VIEW Spring 2024 Canada Post Mail Publications Agreement Number: 40609661 The voice of the Canadian Tooling & Machining Association COMPETING WITH CHINA: THE FUTURE OF CANADIAN MANUFACTURING IS BEING DECIDED NOW4 17 17 October,2024 S a v e th e D a te : Keynote presentation from: Keynote presentation from: TROYNIXTROYNIX BestWesternPlusLamplighterInn&ConferenceCentre 591WellingtonRd,London,ONN6C4R3 CTMA’SANNUALGENERAL MEETING&DINNER CTMA’SANNUALGENERAL MEETING&DINNER FEATURING:FEATURING: AND...AND... M ore det ails co min g soon !5 CONTENTS SPRING 2024 11 PtSA works to fill South Africa’s TDM skills gap 14 How to get started with robotics and automation 17 Boosting Canadian manufacturing: The advantages of utilizing the Foreign Worker Program MEMBER PROFILE 19 A Genius ERP solution CTMA HEADLINES 21 Welcome new CTMA members! 22 New CTMA members receive plaques 23 Success at Manufacturing Day meetings 23 Subscribe to CTMA’s Member Forum 24 CTMA hosts tour of Rapid Gear in Kitchener 25 In memory of Ronald Bruce McKitrick 26 INDEX TO ADVERTISERS 11 UP FRONT 7 A Message from the CTMA president FEATURES 8 Competing with China: The future of Canadian manufacturing is being decided now 24 14 Spring 2024 Published For: The Canadian Tooling & Machining Association 140 McGovern Drive, Unit 3 Cambridge, Ontario N3H 4R7 Tel: (519) 653-7265 Fax: (519) 653-6764 marketing@ctma.com www.ctma.com The contributed articles presented in this magazine represent the opinions of the authors and the interviewees. Their inclusion does not directly or implicitly denote concurrence by the Canadian Tooling & Machining Association. Articles were selected for inclusion based on the issues and views of interest to the industry. Email sales@matrixgroupinc.net or call (866) 999-1299 to request a Media Kit. There are advertising options to fit all budgets and marketing campaigns. Published By: Matrix Group Publishing Inc. 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Account Executives Colleen Bell, Jackie Casburn, Rob Gibson, Jim Hamilton, Scott Hendren, Touhid Khan, Frank Kenyeres, Sandra Kirby, Charlie Langsford, Andrew Lee, Brian MacIntyre, Shaun Minett, Lynn Murphy, Caitlin Nakamura, Vlada Radchenko, Wilma Gray-Rose, Luke Stevens, Joseph Ukaoha Advertising Design James Robinson Layout & Design Kayti McDonald 2024 Matrix Group Publishing Inc. All rights reserved. Contents may not be reproduced by any means, in whole or in part, without the prior written permission of the publisher. The opinions expressed in this publication are not necessarily those of Matrix Group Publishing Inc. Printed in Canada. The reproduction of any articles or pictures in this publication requires the prior written consent of the Canadian Tooling & Machining Association. To request permission, please contact the association’s office by e-mail at info@ctma.com. 867 UP FRONT THE 1960S AND 70S WERE my formative years growing up in Windsor, Ont. We all listened to the “Big 8” radio station on AM800, which was the station for the latest top 40 hits. We were fed a steady diet of great Motown music because of our location across the river from Detroit, Mich. Blasting from our radios we heard Marvin Gaye, Michael Jackson, Smokey Robinson, The Temptations & The Supremes, which included one of my favourite artists, Diana Ross, who went on to have a prolific solo career. I remember our high school prom theme was one of Diana Ross’s biggest hits: “Do you know where you’re going to?” I thought it was an amazing prom theme for so many reasons. Aside from just loving the song, it spoke to me at that time in my life and to all of us kids graduating from high school beginning to tackle the seriousness of where we were and where we were going. It was an awesome ballad for our generation and an exciting time in our lives. This question and song title “Do you know where you’re going to?” was so important when we were young and I think even more important as we all went on to choose our career paths, education choices, life partners, and a host of other things. As we became business managers charting direction of companies or direction of business units within organizations it became even more relevant and important. We are all familiar with the wisdom that says, “failure to plan is a plan to fail.” Does your company know where it’s going or are you in a reactionary mode to the business environment around you? This issue of CTMA View focuses on the enormous impact of offshore competition in our industry, primarily from China. This is not just a blip on the radar or part of a normal worldwide competition cycle that we have always faced here in Canada. This is a very strategic, well- planned effort by China’s government to do whatever it takes to artificially support their industry players, which in reality is a plan to undermine our industry here in North America. They are playing the long game; they have a plan and they know where they’re going to. Did our industry and government players know where they were going to when they made a huge push to develop low-cost country (LCC) suppliers to make next quarter’s profits look good? The technology and intellectual advances that our industry players took 50 years to learn were transferred happily to these LCCs in less than 10 years to make short-term profit. China was more than willing to learn how we do it and we even paid for them to absorb our technology and intellectual property along the way. This new reality has already displaced many tooling companies and the next phase is displacing the manufacturers who got the ball rolling. Did they know where they were going to? A common thread of successful companies is that they are never rudderless, they have goals, plans, strategies, and at the same time are nimble to react to new technologies and market changes. Things like embracing Industry 4.0, looking for alternate opportunities both within their current customers and in new areas with new customers, and making sure they are at the top of their class in their peer group with the latest equipment and technological inputs in software, communication, and human resources, are all ways to right this ship. Charting our future should also include the various possible impacts of our decisions on our business both short- and long-term. We are now seeing a lot of long-term pain originating from short-term gains. I have walked through many shuttered companies being auctioned and they pretty much all have one thing in common: out-of-date equipment and infrastructure. Lack of planning or concentrating on short- term gains without consideration of all the possible outcomes of decisions quite often ends up with disastrous results. Much like the story of the turtle and the hare, companies who play the long game with strategic plans and goals continually cross the yearly fiscal finish line. They may not have earth shattering EBITDAs, but like the turtle, they make it year after year. Thinking about this onslaught of competition forces me to quote Diana Ross’s hit song and ask: “Do you know where you’re going to?” ❙❙❙ Louis Jahn CTMA President Jahn Engineering Ltd China was more than willing to learn how we do it and we even paid for them to absorb our technology and intellectual property along the way. Where do we go from here?8 ON THE COVER hen the United States-Mexico- Canada Agreement (USMCA) was drafted, it recognized the fundamental role of small and medium-sized (SMEs) businesses as economic drivers of the North American economy. It did not intend to benefit SMEs or economies of other parts of the world, such as China. But as the old saying goes, ‘Beware the unintended consequences of good intentions.’ In the years since the COVID-19 pandemic, there has been a significant effort across North America to reshore production, which USMCA helped facilitate by promoting domestic manufacturing, while also espousing the benefits of lower Mexican labour costs to feed demand in Canada and the United States. At the same time, however, China has been steadfast in establishing/re-establishing itself as a dominant world power, and the nation has found a loophole in USMCA to exploit. “China is today making decisions that say, ‘In 100 years, this is where we’re going to be as a country,’” said former Ontario Minister of Economic Development and Trade and current board member of Martinrea International, Sandra Pupatello. “I wish we were doing that. The North American market is competing against that kind of mindset, so we need to be aware of it and start to think like this ourselves.” In a very coordinated effort, more than 200 new Chinese manufacturing and production companies have been launched in Mexico over the last two years as a way to win product from their North American counterparts. “Mexico is a good place due to its lower cost labour and because the Chinese are able to bring it right into the United States through USMCA,” said Laurie Harbour, president and CEO at Harbour Results Inc. “This has definitely put a lot of pressure on our small- and mid- sized manufacturers to become cost competitive, and we’ve been seeing companies lose work to Chinese shops, both overseas in China and now in Mexico.” Canadian Tooling & Machining Association (CTMA) President, Louis Jahn agrees, “A whole bunch of big Chinese manufacturing companies are now set up in Mexico and are supported by Chinese tooling sources to produce a whole range of products in Mexico to sell—or backdoor—into the United States as if it’s Mexican content, but it’s not. They are Chinese products masquerading as Mexican products. And plans are already in motion for China to take the next step and set up their tool shops in Mexico.” IT ALL COMES DOWN TO PRICE It can be extremely difficult for Canadian manufacturers to compete with a country that doesn’t have to do business following the same rules or, in some cases, knowingly bending the rules they should be following. Canada faces a major disadvantage when it comes to competing against China in this arena, stemming from a significant pricing discrepancy between the two marketplaces. China has the ability to design, manufacture, and then deliver products at a cost equivalent to what a Canadian company would need to expend solely on the raw materials for a similar project. Some tool and mould shops in Canada are even reporting that Chinese tooling sources are quoting at half the price of Canadian quotes, and usually quote the finished tooling at below the material cost for Canadian shops. There are numerous factors that contribute to this gap, including the absence of stringent environmental and labour regulations, as well as substantial government subsidies. Specific to tooling, China’s extensive labour pool and government support also allows for the production of dies and moulds at a pace that far surpasses what is achievable anywhere in North America. “The Chinese government is highly subsidizing their tool shops and enabling those shops to run at almost nothing,” said Jahn. “If they would have a real tooling cost like we do here, then we wouldn’t even be having this conversation because we would be on a more level The future of Canadian manufacturing is being decided now By Paul Adair, Staff Writer Competing with 9 playing field and be just as competitive as they are—but they don’t, and we are paying the price.” While North American original equipment manufacturers (OEMs) and tier one vendors may be able to benefit their bottom lines by developing tools sourced from China at half the price, in reality, this is a business model that is very short-sighted and will ultimately decimate their industry here in North America. “Businesses are disappearing because we can’t compete with unfair prices coming out of China,” said Jahn. “If our tooling industry is diminished in Canada, then manufacturing is next. You simply can’t have manufacturing without technicians there to support it.” While the age of cheaply made Chinese products is over and the quality of ‘Made in China’ products today is on par with what is produced domestically, there is still a risk associated with North American OEMs and tier one shops in chasing the ‘go with the best price’ philosophy, especially during the deployment of the die in production. After all, if there are any issues with setup or operation, manufacturing plants will typically turn to their local die shops for assistance, which may involve adjustments or modifications to the die itself; not to mention the ongoing concern of maintaining the die or mould throughout the project’s lifespan. What happens when those local die shops close their doors because there isn’t the business there to support them? “Despite relying on local die shops for support, manufacturing plants often refrain from contracting them for the initial manufacturing of the die or mould,” said CTMA Director of Government Relations, Alex Mazerolle. “Over time, this reluctance will certainly lead to a depletion of skilled labour in the industry and jeopardize our long-term sustainability. A failure to act will ultimately impede our capacity to rebound should market conditions shift.” HISTORY OF STRONG MANUFACTURING The automotive industry stands as the most significant customer for North America’s precision metalworking sectors, and a failure to tackle this issue is certain to undermine the strength of the domestic automotive sector. Without action, local die and mould shops will China: “A whole bunch of big Chinese manufacturing companies are now set up in Mexico and are supported by Chinese tooling sources to produce a whole range of products in Mexico to sell—or backdoor—into the United States as if it’s Mexican content, but it’s not. They are Chinese products masquerading as Mexican products.” – Louis Jahn, CTMA presidentNext >