Special Report — Fighting Back: Quick or Dead

Statistics Canada has found that in general for our country the second quarter economic growth for this year was comparable to the third quarter growth of 1995, which was far from a great year. Plastics News reported in June that American tool makers are calling this the worst economic crunch they’ve seen in 20 years. And while no statistics were available for Canada at press time, Canadian moldmakers are clearly suffering, too. But, on the upside, industry leaders say it’s not as bad as some think.

“We feel that at the worst it’s only down to 87% of capacity on the average,” says Louis M. Papp, industrial strategist for Canadian Association of Moldmakers (CAMM). “We’ve been following this closely since June 2000 when it first started hitting and a lot of the boys were bleeding quite badly from July and now all of a sudden some of these boys are picking up.”

The slowdown seems to be largely caused by the falling automotive market, which has decreased by about 15 to 20 percent in production in North America so far this year.

“I think it was triggered by indecision on the fuel prices, because no one knew whether they were going to be bringing out new SUVs or whether the smaller car lines were going to be big,” explains Peter Elford, vice-president of sales and marketing at Hallmark Tools, Windsor, ON.

Papp concurs, explaining that the automotive companies quoted on programs that were never released. Hallmark, for instance, lost some programs on the bigger cars, but has since turned itself around by gaining more contracts on smaller cars. Although this has affected them somewhat, Elford says that because his company is product-specific, it has weathered the downturn well.

“We’re mostly into headlamp styling. So, if they want to change a vehicle a little bit and get a jump on the competition, they’re going to play with the headlamps and tail lamps and that’s our business,” he says.

Not mean, just lean

But some of the moldmakers haven’t or won’t make it, points out Ed Bernard, president of Bernard Mould Ltd., Windsor, ON. For instance Zygo Mould Ltd., one of Canada’s largest moldmakers, didn’t make it. But maybe that’s because bigger isn’t always better and in this current race for survival it seems the smaller shops are faring much better.

“We thought the really big shops were the ones who were going to do the best,” says Bernard. “But the really big shops have a voracious appetite for work. They’re putting 300 molds through a shop a year. When they miss a program, it really hurts. It’s these 50 to 100-man shops that are going to be able to do the best in the next few years.”

And perhaps the best way to survive is to diversify your client base. When asked about strategy, all agreed it was to expand your company into different areas. “You have to diversify into different fields, which is toys, home appliances, whatever,” says Papp. “You have to go where you’re needed, not where you want to be.” That also means looking ahead to find out who your customers are and whether or not they will be in business in the near future, he adds.

Diversification is an all-encompassing word, not just limited to your client base. You can diversify your work force and your focus, too. Last year Bernard Mould had record sales, and reduced their automotive work from 50% to 20%, yet they still laid off a few employees. But while they are down a few people in their production department, they’re up to six full-time engineers, more than they’ve ever had. When Ford recently let go 5,000 people, targeting mostly white collar workers, a lot were in the engineering department, which meant the design functions were going to fall to moldmakers, says Bernard. “Ford doesn’t need the engineering staff. Their suppliers do the engineering for them. So it’s changing the make-up of a mold shop,” explains Bernard.

Diversification of shop focus is good if you have the money, but what do you do if you don’t? Many companies are getting around this problem by sharing resources, which Papp says is another effective cost-savings measure. “Over the next five years, you’ll see, probably 40% of our industry will be talking about coming up with a means of working together with their past competition, with the idea of collectively forming a consortium to really quote on bigger jobs and to be more effective with their quoting,” says Papp. Although this has been going on for a few years already, Papp says people are just starting to talk about it openly, especially in light of today’s economy. “They [companies] realize now that we have to work together. We don’t have to go to bed together, but we can work together and survive together. Or we can work independently and all go down independently,” says Papp.

Survival skills — marketing, training

Working together is one way to survive, but perhaps the number one mistake most business owners make when times are tough is cutting the advertising budget. But that’s when you need to advertise the most, says Bernard. “There’s a lot of mold shops where the owners have no business background,” he explains. “They were moldmakers that became businessmen. And they need to either hone their skills and become business savvy or hire people who have those talents.”

Elford concurs, saying that a good way to survive any economic downturn is to become extremely aggressive. “You’ve got to be very innovative as well,” he adds. “As an example: A customer comes to you with a quote on tooling and you look at it and it’s a difficult part — if you can take a look at it and find an easier way to make it and save them some plastic and save them some cycle time, it gives you an edge.”

One thing we haven’t seen in Canada is a huge amount of layoffs in the plastics industry. Instead, companies should be continuously training employees and upgrading people, Mr. Papp says. Layoffs and other such cost savings measures are drastic and should only be taken into consideration when everything else has been tried, he adds. “Once you lay a person off, you’ll never get him back. And that person will be gobbled up within the week. I guarantee they will be,” he says. “This is how Canada is creating its brain drain. The guys are not waiting to get a job. They’ll get a job if they have to go stateside or to Mexico.”

Though there are definitely slowdowns and companies should be diversifying, shifting their focus to markets outside Canada and thinking of new and improved ways to do business and take care o their employees right now, the news isn’t all bad. In fact, the economic forecast in the near future, though far from excellent, is pretty good, says Mr. Papp.

“We don’t like it, because any downturn, even one per cent, gives you an ulcer,” he says. “The economy right now is running at where it was three years ago. We were happier than pigs in a poke then and today we’re disappointed. However, we’re all going on the assumption that things will turn around. Not necessarily to what it was a year ago, but at least to what it was two years ago. And we feel that the turnaround will take place in maybe eight months to a year.” One thing that’s given Canadian companies the jump is our low dollar, he adds, noting that there are probably twice as many U.S. companies, by ratio, affected by this. It’s times like these that Mr. Papp finds exciting for the plastics industry. “Now’s when the best come out of the woodwork,” he says. “When things are good, you don’t have to be good. But when things are bad and you still want to make money like the good times, you’ve got to be good.”