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2017 Q3 Pulse Tooling UpdateSeptember 2017

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The OESA Automotive Tooling Barometer survey series was created by the OESA Tooling Council with the partnership of Harbour Results, Inc. to provide an indicator of the current state of the automotive tooling industry, and the perception of near-term prospects for the industry. The OESA Automotive Tooling Barometer captures the sentiment of the major companies in this market. Each survey in the series will have a different focus; this pulse will focus on industry diversity and capital expenditures.

OESA/HRI Auto Tooling Barometer - Sept. 2017

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▪ Across industries, geographies and shops types, skilled labor is the lead issue facing manufacturing.

– Shops remain positive about the state of the industry.

▪ Mold shops are less utilized than die shops, but are making slightly higher profits and investing more back in the business.

▪ Tooling customers are consistently less utilized than their tool shop suppliers.

– Customers are facing many of the same key issues, though, as their supply base

Executive Summary - I

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▪ On the surface, most profitable shops look very similar to less profitable counterparts

– The issues they are focused on are very different, though.

▪ Canadian shops continue to benefit from higher utilizations and profits.

– Canadian shops are taking advantage of this and investing over 20% more back into their businesses than US competitors

Executive Summary - II

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Location

30%

70%

18%

24%

30%

17%

11%

0%

5%

10%

15%

20%

25%

30%

35%

Revenue Range

77%

23%

Shop Type

Mold Die

Respondent Demographics

Question: Please identify your Revenue for 2017 Question: Please identify your company’s geographic location. Respondents: 132

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91% 89%87%

81%85%

88% 89%

83%87%

84%88%

77%79% 79%

76%

67%

76%77% 76%

81%83%

81%

60%

65%

70%

75%

80%

85%

90%

95%

100%

2015Q1

2015Q2

2015Q3

2015Q4

2016Q1

2016Q2

2016Q3

2016Q4

2017Q1

2017Q2

2017Q3

Capacity Utilization By Shop Type

Die Mold

Die Shops See Spike in Utilization In Third Quarter

81%78%

87%84%

85%

60%

65%

70%

75%

80%

85%

90%

95%

100%

2017 Q3 Capacity Utilization

Question: Current capacity utilization for design/machining/assembly. Respondents: 132

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Work On Hold Falls Under 10% Across Tooling Cyclical Nature of Work On Hold Continues, But Average Levels Continue to Drop

15.7%

11.9%

17.9%

12.2%

13.9%

9.3%

11.8%

8.6%

6%

8%

10%

12%

14%

16%

18%

20%

Work On-Hold Trend

Percent of Work On Hold Linear (Percent of Work On Hold)

Question: What percent of jobs that you have been awarded are currently on hold due to reasons outside of your control? Respondents: 132

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▪ In our recent study, 53% of tooling shops are taking advantage of prog payments, typically under 1/3 split or 30/30/30/10 terms.

▪ In general, smaller shops are obtaining prog payments more frequently

▪ Are you leveraging progressive payments?

Payment Terms and Timing Continue 2017 Decline

Question: Over the past three months, approximately what percent of your new booked business includes progressive payment terms and accounts receivables were being paid within contract terms. Respondents: 132

62% 62%68%

67%

61% 61%

71%69%

55%

60%

65%

70%

75%

2016 Q3 2016 Q4 2017 Q1 2017 Q2

Progressive Payment Terms and AR Paid On Time

Percent Progressive Terms Percent of AR Paid On-Time

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▪ 54% of shops indicated capital expenditure plans greater than 4% of their annual revenue.

▪ Overall average for capital purchasing hovers around 5%, or around $1M in annual investment for a $20M company.

21%

12%

22%

26%

19%

Capital Equipment Purchasing

Less than 2%

Between2% and 4%

Greater than 8%

Between 6% and 8%

Between 4% and 6%

Capital Equipment Purchases Up Among Tool Shops

Question: As a percent of annual revenue, how much is your business planning to contribute towards new capital expenditures in 2017? Respondents: 132

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56%

72% 72%68% 68%

73%

79%

79%

85%80%

78%

40%

50%

60%

70%

80%

90%

2015 Q1 2015 Q3 2016 Q1 2016 Q3 2017 Q1 2017 Q3

2017 - Tooling Sentiment Index

Sentiment Positive Threshold

The third quarter saw a repeated dip in overall

sentiment, but remains in the overwhelmingly positive

range.

Sentiment% of

Respondents

Very Pessimistic 1%

Pessimistic 4%

Neutral 19%

Optimistic 56%

Very Optimistic 20%

Sentiment Falls Further From First Quarter

Question: Over the next three months, the general outlook for your business. Respondents: 132

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▪ Overall, skilled labor stands out as the foremost issue, followed by profitability and on-time delivery.

▪ Key issues vary considerably depending on factors such as shops’ profitability, type and geography.

Biggest Hurdles in Tooling Right Now

Skilled Labor Shortage

38%

On-Time Delivery

18%

Maching Supply and

Demand15%

Profitability14%

Economic Uncertainty

9%

Political Uncertainty

6%

Tooling Business Challenges Over Next 12 Months

Question: Please outline your top challenges over the next 12 months. Respondents: 132

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DIE VS MOLD

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Respondent Demographics

$18.6M $18.4M

$M

$4M

$8M

$12M

$16M

$20M

Die Builder Mold Builder

Average Shop Revenue

Auto, 90%

Non-Auto, 10%

Die Builders

Auto, 73%

Non-Auto, 27%

Mold Builders

Question: Please identify your Revenue for 2017Question: Please identify your company’s geographic location. Respondents: 101 Mold Shops, 31 Die Shops

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Mold Shops Averaging About 10% Less UtilizedMold Averages Pulled Down by Significantly Under-Utilized Shops

95%

90%

95%

75%

70%

75%

85%79% 83%

50%

60%

70%

80%

90%

100%

Design Machining Assembly

Mold Capacity Utilization

Quarter of mold shops less than 75% utilized

100% 100% 100%

85%

80%

75%

92% 93%

85%

50%

60%

70%

80%

90%

100%

Design Machining Assembly

Die Capacity Utilization

Question: Current capacity utilization for design/machining/assembly. Respondents: 101 Mold Shops, 31 Die Shops

15

25% 31%

56%53%

8% 6%

11% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mold Builder Die Builder

Profit & Loss Breakdown

EBIT

SG&A

Other COGS

Materials

Mold Shops Slightly More Profitable

Question: Please Identify your YTD Gross Profit/Operating Profit/Direct Materials percentage. Respondents: 101 Mold Shops, 31 Die Shops

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CapEx Spend Highest Amongst Mold Shops

Mold Shops investing, on average,

9% more than Die Shops

$0.3M

$0.8M

$1.5M

$2.9M

$0.2M

$0.7M

$1.3M

$2.6M

<$10M $10-$20M $20-$40M >$40M

Revenue Range

Avg CapEx Spend for Tool Shops

Mold Die

Question: As a percent of annual revenue, how much is your business planning to contribute towards new capital expenditures in 2017? Respondents: 101 Mold Shops, 31 Die Shops

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Die Shops More Concerned With Talent ShortageWhile Mold Shops Have Greater Diversity of Concerns

29%22%

16% 17%10%

6%

65%

8%12%

4% 4%8%

0%

10%

20%

30%

40%

50%

60%

70%

Skilled laborshortage

On-time delivery Profitability Matching supplyand demand

Economicuncertainty

Politicaluncertainty

Perc

ent

Sele

ctio

n a

s Le

ad Is

sue

Most Significant Industry Issues

Mold Builder Die Builder

Question: Please outline your top challenges over the next 12 months. Respondents: 101 Mold Shops, 31 Die Shops

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TOOLING CUSTOMER BASE

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Tool Builders Consistently More Utilized Than Customers

90%

80%

70%

53%

82%

67%

40%

50%

60%

70%

80%

90%

100%

Mold Builder Plastics Molder

Overall Capacity Utilization

Question: Overall Capacity Utilization. Respondents: 85 Mold Builders, 45 Plastics Molders, 27 Die Builders, 13 Die Stampers

95%

75%80%

55%

88%

65%

40%

50%

60%

70%

80%

90%

100%

Die Builder Die Stamper

Overall Capacity Utilization

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Plastics Molders Also Struggling With Skilled Labor

28%24%

18% 15%10%

5%

58%

9%

18%11%

2% 2%0%

10%

20%

30%

40%

50%

60%

70%

Skilled laborshortage

On-time delivery Profitability Matching supplyand demand

Economicuncertainty

Politicaluncertainty

Perc

ent

Sele

cted

As

Lead

Issu

e

Number One Industry Issues

Mold Builder Plastics Molder

Question: Please outline your top challenges over the next 12 months. Respondents: 85 Mold Builders, 45 Plastics Molders

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61%

11% 11%7% 7%

4%

45%

18%

9%

0%

18%

9%

0%

10%

20%

30%

40%

50%

60%

70%

Skilled laborshortage

Politicaluncertainty

Profitability On-time delivery Economicuncertainty

Matching supplyand demand

Perc

ent

Sele

cted

As

Lead

Issu

e

Number One Industry Issues

Die Builder Die Stamper

Question: Please outline your top challenges over the next 12 months. Respondents: 27 Die Builders, 13 Die Stamper

Die Shops More Concerned With Talent ShortageStampers Facing Much More Economic and Political Uncertainty

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TOP PERFORMERS

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Auto, 83%

Non-Auto, 17%

Low Performers

Auto, 86%

Non-Auto, 14%

Top Performers

Top Performers: • Operating Profit > 15%• 29 shops• Sentiment: Positive• Overtime: ~25%

$20.2M

$17.9M

$M

$5M

$10M

$15M

$20M

$25M

Top Performer Low Performer

Average Shop Revenue Low Performers:• Operating Profit < 5%• 19 shops• Sentiment: Positive• Overtime: ~25%

Question: Please identify your Revenue for 2017Question: To what extent does your facility support the following markets as a percent of annual revenue? Respondents: 25 Top Performers, 19 Low Performers

At A Glance, Top Performers Not That Different

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28% 25%

48%62%

5%

11%19%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Top Performer Low Performer

Profit & Loss Breakdown

EBIT

SG&A

Other COGS

Materials

Question: Please Identify your YTD Gross Profit/Operating Profit/Direct Materials percentage. Respondents: 25 Top Performers, 19 Low Performers

90%

93%

81%

78%

80%

82%

50% 70% 90%

Design

Machining

Assembly

Capacity Utilization by Function

Low Performer Top Performer

How Are Most Profitable Shops Different?

25

32%

20%16% 16%

12%

4%

26%

11%

5%

21%

37%

0%0%

5%

10%

15%

20%

25%

30%

35%

40%

Skilled laborshortage

Matching supplyand demand

Economicuncertainty

On-time delivery Profitability Politicaluncertainty

Perc

ent

Sele

ctio

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s Le

ad Is

sue

Most Significant Industry Issue

Top Performer Low Performer

Question: Please outline your top challenges over the next 12 months. Respondents: 25 Top Performers, 19 Low Performers

Most Profitable Shops Thinking Very Differently

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REGIONAL DIFFERENCES

27

$27.2M

$14.3M

$M

$5M

$10M

$15M

$20M

$25M

$30M

Canada United States ofAmerica

Average Shop Revenue

Auto89%

Non-Auto11%

Canada

Auto61%

Non-Auto39%

United States

Respondent Demographics

Question: Please identify your Revenue for 2017Question: Please identify your company’s geographic locationQuestion: To what extent does your facility support the following markets as a percent of annual revenue? Respondents: 37 Canada, 83 United States

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90%94%

70%

80%81%

87%

60%

65%

70%

75%

80%

85%

90%

95%

100%

United States of America Canada

Overall Capacity Utilization

Quartile Average

Question: Current capacity utilization for design/machining/assembly. Respondents: 37 Canada, 83 United States

80%

80%

77%

89%

85%

84%

50% 70% 90%

Design

Machining

Assembly

Capacity Utilization by Function

Canada United States of America

Canadian Shops Staying Busier OverallDriven by Subset of Under-Utilized US Shops

29

42%

19%

12%

5% 4%

16%

35%

23%

16%13%

6% 6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Skilled laborshortage

On-time delivery Matching supplyand demand

Economicuncertainty

Politicaluncertainty

Profitability

Perc

ent

Ch

ose

n a

s Le

ad Is

sue

Number One Industry Issues

United States of America Canada

US companies more concerned about current profits, while Canadian shops focused more on future threats to profits.

Question: Please outline your top challenges over the next 12 months. Respondents: 37 Canada, 83 United States

All Countries Facing Skilled Labor ProblemsUS Shops Significantly More Concerned With Profitability

30

25% 29%

56% 52%

9% 7%

10% 13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

United States ofAmerica

Canada

Profit & Loss Breakdown

EBIT

SG&A

Other COGS

Materials

Top Performers

Overall Survey

70%

30%

55%

45%

EBIT - Overall EBIT – Top Performers

USA 10% 18%

CAN 13% 19%

Question: Please Identify your YTD Gross Profit/Operating Profit/Direct Materials percentage. Respondents: 37 Canada, 83 United States Shops

Canadians Experiencing Margin Advantage

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Canadian Shops Using Profits to Reinvest

$0.5M

$1.5M

$2.5M$3.0M

$0.7M

$1.7M

$3.5M

$7.7M

<$10M $10-$20M $20-$40M >$40M

Revenue Range

Avg CapEx Spend for Tool Shops

US Tool Shops Canadian Tool Shops Canadian shops are investing, on average,

22% more than US counterparts.

Large Canadian molders are investing massively into their businesses.

Question: As a percent of annual revenue, how much is your business planning to contribute towards new capital expenditures in 2017? Respondents: 37 Canada, 83 United States

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▪ The lead concern facing the tooling industry is finding skilled labor. Even with this, shops still remain positive.

▪ Mold shops are seeing higher profits and investing most back in their business even though they are less utilized than die shops.

▪ Tooling customers are consistently less utilized than their tool shop suppliers; however, they still face similar key issues.

▪ The demographics of profitable shops and lower performers are quite similar but their issues surface, most profitable shops look very similar to less profitable counterparts

▪ Canadian shops see a benefit from their higher utilization rates and profits. They are taking advantage of this by investing over 20% more back in to their business compared to their US competitors.

Summary