New business models make diecasters optimistic
The North American Die Casting Assn.’s 2007 “State of the Industry” report suggests that “sluggish” activity may give way to a rebound in 2008. The study points to economic developments in China and new business models adopted by domestic diecasters as initiators of better results this year.
"The United States is still a huge world market with growth opportunities in highly technical castings and offshore alliances. The outlook is especially promising for diecasters who can adopt new business models," according to NADCA president Daniel L. Twarog.
Among the new business models and practices that diecasters have adopted, the report highlights improvements in marketing communication; supporting OEMs’ efforts to adopt diecast components; developing relationships with offshore manufacturers, to build global business models; including offshore tooling as a cost-saving option; and coordinating supply systems with buyers’ MRP systems.
In 2007, the decline of the U.S. housing market and the slowdown in domestic automaking affected diecasting production. However, NADCA contends that the outlook for its members in the automotive supply chain is largely positive. It finds that demand for aluminum automotive diecastings will grow at a global annual rate of approximately 4% as automakers replace steel and cast iron components with lighter weight castings.
Magnesium also is gaining marketshare in the automotive sector at the expense of iron and steel, though production cost and availability continue to limit greater growth for magnesium diecastings.
NADCA’s report includes tabular and comparative data to illustrate the statistics shaping the industry’s economic performance. For example, the U.S. is the world’s largest exporting nation, which stimulates revenues for diecasters; and, China’s manufacturing cost advantages are beginning to diminish versus the rest of the world, which favors North America’s diecasters.
According to Twarog: "As Chinese labor rates increase, the cost of purchasing diecastings offshore will increase. If the low projections prevail, with factory wages doubling to 25% of the American norm from their current 14%, and engineers receiving salaries one-half to two-thirds of American norms, the Chinese cost advantage would be cut roughly in half. If the higher projections were to prevail, the Chinese cost advantage would largely evaporate over the next five years."