by Andrew Brooks
Gauging the pulse of Canada’s job shops and their critical role in manufacturing
There are lots of moving targets these days. Between the election of Donald Trump, the rebirth of Cold War-style tensions between the US and Russia, and the increasing travails of the once-popular Justin Trudeau–and his government’s 2017 budget, which doesn’t seem to do much for Canadian manufacturing (see Mary Scianna’s Shop View on page 7)– you could be forgiven for feeling a bit distracted.
But despite all the noise, Canada’s machining, welding and fabricating job shops seem to have concerns that line up pretty consistently with those of past years. Taxation, bureaucratic barriers to growth, labour force challenges and perceived inequities in trade agreements, whether trans-border or trans-global, top the list of challenges.
“I’m always frustrated with red tape,” says Robert Jacobs, president and owner of Jacobs Industries, a highly diversified welding and machine shop in Whitehorse, Yukon Territory. The complaint is a chronic one, especially among small business owners. But in addition to a reduction in bureaucratic obstacles (“it takes three months to get a building inspector to see if you can build a new bathroom–it’s crazy”), Jacobs would like to see cuts to the taxes imposed on small business.
“With the business tax, I’m paying 15 per cent on profit,” he says. “I add that to the price of my goods, and now the public’s paying for it. You might as well add it to personal taxes and get rid of the business tax. Then doing business will become cheaper and more profitable, and businesses will have more money to grow.”
Shops in the Maritimes face an especially high tax burden compared with the rest of the country, says Mike Morrison, owner of Precision Enterprises in Mount Uniacke, NS, about 20 miles northeast of Halifax. “I have two grandsons working in Alberta, and they just laugh about how high the taxes are here compared to there,” Morrison says. He’d like to acquire some CNC machines to go after new markets and make repeat work easier, but the tax crunch doesn’t leave much room to move.
Ron Feigel, who’s in charge of business development at Universe Machine Corp. in Edmonton, AB, also has a bone to pick with the federal government, and the NDP one currently in charge in Alberta. In his case, it’s their approach to the oil patch, a big part of Universe’s customer base.
“Our NDP government and the federal Liberals came in with grandiose ideas of shutting down Canadian fossil fuels, without considering how to pay for better alternatives,” Feigel says. “I hope they’re both starting to realize how out of touch with reality those ideas are, and that they need to support the Canadian resource industries that provide our wealth and future. This will support investment, strengthen businesses, and keep and grow jobs–which is positive for all of Canada.” Feigel says the wealth generated can be put to work to diversify businesses and to set in motion a prudent strategy for developing cleaner energy alternatives.
“We need more kids to understand the importance of trades,” says Lisa Burgess, owner and general manager at KSM Stainless Steel Fabricators in Langley, BC. “I have a young niece and nephew, and in high school metalworking is half of a semester, mixed in with woodworking. They’re not encouraging it. There are so many jobs that are going to be opening up when the guys we have now start retiring, and there’s not going to be anybody. I don’t know if I’ll have a fabrication division in 20 years.”
More incentives to hire young workers would be a big help, Burgess says, especially if they were targeted more broadly to the whole population, in addition to groups that have historically been underrepresented. She recalls one instance when KSM wanted to hire a young person but couldn’t get the required government support because the candidate wasn’t part of a minority group. “We actually had a particular person in mind for a position. The government support should be more broadly applied.”
Marcon Metalfab in Delta, BC. actually found itself going toe-to-toe with the federal government to hang on to its skilled workers a few years ago. In a much-publicized announcement in 2011, Ottawa awarded an $8 billion dollar shipbuilding contract to Vancouver-based Seaspan Marine to build Coast Guard and civilian ships. The call went out for skilled metalworkers and Marcon found itself fighting uphill to keep its talent in-house.
“They came in with wages that were 25 per cent more than anybody was expecting,” says president Ari Burstein. “We’re paying fabricators $35 an hour and the shipyards started offering people $45. They killed us by 20 to 25 per cent. And they demanded that anyone offered a job had to walk off their shift. We had people with 10, 12 years here walking off the floor.”
Burstein understands that employees felt they had to grab the opportunity. “It’s a complete lifestyle change to go from $65,000 a year to over $100,000,” he says, “but it was disrespectful to the industry.” Marcon made sure to offer employees who left on good terms the chance to return, and eventually nearly half of them came back.
A challenge for shops with a greater variety of work–or a plus, depending on how you look at it–is the flexibility required of the employee. For Jacobs Industries, the Yukon’s extreme winters have a lot to do with it, as you’d expect. In the winter the volume declines, seasonal workers go back south, and the bitter cold means slower work, as pieces stored outside have to be warmed up indoors before they can be machined. Employees are expected to chip in any way they can.
“The welders here have to do a lot more than just weld,” Jacobs says. “They have to be a machinist, a mechanic, work on hydraulics–even be a carpenter some of the time. Not to mention shoveling snow.” That variety can add interest to the work but it’s very different from what employees find in larger and more specialized firms in the south.
“Most people want to stay down in Alberta where they can make $45 an hour and have all their expenses paid–plus they can get 50 or 60 hours of overtime every week. It’s hard to compete and keep people up here.”
Obviously the big news south of the border is US President Donald Trump. Trump has talked tough about revisiting North American trade agreements that he claims are biased against his country, and drew particular attention when he promised to impose a huge tariff on cars made in Mexico coming into the US. He claimed this would motivate auto makers to relocate production capacity to the US (though at least one auto maker has said it won’t alter plans to develop its Mexican operations).
Anything that impacts the automotive sector is going to affect job shops. One such business is machine shop Noble Precision of Toronto, Ontario. Noble is part of a network of companies that includes an automotive parts supplier. President and owner Manos Pavlakis is taking note of the noise coming from Washington, but it hasn’t changed his mind about a massive, multi-year re-engineering plan now underway at Noble.
“I don’t know what’s going to happen with the Donald, but I’m not thinking about what could happen to us,” Pavlakis says. “If I thought it was going to hurt me, I wouldn’t be moving forward. Canada is still valuable as a trading partner. I think it goes both ways with the US. We have technology and other resources, and the only thing Mexico really has is labour. Canada is on a completely different level. Looking to make sure the playing field is level–I think that’s what Trump is more concerned about.”
Not everyone feels that way. Trump’s rise to power has put people like Peter Montroukas, president of Geotech Precision, in Montréal, QC, on alert. “He’s created expectations of change. A lot of it is hot air, but for me it’s been done in a very negative manner. I’m really concerned with the vindictiveness of his message and his tone.”
Geotech does work for a couple of major US customers, and Trump’s talk about trade has them worried. “I see a lot of hesitation on their part in terms of committing for things, and they’re transferring work back to the US,” Montroukas says. “One of them has its own machining facilities in upstate New York, and they’ve filled that shop with much more work. We’re actually more competitive than their shop, but that doesn’t seem to matter. They’re more concerned with what’s happening down the road with their main customers in the US. I think everybody’s waiting to see how things will go.”
Looking farther abroad, Ari Burstein feels that Canadian businesses are at a disadvantage against countries that don’t have the same social compact. He feels the burden of maintaining a high standard of living should be weighed in the balance when considering offshoring sources of supply, and in implementing international free trade agreements generally.
“Recently we’ve come across steel coming in from the Asian markets,” Burstein says. “We understand the importance of free trade and governments getting the best bang for their buck, but there’s a cost to doing business in Canada that I think has to be factored in.” Canadian employers have to ensure that what they pay their workers will enable them to live according to Canada’s high standard of living. They also have to deal with tougher regulations and standards.
For Manos Pavlakis, keeping pace with automation is the main challenge right now. He’s steering Noble Precision through a massive overhaul with several objectives, one being to automate as extensively as possible. That means converting to an exclusively five axis setup, including Parpas/OMV CNC milling centres. Four or five new machines have been added now, and at the end of the day there could be as many as 15, not exclusively OMVs of course–those cost around $1.7 million apiece, including setup and added options.
“We’re automating everything, in every single aspect,” Pavlakis says. “We’re investing all our time on this. We’re not looking at making any money right now; we’re spending money, and then opening our eyes one day and seeing a completely new company, a completely different type of business.
“The change is painful. But I’m not looking for today or next week–I’m looking years down the road.” SMT