Are interest rates having an impact on equipment purchases? Do forecasts of an economic downturn reflect industry reality? Is automation the answer the skilled labour shortage? Marc Hasrouny, president CMTDA and general manager of Megatel, answers these critical questions and more in an exclusive interview.
SHOP: Are interest rates having an impact on equipment purchases?
HASROUNY: The interest rates have just started to really go up and we haven’t had any issues approving customers in the last few months. We had a customer in April who wanted to place an order and knowing already from discussions that interest rates were going to go up and the delivery of the machine would not be till the fall, what he did was to sign the agreement with the leasing company and start his payments in May. His savings by starting to pay for the machine five or six months before it hits his floor were significant. Also, when he signed his agreement the exchange rate was less than it is today so he got a good deal. We are encouraging customers as soon as they know that they want to place an order, even though the delivery will be later on, to fix their rate now and start their payments. They won’t have the revenue associated with the equipment but they will be saving money and paying off the equipment sooner.
SHOP: What are delivery timelines looking like for 2023?
HASROUNY: Shipping costs for containers from Asia have come down but the problem we are still facing is availability of the equipment. The ports are still very congested and it’s still taking double the normal time for delivery. From the time the equipment is ready to the time we receive it you are easily looking at 90 days, and sometimes longer, whereas before it was 30 to 45 days. There is so much congestion in Vancouver, Seattle and other West Coast ports that you have to call on ports on the East Coast. It’s very chaotic. I thought it would get better by the second half of this year and we are already past that, and it hasn’t. Congestion and delays are still very prevalent in today’s business.
SHOP: Are there still issues with making new machinery and also spare parts?
HASROUNY: That is also still an issue. Spare parts from our manufacturers are experiencing crazy delays—we are talking months, whereas it used to be days or weeks. Prices of machinery have gone down due to the exchange rate. The higher the U.S. dollar the better the purchasing power they have so they extend that relief on us. But material costs are still very high.
SHOP: What are CMTDA members expecting for 2023?
HASROUNY: Our outlook and projections for 2023 is very similar to 2022. A lot of challenges but the market is healthy and dynamic, people are purchasing, there are shops that are very busy and some shops still struggling to get their feet back on the ground after the pandemic, just like last year. There is definitely a continuous momentum, especially in the mould industry. If we continue along with this momentum we should be good for at least the first quarter of 2023.
SHOP: What’s your advice for jobshop owners planning for next year?
HASROUNY: I have noticed that every time you hear in the news the economy is going bad you come to work and you feel you are living in a different reality—projects are nonstop, customers are busy and placing orders. The small family-owned shops are a bit more anxious about what they hear in the news about exchange rates and interest rates. All of these factors definitely scare them. My advice is don’t be scared. Your dealers are here to help you, to consult with you, to give you advice and if it doesn’t make sense for you, put (the equipment purchase) on hold until you think you are able to make the investment. But if you’re interested in equipment and you have a dealer you’re working with and he has inventory, go through the financing process and see what your monthly payments would be, what that does to your financial ratios, and what your bank thinks. How fast will be the delivery? If you skip on the opportunity today what is the next delivery for you? Equipment is still very difficult to deliver. As soon as we have stock it’s gone. We don’t have stock for longer than two or three months now whereas before we would have stock for six to eight months. There are a lot of factors to consider but if it makes sense and you have the work for it, maybe it’s better to go ahead and make that investment right now. If you decide to skip it, your competitor may not. Don’t think that just because you’re hearing bad news it’s not the right time to invest. Sometimes it is the best time to invest.
SHOP: Do you see this as the biggest concern for next year?
HASROUNY: My main concern is still manpower. This is our biggest threat. Everywhere I go and whoever I speak to, this is the most important problem for them.
SHOP: What role can automation play in helping solve the problem?
HASROUNY: This is something that unavoidable. Automation is going to start being the way that the North American machine shops transition. Everywhere we go now, especially the medium-sized shops, are seriously starting to consider automating a lot of their processes, whether it’s robotics or multiple pallets. They have no choice and I think they’ve come to that realization and more and more customers are talking to us about their next purchase for their next project is automation. We are getting ready for that and many of my colleagues in the industry are doing the same. For us to remain competitive as Canadian manufacturers we need to look at how can we produce products more efficiently. There is a lot of manufacturing coming back right now but I think it’s very temporary. It’s a reaction to the pandemic. If we don’t find a solution to our workforce, I think we will have no choice but to start shipping work outside the country again. That’s what I am worried about as a business owner. If you can’t find skilled people year after year what happens? If you have to pay unskilled people so much money and still can’t be competitive, it’s very scary.
For more insights from the industry’s most influential leaders about what to expect in 2023, see the November issue of Shop Metalworking Technology.