MMT Blog

Mexico is a rapidly growing location for manufacturing in North America. According to consulting agency Roland Berger, Mexico currently is the seventh largest location in the world for automotive production and wants to join the top five by 2020. For that to happen, original equipment manufacturer (OEM) suppliers and partners also would have to increase their capacities in the region of Mexico significantly, and many are doing so. New production startups require new tools and molds that must be delivered one year before production startup or general practice begins. In the case of Mexico, these tools and molds mainly have to be delivered from abroad.

“The industrialization phase begins when the tools for the new startups are delivered to the plants. This time is characterized by numerous, quickly occurring changes since there is no time to return the tools to a German moldmaker in Germany or elsewhere in the world. As a tool and moldmaker in the automobile sector, you have to be able to ensure local service on-site," Christian Siebenwurst, managing director of Siebenwurst Modell- und Formenbau in Dietfurt, Germany, says. “Of course, mold shops can be found locally in Mexico, but with the extremely high demand of the rapidly growing automotive industry today, these companies’ capacities are fully booked, and usually there is not enough time to wait, for example, until a local group has a five-axis machine available.”

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By: Michael J. Devereux II, CPA, CMP 24. October 2018

The Impact of Tax Reform on Bonus Depreciation

The Tax Cuts and Jobs Act (the Act) allows mold shops to claim 100-percent bonus depreciation for eligible property that they place in service after September 27, 2017 through December 31, 2022. The claim amount phases out 20 percent for each of the following five years. This past August, the U.S. Treasury issued a notice of proposed rulemaking related to bonus depreciation (or first-year depreciation deductions).

Mold shops are allowed a depreciation deduction for the exhaustion, wear and tear and obsolescence of property that they have used in the business. For tangible property, the allowable depreciation deduction is determined under the Modified Accelerated Cost Recovery System (MACRS). 

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Tim Krieger, MMT EAB member and owner of Krieger Craftsmen Inc. in Grand Rapids, Michigan, says that as an American moldmaker, he has learned a lot from his quest to open a new operation in Guadalajara, Mexico, and he shares some of those teachings here.

My father once told me that “a man can only make decisions based on the information he has at the time.” For those who are considering expanding into Mexico or are just curious, I would like to share some takeaways from my experiences.

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Knarr Group (Knarr) is a full-range provider for the tool and moldmaking industry and offers all standard parts ranging from ejector technology, guides and tempering elements through to quality products such as limit switches, centering units, slide elements, short-stroke cylinders and collapsible cores. In addition to the company’s standard product range, complete machining is also playing an increasingly important role. “The demand for custom mold bases is rising constantly,” Marco Mergner says. As head of the milling department, the engineering technician and master precision mechanic is responsible for the CAD/CAM programming and milling technology of the department, which has grown considerably within a short period of time.

According to Mergner, the expertise, motivation of the employees, friendly and respectful cooperation within the team and the modern machine park are all part of the company’s recipe for success. The company’s managers have full confidence in their workforce. This has prompted them to invest in state-of-the-art machining centers for the mold-base milling area. Since going into operation, the machines have been used to capacity in a two-shift system.

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Moldmaking may be known as a one-off industry, but that is not an accurate description of the current employment landscape across many mold shops. Those who are under 30 are entering and staying in this niche trade. And, I am not just talking about one noteworthy individual—I am seeing multiple workers under 30 making an impact across the shop floor in everything from engineering departments to human resources and marketing. Today's blog features those among them who are designers.

 

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