalition are betting is that salvation lies not in undercutting your rival but in combining brainpower and resources to solve problems for customers, especially if those customers are also willing to share information and work intimately with the group in ways that are highly unconventional. Lawyers have told them that this sort of collaboration is safe from antitrust laws as long as the partners communicate only about hours of work, not dollar costs or prices. The bigger issue is this: How do you break a lifetime of habits learned in the every-man-for-himself arena of American capitalism? "These are my competitors," said Patrick Quinlan, the owner of Precise Engineering in Lowell, Mich. "It's taken a lot of time to build up trust." Tooling companies are largely invisible to consumers, but they form a critical foundation for the manufacturing economy. They produce the dies and molds that manufacturers use to form parts for assembly. These "tools" are typically carved out of solid blocks of metal by high-speed milling machines. The manufacturer then attaches the tools to huge machine presses that stamp out metal parts like body panels or mold plastic ones like dashboards. Precision is crucial; dies that can weigh thousands of pounds are cut to tolerances within thousandths of an inch and put through an elaborate testing process to ensure they make the grade. Anything less and the parts might not fit together correctly, leading to quality or production problems that could prove disastrous for a carmaker or parts supplier. Tool-and-die companies tend to be small, family owned and fiercely independent. They employ highly skilled craftsmen who have long considered their profession an equal blend of manufacturing prowess and what Baron calls "black art." When a machine bends a sheet metal part in certain ways, for example, the metal can spring back inconveniently to a shape that doesn't meet the design. The secret is to over-bend the part to compensate, but judging the degree of over-bending is a delicate business. Doing it right in a timely way is where the skill and black artistry come in. Over the years, U.S. manufacturers paid handsomely for those abilities, and the industry convinced itself that nobody made better tools in the world. That, it turned out, was a dangerous bit of hubris. Not only were the Japanese devising cheaper, high-quality ways to do things, but toolmakers in places like China and eastern Europe also have been making low-cost dies and molds. That has helped make the Japanese more competitive, which, in turn, has driven work across borders as domestic companies like GM and Ford Motor Co. try to catch up by hammering their suppliers each year for ever-lower prices. "Even with the shipping it's usually still cheaper (to source tools overseas)," said Jim Clancy, an industry consultant and former DaimlerChrysler executive. "Like it or not, it boils down to cost." With the U.S. tooling industry threatening to implode in 2001 because of the cost cutting, five of Michigan's biggest tooling companies came to the Center for Automotive Research and asked for help exploring ways to work together to be more competitive. Their efforts, supplemented by a grant from the State of Michigan, led to a working paper on building coalitions. But the original group grew apart amid a lack of progress in finding work. Three years ago, the center helped form a new group of smaller companies and called it the United Tooling Coalition. They got training help from the state and showed enough progress that Lansing eventually came through with tax breaks for tool shops in Michigan that participated in coalitions. The biggest benefit so far has been learning and sharing knowledge about applying Japanese-style "lean" manufacturing techniques to a job-shop environment. This has been more useful for some shops than others but "getting lean" can free up capacity and cut operating costs significantly. Coalition members regularly visit each other's shops and share tips about how to be more efficient or competitive when it comes to things like machine placement and scheduling. They also help each other cope with the industry's typical boom and bust cycle. Shops that are overwhelmed with work regularly pass along what they can't handle to other coalition members with free capacity. But Baron and his coalition members have much more ambitious plans than that. They want to develop a system akin to the one used by Toyota and Honda, who form long-term, mutually sustaining ties with their parts suppliers and tooling companies that drive down costs for everybody. It's a supply chain lubricated by deep levels of trust and communication, not the cutthroat bidding contests and multipage contracts that American managers are used to. The selling point is clear: Baron estimates the Japanese automakers have a 20 percent advantage over their U.S. rivals when it comes to tooling costs. Sitting in an office wallpapered with charts and graphs monitoring the heartbeat of his Grand Rapids tooling plant, 32-year-old Dave Muir explained why the U.S. obsession with cost cutting is, in the end, a loser's game. Muir's Paragon Die and Engineering Co., which his grandfather, Fred Keller, bought in 1962, is the largest company in the coalition with about 170 employees and $30 million in sales. Owing to Keller's skills as an innovator, it is one of only a handful of U.S. toolmakers that can build the largest plastic molds available _ tools that can produce big truck grilles or one-piece plastic bumpers, for instance. Paragon's operating expertise has allowed Muir to double the company's capacity in the last year with the purchase of several massive robotic cutting machines that cut three times as fast as the ones they replaced. The machines have made Paragon more competitive, but they haven't shielded it from the industry's frenzy of cost cutting. Muir, who has U.S. and Japanese customers, said working with them is sometimes like night and day. GM and its biggest suppliers, for instance, tend to put out a part for bid and take the lowest bidder every time. The purchasing department makes that decision, minimizing communication between the tooling company and the engineers who design the product or its manufacturing system. This can lead to situations like something out of "Alice in Wonderland." Muir said a buyer from a large auto supplier recently told him that his bosses had laid down a mandate to buy a certain amount of tooling from China. That meant Paragon would have to source part of its product from Asia if it wanted to win the business. Muir countered that Paragon could actually do it 5 percent cheaper in Michigan once you factored in the shipping. But the buying manager said there was nothing he could do. The corporate mandate tied his hands. "And that's not just one company," Muir said. "We're seeing that more and more." Even when Paragon does win business from a company like that, the experience can turn into a nightmare. Despite the fact that Paragon is responsible for delivering a virtually perfect piece, tested and ready to go, getting paid is another matter. Before GM will pay its suppliers (and before they, in turn, pay toolmakers like Paragon), the automaker insists that all parts in an often complex assembly work in production. Paragon's tool may produce perfectly fine parts, but if any of the others are flawed, nobody gets paid until it is fixed. "We had a tool finished in 2004 that we still haven't been paid for," Muir said. "At Christmas (of last year) one-third of our sales was caught up in past-due receivables." Honda's philosophy couldn't be more different. Rather than focus obsessively on the cost of each single piece of tooling, it evaluates the entire system. Product design, manufacturing and suppliers work in concert to develop a process that will be the most efficient and easy to manage, saving costs over time. This involves forging close, long-term relationships with its suppliers and creating a team-oriented environment toward solving problems. When Paragon gets an order, Honda works with the company closely to refine the design and share knowledge about how the tool will work best in the total manufacturing system. Better yet, Honda gives Paragon three progress payments so it can fund its overhead without expensive borrowing. The result is a classic win-win situation: Honda cuts its costs and Paragon makes more money. Along these lines, Baron's goal for the coalition is to win a contract to provide tooling for an entire assembly, say a car's engine compartment or instrument panel. That way, work could be divided among coalition members with specific expertise and they could work together, along with the product designers and manufacturing engineers at the customer, to devise a process that is most efficient. One element of this is a concept called "functional build," which acknowledges that parts don't have to be perfect as long as the final assembly is acceptable. Instead of toolmakers laboring in isolation to build dies or molds that produce "perfect" parts, they work together to determine what's good enough. If the optimal solution means deviating from the original design for one part rather than spending hours and hours trying to perfect another part married to it, then making that trade-off saves time and money. But it requires a level of trust, familiarity and teamwork that can make many U.S. managers deeply uncomfortable. So far, the coalition has run into two major hurdles. First, because companies like Toyota and Honda are accustomed to those close, long-term relationships, they are reluctant to make a big bet on an unfamiliar group of tooling suppliers. Many of the big U.S. companies, meanwhile, simply aren't used to the idea and those that are adopting functional build and closer relationships with their suppliers are still learning. James Morgan, Ford's engineering director in charge of stamping, for instance, said his company has been moving steadily toward a more Japanese-style tooling system over the last couple of years. But "we're proceeding pretty cautiously. It's a journey. As far as we've come, we have even farther to go." (EDITORS: STORY CAN END HERE) Baron has been lobbying Toyota for three years to take a chance on his coalition. Last year he had six Toyota engineers out to visit a set of the coalition companies and asked them point blank: "Are we competitive or not?" The feedback was invaluable and helped the coalition make important changes to their shops. This year, Toyota finally responded. It gave the coalition drawings for two reasonably simple high-volume sheet metal parts and challenged members to come up with a cheaper way to build them. The response was typically American, Baron said. Coalition members first thought they should each retreat to their corners and come up with competitive designs. But Baron put a stop to that; he said they had to brainstorm a solution together. "They're testing the waters of the coalition," Baron said. "If we screw this up you can kiss Toyota goodbye." At the meeting in Lansing, coalition members also laid out what is quickly developing into an opportunity with a big U.S. supplier of car doors. Several months ago, an executive from this supplier, who knew Accu-Mold's Martin from other business, invited coalition members to his plant for a tour. The visit turned into an emotional problem-solving session when coalition members began spotting ways the supplier could save money and managers at the supplier began pouring out their hearts about how much pressure they were under to cut costs. It turns out engineers had rushed to design the door and made a lowball bid to win the business from one of the Big 3. Now the company is frantic to figure out a way to drive costs out of the manufacturing process to make it profitable. "We came up with a list of things _ what is wasteful, what could be done better," Martin said. "They were astounded." More important, working with a customer this way shifts the conversation from "What's the lowest price you can give us?" to "What's the smartest way to design tooling so we can save costs over time?" "It's a cost saving on the whole process, not a tool-for-tool saving," Martin said. "It gets us out of the `What's the China price?' mode." Neither initiative has produced real orders. And it's unclear if they ever will. But Baron notes the coalition is a lot closer to proving its worth today than it was a year ago. And in desperate times that means a lot. "It's a slow boat," said Muir. "But hopefully away from China." ___ (c) 2006, Chicago Tribune. 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