SHOP: What are you expecting in terms of business conditions in 2024?
HERGOTT: It’s tough to say. Things are so up in the air. The end of the last quarter really dropped off for us. We had expected a lot of new projects coming our way and now we found out they’re all going to China. The prices coming out of China aren’t sustainable for us being competitive. It is just absolutely absurd. I can give you an example. I have a die that is a $150,000 tool and (China is offering it) for $40,000. The steel cost alone in Canada for that would cost me $30,000. That’s not even machining it. They are starving for work in China right now and they’re dropping their prices like you’ve never seen. And the big OEMs are taking advantage of that. The sooner the government wakes up and realizes we have to control things coming in from China for our manufacturing sector, the better off we will be. The longer they leave it, the worse it will be. Place tariffs on anything coming in from China. There is a lot of stuff that is not going to stay here otherwise. So to project 2024, I couldn’t even begin. With the numbers I am seeing coming out of China, it’s absolutely atrocious. We are talking about rebuilding manufacturing, and we are very good at it, but you can’t compete with a monster like that, and everyone is going to go to the cheapest price. That’s my primary concern.
My secondary concern is that electric vehicles aren’t coming out at the rate that gas vehicles would so there seems to be a slowdown coming there as well.
SHOP: Economics aside, manufacturing has faced a host of issues in 2023. Heading into 2024 how would you describe the state of the industry?
HERGOTT: I think we are well poised to take on manufacturing and to produce. We are in rebuild stage just because we don’t have the employees we need. For our company, I could hire six machinists tomorrow. I am bringing people in from the Philippines and other countries. But everyone has the same problem. I was out for dinner and the restaurant manager came over and apologized because the restaurant was full and he only had two waitresses. We just need to work around the current situation. Automation takes a process and gets it to a point where you can modify it to gain efficiency and productivity. But if you are doing one-off custom business, how do you automate something that you are only going to make once? There are facets of automation that can help, and we are working on that, but it’s not an all-in answer for custom tooling. Automation can only take you so far. You can automate maybe some of the machining components, but you can’t automate the fitting, the development, the testing. My customers are so short on tool makers right now that we are having to go into their plants and do everything ourselves for them. CTMA is still focused on getting kids into the trades and doing very well at it. Getting back into the high schools is one of the best things that anyone has done in a long time in this industry. Manufacturing is alive but we must do some things to make sure it stays that way.
SHOP: What is the most important issue that still needs to be addressed?
HERGOTT: Getting and keeping skilled trades in Canada. We do that through the correct immigration. Not engineers but machinists, tool makers, programmers. We don’t need any more engineers.
SHOP: Your advice to our readers as they prepare for 2024?
HERGOTT: Build your team and pay off your debt because I think there is a slowdown coming. No one can forecast what the switch to electric vehicles is going to bring. You build all the tooling and if the sales aren’t there and you’re not running, then what? If those volumes slow down, is the government going to put in more incentives to buy these vehicles? In the meantime, there is still a lot of investment going on in manufacturing, which tells me it’s still very much alive. But we need to do some things in the near future to make sure it stays that way and that means the big OEMs government is giving all the incentives to are keeping the tooling and manufacturing in Canada. In the meantime, keep plugging away and moving forward. That’s all you can do.