Tool-and-die companies demanding quick 'trickle down' of bailout funds
Representatives of several tool-die-mold companies in Michigan want to make sure that when the $17.4 billion federal emergency loan goes to the automakers, there is not a repeat of the financial industry bailout, where the funds did not trickle down to small companies and consumers.
"The reality is that the automotive tooling sector is in peril, driven by the weakness of the Detroit 3 as well as the current banking situation," said Todd M. Finley, vice president of Commercial Tool & Die in Comstock Park.
The tool-die-mold group is being aided by D. Craig Wiggins of Tooling & Equipment Capital Solutions Inc., which arranges financing for tool-die-mold companies that supply the auto industry.
According to Wiggins, the automakers themselves are paid, on average, within 15 days of vehicle delivery to dealerships, and their Tier One suppliers that provide them with parts are generally paid in 45 days. But the tooling companies, which generally work for the Tier One and Tier Two suppliers, "are waiting five to 18 months or more, post delivery, for payment."
The tooling group, which also includes Rapid Die & Engineering in Grand Rapids, has asked the Michigan Economic Development Corp. to put pressure on federal officials "to ensure that TARP and government loans trickle down and make a meaningful difference," said Finley.
The financial crisis faced by U.S. automakers has made banks leery of lending to tool-and-die companies that supply them. At the same time, the automakers have been gradually extending the amount of time they take before they pay their American and Canadian tool, die and mold suppliers.
"If one of our OEMs goes bankrupt, any of those suppliers of those tools probably aren't going to get paid at all. So everybody's gong to go down with them,' said Jay Barron, president/CEO of the Center for Automotive Research. Last week he met with the group, which told him they want to press for more timely payment if the fed is going to provide the carmakers with loans.
"My comment (to the group) was, I think they should be more aggressive," said Barron. He said they should demand that machine tools, dies and molds that would be bought by the carmakers using federal loans should only come from U.S. and Canadian companies — not companies overseas.
"U.S. taxpayer dollars should be used in the U.S.," agreed Finley. "Standard operating procedure for the Detroit 3 has been to source many injection molds and dies offshore."
Meanwhile, the carmakers' delay of payments to U.S. tool companies has "gotten continually worse over the last six or seven years," he added.
Ironically, said Barron, the offshore tool makers are paid much quicker by the U.S. car makers.
"When you buy tools from China, they will not ship those tools to the United States until they get cash in hand, nine times out of ten. That gives a financial advantage to the Chinese (tool makers) right away. That puts our guys at a financial disadvantage," said Barron.
He estimates that the tool-and-die industry in Michigan has about half as many companies now as it did five years ago.
"There's a tool company a week going bankrupt in Michigan. The primary reason they go bankrupt is obviously, they have no cash."
The tooling group led by Wiggins has contacted Michigan's senators in Washington and Gov. Jennifer Granholm about their concerns. At the same time, the American Mold Builders Association is "going to attack this from a national level," said Finley.