Auto suppliers work for survival after COVID-19 shutdowns

Tuesday, July 21, 2020

The Windsor Star/Dave Waddell

 

A Canadian Association of Mold Makers/Automate Canada survey released this week reveals Southwestern Ontario’s automotive supply and automation sectors are moving from the survival phase to planning for long-term sustainability.

The survey, which was completed last week, was aimed at exploring the impacts of COVID-19.

“We’re in the recovery mode and building resilience,” said Automate Canada chair Shelley Fellows.

“We’re seeing changes in the workforce. Companies are thinking long term again.”

Fellows said those changes in the workforce seem somewhat contradictory on the surface with an increase in layoffs and hiring at the same time.

Temporary layoffs jumped to 408 in the July survey from 147 in June while permanent layoffs doubled to 77.

New hires also doubled to 72 with another 222 workers recalled in the week leading up to July 10.

“What that tells us is companies are understanding what’s ahead better and are positioning themselves to return to probability,” Fellows said.

“They’re changing the workforce to have the right number of employees with the right skills to meet the volume of business ahead.”

That long-term thinking was also reflected in a shifting of key concerns among the 48 companies participating in the survey.

Cash flow was knocked off its perch as the top concern by worries over generating profits. Also moving up the list was a concern about the border and the impact it will have on generating new business.

There were 31 cancellations/indefinite delays of projects in the past month.

However, there were 21 new projects awarded and nine cancelled projects were revived.

There were also 37 requests for quotes (RFQ) on new work.

“The number of RFQs was bigger than the cancellations in July, so that’s a good sign,” Fellows said. “However, it wasn’t broken down by sectors, so we don’t know if it that was automotive.”

Laval International CEO/President Jonathon Azzopardi called the industry ‘spotty.’

Azzopardi said a lot of the work being done is on projects that were already planned.

“My guys (mould makers) deal with projects that are two years down the road and there’s not a lot of activity there right now,” said Azzopardi, past president of the Canadian Association of Mold Makers. “They’re like the canaries in the coal mine for the automotive industry of what’s coming.”

Cavalier Tool and Manufacturing’s sales manager Tim Galbraith agreed new automotive work is scarce right now. He’s heard of a couple new projects being awarded to local companies, but it’s more about delaying things to the third and fourth quarter of 2020 or beyond.

“Automotive is definitely in a lull,” Galbraith said. “Cavalier has a footprint in many different markets. We purposely limit automotive to a maximum of one third, but we’re doing less than 10 per cent automotive.”

Despite the decline in automotive, Cavalier just posted its fifth consecutive record-breaking month.

The company has made up the automotive shortfall by diversifying over the past decade into the sport and recreation, commercial and heavy truck sectors.

Azzopardi and Galbraith both agreed it’s far too early to panic. A period of transition was expected and there are other signs that indicate the disaster of 2008-09 isn’t looming over the horizon.

He said the uncertainty of it also being a U.S. presidential election year also plays into a conservative investment strategy by automakers.

“Companies are trying to figure out what type of car market there’s going to be,” Azzopardi said.

“Is this period of transition going to last three months, six or well into 2021? It’s just my personal opinion, but I think this is going to drag on into 2021.”

Azzopardi pointed out that unlike in 2009, the U.S. economy is still relatively resilient in other sectors like construction.

“In 2009 everything in the economy seized up,” Azzopardi said.

“It’s not like that now. This looks more like the downward trend we normally experience in the seven-year cycles in the auto industry.”

Azzopardi said local companies with significant percentages of their production portfolios in the non-automotive sector are actually faring pretty well.

After 2009, Laval Tool reduced its exposure in the sector to a third or less.

“We’d be in a lot worse shape if it wasn’t for our non-automotive production,” Azzopardi said.

“I’ve heard from our members that aerospace is on fire. It doesn’t make sense, but someone must still be buying airplanes.”

There are still plenty of challenges facing local manufacturers. They include disruptions in the supply chain, returning workers safely, layoffs and securing new investment.

“Companies are having to be leaner and I expect some workers will find their jobs aren’t there any longer,” Azzopardi said. “We’re going to have to watch this transition period closely between now and October.”

The transition period is also shuffling the deck on opportunities to gain new market share and presenting new challenges from Chinese companies looking to snap up domestic companies at bargain rates.

Galbraith said there’s real opportunity for Canadian manufacturers to gain market share while other countries struggle to right their ships.

“We deal in a number of countries and we’ve seen the mess they’re in in the U.S. and a little of that in Mexico,” Galbraith said.

“The Canadian entrepreneurial spirit right now reminds me of the U.S. 100-200 years ago. It’s just give us the mountain to climb and we’ll figure it out.

“Canadian manufacturers are very good at adapting and adjusting.”