The fast, the lean, the fair, and the curious
August 10, 2004
Editor's Note: In an effort to offer a glimpse into some of the successful fabricating and manufacturing operations in the world, The FABRICATOR® offers this quick look at four Canadian companies.
On a busy workday the machine shop at F&P Mfg. Inc., in the village of Tottenham, northwest of Toronto, is a whirl of blue-shirted, safety-helmeted activity punctuated by the thump-thumping of steady, percussive sounds: the backbeat pounding of transfer presses, the hiss of a robotic arm feeding a car engine cradle into a hydroforming machine, the keening wail of hot gases from a welding booth, and the clank of new parts leaving a stamping station and falling into a metal drum.
A Tier 1 supplier, F&P produces subassemblies, suspension components, and pedals for Honda's main Canadian assembly plant to the north in Alliston, Ontario, as well as for two plants in Ohio. F&P also has plants in Stratford, Ontario, and in Ohio and Georgia. The Tottenham plant sells more than $400 million in parts every year.
F&P has focused on reducing costs and running a lean operation, says Senior Managing Director Ken Bradley. "All Tier 1 companies face the pressure to keep costs down." To meet that pressure, the company has instituted advanced training to reduce wasted time in workplace processes; automated most operations with robotics; improved work flow to balance the amount of material coming in and product going out; and implemented recycling of all scrap. It runs a just-in-time operation, with three daily shifts, 80 percent of the time.
The 330,000-square-foot, 750-employee firm has been producing parts since 1987, and it is doing so well that it has expanded several times.
F&P's story is not too different from some other Canadian fabricators' that have developed successful business strategies to carve a niche in Canada's industrial sector.
Farther to the west in southwestern Ontario is Linamar Corp., a designer and manufacturer of precision machine components for brake, engine, and transmission/driveline and steering/suspension systems for OEMs and Tier 1 companies. It exports 90 percent of its product to the U.S.
The company was founded by Frank Hasenfratz, who immigrated to Canada from Hungary following the 1956 Revolution. Over the years he expanded the shop, turning a small firm based in his garage into a $1.4 billion company.
He built the company by identifying ways to get parts built faster and to his automotive clients more quickly, driven by the same pressures then that the rest of the North American auto industry faces today to keep pace with foreign competitors.
He also invested heavily in automation, advanced technologies like hydroforming and roll forming, and high-intensity work units in which workers produce more than one part at a time.
Now run by Hasenfratz's daughter Linda, Linamar employs more than 9,000, operates 33 plants, two R&D offices, and four sales offices in Canada, the U.S., Mexico, Germany, Hungary, and Japan. The company's goal is to reach $10 billion in sales by 2020.
In early 2003 Linamar acquired the technology and assets of Saltzgitter Antriebstechnik, a camshaft manufacturer in Crimmitschau, Germany. The move allowed Linamar to access the company's specialized technology for hydroformed camshafts and to apply the technology to other engine, transmission, and chassis applications.
And just last fall Linamar announced the opening of a new, $80 million auto parts plant, Camtac, in Guelph. The 220,000-sq.-ft. operation is Linamar's 33rd facility. It will employ 500 skilled workers to build cylinder heads for Caterpillar trucks.
Possibly Canada's best-known fabricator is Frank Stronach, whose Magna family of companies employs 71,000 people at 206 manufacturing divisions and 47 product development and engineering centers in North America, South America, Mexico, Europe, and Asia. In 2002 the companies recorded earnings of $554 million and record sales of $12.9 billion. The companies design, develop, and manufacture automotive systems, assemblies, and modules and components and engineer and assemble complete vehicles.
Stronach moved to Canada as a 25-year-old tool- and diemaker from Austria in 1954 with $200 in his pocket. He went on to create a chain of companies that earn billions: Intier Automotive Inc., an interior products manufacturer of seats and instrument and door panel systems; Cosma Intl., a stamped, hydroformed, and welded metal parts and assemblies fabricator; Magna Donnelly; Decoma Intl. Inc.; Tesma Intl. Inc., an engine, transmission, and fueling and cooling components company; and Magna Steyr, a drivetrain components and vehicle engineering and assembly company.
Stronach's success story began in 1957, when he took a $1,000 bank loan and opened a one-man tool and die shop. He initiated what later would be called a "fair enterprise management" concept of employee equity and profit participation that makes every employee a shareholder in the company. Annual profits are shared among employees, managers, and investors.
Like Hasenfratz, Stronach started small—manufacturing sun visor clips in 1960. But by 1961 he had brought together six metal fabricating and equipment companies for the computer, radar, aircraft, electronics, and missile industries.
In his biography of leading Canadian business figures, author David Olive said of Stronach: "Long before North American manufacturers woke up in the 1980s to the quality and innovation threat posed by Japanese and European interlopers, Stronach created a business model for managing sustained growth based on those principles. The model insulated Magna from the feast-and-famine business cycle of the auto industry, which had humbled General Motors and stripped Nissan and Volvo of their independence."
In the 1960s Stronach obtained his first auto parts contract with GM. In the 1970s he expanded his automotive operations to include a greater number of stamped and electronic mechanical components. In 1976 he implemented a major product diversification strategy, organizing his divisions into product groups. In the 1980s Magna began concentrating on the auto industry and sold its aerospace and defense operations. In the 1990s it was focused on innovation.
Magna obtained a GM contract to supply 1.2 million pickup truck frames, assembled from hydroformed and roll formed modules, for the 1999 Silverado® and Sierra® models. The company achieved enhanced precision and a lighter and less expensive chassis through hydroforming and roll forming. The process saved GM more than $60 per frame.
Cosma Intl Inc., Magna's body and chassis sheet metal forming subsidiary, is Magna's single largest revenue stream, contributing up to 28 percent of overall sales. A major success story within Magna, the Concord, Ontario-based company's revenue increased from about $300 million in 1993 to about $4.5 billion in 2001, largely by adding hydroforming to its metal stamping and welding operations.
Currently Cosma is making its foray into the use of advanced high-strength steel (HSS), which the company believes can cut costs by 15 percent, reduce product weight by about 20 percent, and improve crash performance by 20 percent, compared with HSS. The company already is using advanced HSS to manufacture vehicle parts sold in Europe, including a 2003 Volkswagen.
Another leading Canadian fabricator is Van-Rob Stampings Inc. of Aurora, Ontario. Like F&P, Van-Rob is a Tier 1 automotive supplier. The company designs and manufactures metal stampings, modular welded assemblies, structural welded assemblies, and mechanical assemblies. In business since 1980, the company boasts seven facilities and more than a million square feet of manufacturing space.
Van-Rob credits its success largely to developing long-term partnership agreements with customers and suppliers and establishing engineering and R&D teams to create advanced processes and patented products. In fact, it developed the first total lot traceability for spot weld quality.
The company remained private and independent in the face of acquisitions and mergers and has been able to generate itself into a full-service provider.
Education factors into Canada's fabrication industry. Gerald Fedchun, president of the Automotive Parts Manufacturers' Association, said Canadian fabricators have worked hard with local colleges and universities on training programs. Academic programs include training and apprenticeships in tool- and diemaking, automation and robotics technology, and sheet metal fabrication.
"A company like Linamar may spend millions within themselves and in the community college system to train people," Fedchun said. "And the really good people in fabrication also have good apprenticeship programs, like Magna. The ones who are heavily involved in the community and in education are also the ones that are very successful."