SHOP: Last year was a strong year for the industry. Now that we are halfway through 2022, how is the year looking from a business standpoint and what are you expecting for the rest of the year?
HERGOTT: We have had a busy year at XL Tool Inc. and with the current workload we will be busy into 2023. There have been a lot of electric vehicle model launches for dies. Our custom machining portion of the business is extremely busy. We do a lot of custom machining for automation houses. Our nuclear machining business is also extremely busy with custom, one-off nuclear components work. We just can’t keep up. There is the potential for a slowdown to come but I know there is some bigger work coming from Tier 2 and Tier 3 customers. Our workload that we have now will basically carry us into 2023. I am expecting that we will have more work coming to get us into 2024 but that’s speculation at this point.
SHOP: There have been a great number of investment announcements over the past year focused on creating a manufacturing base in Ontario for both electric vehicles and electric vehicle batteries. In your view is there anything that still needs to be addressed?
HERGOTT: Re-tooling for EV business has kept us very busy to date but infrastructure is what still needs to be addressed. No one is talking about infrastructure. Where are we going to charge all these vehicles? The other challenge is the shortage of skilled labour to support tooling builds.
SHOP: Over the past 25 years you have grown your team to more than 40 experienced machinists, die makers and design professionals. How hard is it to continue to find the skilled labour you need to grow XL Tool?
HERGOTT: This is our biggest challenge. We have travelled down many roads in an effort to fix this problem and they all lead back to the same place: training local talent and giving kids a chance to make a wonderful living in our trades right out of high school, working together with the CTMA. We are working with local high schools to re-ignite manufacturing classes. We want kids right out of high school to start apprenticeships. The CTMA has developed a “Career Ready” program to support manufacturing for years to come.
SHOP: There is a push at the federal level to bring in more skilled immigrant labour. Do you see that helping improve the labour shortage?
HERGOTT: The idea is right if you bring in the right people. Engineers is not what we need. We need actual tradespeople. The Ontario government realizes this. The Ontario government has been phenomenal in terms of supporting the CTMA and local businesses, trying to get us ahead of the game. But when it comes to immigration there are just so many roadblocks right now. Quebec seems to be the only province capable of bringing in the right amount of talent to support their manufacturing but their French language proficiency legislation is making some people who have come into Quebec in hopes of getting their citizenship trying to get out of Quebec and into Ontario. You can’t come into a country and have to learn English and French at the same time. I am trying to find out what I can do to get them working permits for Ontario. I don’t know how easy that will be.
SHOP: XL Tool prides itself on being able to manufacture complex components, using enhanced technologies. What have been the most important machine and software additions to XL Tool over the
past five years?
HERGOTT: XL Tool has invested heavily in new equipment and technology including, Okuma CNC machines, Rain Solutions work holding, 3-D scanning capabilities, a Kardex inventory control system, as well as our 20,000 sq ft addition and our new 1600 ton 216” X 96” tryout press.
SHOP: Which technologies do you have your eye on for future purchases?
HERGOTT: Future tech for XL Tool will be based around internal efficiencies and organization. Possibly we will be looking at new software and palletized equipment. Delivery for equipment has been an issue. It can take six months for delivery. I can only hope things get better but with the labour shortage I just can’t imagine when.
SHOP: Another issue is rising raw material costs. What impact is that having on operations such as XL Tool and how is it affecting conversations with customers?
HERGOTT: Material costs are always an issue. We have to be very careful these days making sure pricing is correct when taking on orders. For the most part our customers understand it is out of our control.
SHOP: XL Tool’s involvement with the nuclear industry seems interesting. The expectations for product quality and precision must be extreme.
HERGOTT: In serving the nuclear industry we are basically machining to print. XL Tool Inc is now N299.4-16 compliant and we have several customers in the nuclear industry. The parts can be very complex with tight tolerancing but our team does an amazing job and we have been very successful in this area.
SHOP: There are many issues that shops in this industry are facing. How can being part of an association such as CTMA help?
HERGOTT: This is a great question. With everything changing so fast at every turn in our industry I sure wouldn’t want to run a business without a support system around us. The CTMA provides that with a great team. From the team in the office to our Board of Directors, we offer support on so many different levels. The biggest support right now is our Career Ready program, where if you take on apprentices we have funding for you. Our Wage Survey is also a huge support.You get to see what is being paid and how your company’s pay structure compares for many different positions. There is also the networking support, the talking to other business owners in the industry to understand what they’re doing to handle different situations. I can’t imagine running a business on your own in today’s environment and just thinking you will figure everything out on your own, because you won’t. When you’re dealing with a team of people who have the resources that CTMA does it makes you smarter. If you’ve never sat in on meetings and talked with other business owners you don’t know what you’re missing. I understand company owners are busy trying to run the business and doing the day-to-day stuff but if you don’t try to get ahead of it and understand more than what’s within your four walls you are not going to get ahead. You have to get involved. The better question is if you’re running your business in today’s manufacturing industry, why would you want to do it alone?