Owner, Johannes Messer-Consulting GmbH
Article Series - Introduction 4 Challenges in Aluminum High Pressure Die Casting: Introduction
This article series are dedicated to the changes and developments in the aluminum high pressure die casting industry: "Internationalization", "Product Portfolio", "Technologies" and "Employees".
For several years, the aluminum foundry industry has undergone a major transformation worldwide. Various events such as the economic crisis in 2009 have left their mark. However, one of the main drivers of change is to a large extent the automotive industry. With the emergence of new technologies such as electromobility, new demands are constantly being placed on foundries. As a result, winners and losers are emerging: some are breaking new ground and are therefore operating at full capacity. Others are unable to assess the situation, are uncertain and ultimately have to struggle with insolvencies. So the industry has come into the focus of financial and strategic investors. With these acquisitions, investors are quickly gaining access to the market.
The main reasons are:
- Strong growth in the industry in the past and the future
- Importance of the foundry industry for the automotive sector (perceived supplier at OEMs, know-how industry)
- Straightforward purchase investments (mainly medium-sized companies)
- Below-average profit margins lead to low purchase price with corresponding development potential. For example, the energy costs are currently in Germany twice as high as in the USA. The personnel costs/ gross profit is in die casting foundries higher than at other production processes.
As a result, major players like Martinrea Honsel, JL French Automotive Castings, Teksid S.p.A. or KSM Castings have changed owners. Carlos Vasto was recently appointed as the new CEO of GF Casting Solutions. Learn more about the change here.
Tier 1 companies such as ZF Friedrichshafen, Magna International, Martinrea Honsel and others have thus found their way into the aluminum foundry market. New, partly large market participants (so far mainly medium-sized companies) have emerged. This has led to a major change in the entire aluminum foundry market.
Currently, far-reaching changes are to be expected again. The automotive industry, as the largest customer of the aluminum foundry industry, is facing a serious change. The demands for a drastic reduction of CO2 emissions are getting stronger. Weight reduction and e-mobility are identified as major levers. As a result, today's article portfolio of the aluminum foundry industry will change "revolutionary".
In order to manufacture lightweight components, the focus is on aluminum as a material, which has to prove itself against other light metals. In addition to high costs, high energy consumption also plays a major role. Another challenge will be the ongoing parallel production of new electric motors and conventional combustion engines, which will initially even lead to an increase in the number of components. The ultimate impact on the foundry industry is not yet fully apparent. First indications of the extent and significance of the expected changes are given by the automotive industry itself.
Only a few years ago, the automotive industry significantly reduced investment and thus capacity in the in-house aluminum foundries. However, due to the high demand for new products such as structural components, delivery bottlenecks may now arise at smaller foundries. In order to prevent this, OEMs are currently investing in their own foundries again. Audi builds e.g. a new die casting foundry for aluminum structural parts.
All in all, the aluminum foundry industry faces significant challenges:
- Product portfolio
The 4-part series of articles presents estimates, expectations and recommendations for the challenges described above in the individual contributions. As only foundries with short-term strategic answers to these major challenges will be successful in the long term, the series of articles also provides practical recommendations for action.
For the year 2019, there are clear signs that point to a decline in the economy. Leading economic institutes have repeatedly revised down the forecasts for the year 2019 at short intervals in recent months. The foundry industry judges the year 2019 even more critical than other industry associations. Possible effects of a slowing economy would be threatening for many foundries. However, if we look further into the future, there are enormous opportunities. All forecasts, even of different development scenarios, show increasing demands on aluminum castings.
Foundries that manage the upcoming challenges well, have a good chance of a successful future.
- The proportion of aluminum in the vehicle will continue to grow in the next few years. Aluminum die casting remains the dominant process.
- The industry continues to be the focus of financial and strategic investors. New competitors will emerge through acquisitions.
- 2019 threatens a turbulent year, with uncertain volumes, changing products and financial challenges. The budget planning for 2019 must be questioned. Early warning systems are to be activated.