U.S. Die Casters—Poised to Provide OEMs the Greatest Bang for Their Buck

By on September 29, 2019 in IN THE NEWS

Helping OEMs make stronger manufacturing decisions

With an evolving picture of competitive labor costs and an uncertain political landscape affecting trade policies, the global automotive-manufacturing industry is on the cusp of great change. Historically, lower costs of labor and higher output overseas have encouraged OEMs to relocate manufacturing production operations, helping developers reduce costs tenfold. But the tide is shifting, and the “cheap labor” advantage is diminishing.

While China displaced the U.S. in 2010 as the world’s largest manufacturer, currency adjustments reduced the size of China’s manufacturing sector in 2015 and 2016, which began closing the gap between the two leaders.

Further reducing disparity, the Korn Ferry Salary Forecast expects wages in China to increase by nearly 6 percent in 2019, making labor costs across the map much more competitive. Essentially, lower labor costs will no longer be an overseas business advantage, providing OEMs and Tier 1 suppliers with an opportunity to reconsider manufacturing business partnerships.

Labor costs aren’t the only factor. Changes to trade policies have created tension among leaders in China, Mexico, Europe and Canada—where individual tariff-protection measures are shaking up the market. Additionally, experts at the Council on Foreign Relations are skeptical of the composure exhibited by China’s leaders when addressing the impact of ongoing trade discrepancies with the U.S. on the country’s growth in value added manufacturing by industrial sectors (Figure 1).

As a result, U.S. automakers are feeling the burn. Some are waiting to make major manufacturing decisions until global partnerships, tariffs and trade negotiations are more stable.

Four benefits of a U.S. die cast partner
The U.S. die cast market is in a prime position to help OEMs make stronger manufacturing decisions. As costs level out globally, the focus can be placed on other major advantages. A domestic partnership with U.S. die casters brings four benefits to the table. These are:

1. Greater experience operating with high sustainability standards

Regulators, industry leaders and consumers alike are demanding greater commitment to sustainable practices more today than ever before.

By nature, die casting is a process that produces metal alloys from recycled raw materials, but not all operations push efforts beyond this.

With greater experience navigating strict environmental standards, U.S. die casters have made considerable progress on the sustainability front. The North American Die Casting Association (NADCA) reports more than 95 percent of the aluminum die castings in North America are made of post-consumer recycled materials, helping reduce the aluminum content of municipal solid waste to less than 1 percent.

U.S. die casters have adopted other processes to further push the industry forward. Advances in energy-saving equipment, such as lighting and aluminum-melting systems, help cut power requirements. Closed-loop systems reuse every scrap of material possible—from office paper to machining chips and everything in between—to avoid waste. Some even seek stricter environmental certifications that are dedicated to reducing water, energy and solid waste to help encourage a greater commitment to greener practices industrywide.

On the other hand, operations overseas, especially in the Asia-Pacific region, are facing major environmental concerns in the manufacturing space, causing regulators to step in. China’s Ministry of Ecology and Environment recently closed 40 percent of factories at least temporarily, including steel and casting foundries, for violating air-quality standards. Heavy fines, permanent closings and even jail time are forcing operations in China to meet tougher restrictions in a massive effort to improve air quality.

2. Strong technical networks with highly skilled employees for stronger solutions

Growing regional tech hubs in the U.S. often afford services and expertise that extend the development and capabilities of die casters, providing a ready source for best practices, continuous improvement and production efficiency. With better data integration adopted by die casters, OEM and Tier 1 suppliers enjoy advanced processes, such as predictive maintenance, greater energy efficiency and the ability to make more informed decisions.

Additionally, manufacturing employment has expanded with a workforce that is more skilled and more able to navigate higher demands. Even employees in less obvious tech hubs, such as the Midwest, are seeing the highest number of clean-energy jobs, resulting in less turnover and driving a more technical and value-adding die cast industry.

3. Deep industry expertise in a variety of advanced manufacturing processes to navigate customized needs

Complicated challenges require complex solutions, and a deeper expertise is critical for building tailored solutions to fit individual needs. Some U.S. die casters, such as Arcadia Metalcraft, provide automotive OEMs and Tier 1 suppliers with a wide knowledge base. Capabilities cover elaborate design needs for sizing, lightweighting and strengthening requirements (Figure 2), demanding holding tolerances, customized plans that combine multiple alloys in a single design and greater performance analysis to avoid redundancies.

In addition to applied working knowledge, a number of improved industry systems help U.S. die casters produce higher-quality parts. These include:

• Advanced process monitoring
• High-tech vision systems
• Lubricants with ultra-high dilution ratios
• New treatments for extending die life
• High-speed computer numerical control (CNC) machining
• Faster shot-to-shot cycle times

4. Ready-access, aluminum scrap supplies that are closely connected and domestically produced

The U.S. benefits from the world’s most abundant supply of aluminum scrap that’s paired with a strong culture in recycling aluminum for greener products—especially within the automotive industry. With aluminum materials generated domestically, U.S. die casters are in a position to take on even the largest and most complicated production needs without relying on raw materials that are outsourced.

Beyond price of materials, the proximity of materials to end-user markets creates a faster track for completion.

Despite the challenges, manufacturers are optimistic
With comparable labor costs, a better handle on environmental factors and a strong support network, it’s no wonder the National Association of Manufacturers’ 2019 annual survey indicates greater positivity among U.S. manufacturing leaders. The majority—nearly 80 percent—have an optimistic economic outlook where just a few years ago, only 56 percent were confident.

“Clearly, optimism is still strong among manufacturers, but you can’t overlook the fact that trade uncertainties are causing concern for manufacturers,” said Chad Moutray, chief economist, National Association of Manufacturers. “All things equal, I would expect these number to improve if we get the U.S.-Mexico-Canada agreement across the finish line, strengthen our trading relationships by removing the threat of 232 auto tariffs and get a trade deal with China done.”

With uncertainty across the global political landscape, U.S. die casters are in a position to place competitive bids. Stronger environmental accountability, growing tech networks, a highly skilled workforce and a domestic supply of raw materials help the American die cast industry offer more value and greater benefits.

All in all, U.S. die casting is safer, smarter, more sustainable—and it will only get better. With such a deep skill set for developing stronger, lighter and greener diecast solutions, it’s time OEMs and Tier 1 suppliers take a good hard look at the die casters in their own backyards because we’re here and we’re ready to get to work.


Authored by Graham Furse, vice chairman, Arcadia Metalcraft