The equipment advantage
Blurb: The strong Canadian dollar has made it more profitable for companies like Groupe GMW to invest in productivity-enhancing production equipment.

Every morning Jean Marin takes a walk around GMW Group's Lachine operation, to check production at the sheet metal transformation facility. It's a good way to stay in touch with line employees and to get a feel for the overall operation.

Early last year he noticed that the whole plant was humming, often for weeks at a time. Furthermore, scheduling sheets showed that several key machines were operating on three shifts. Marin, GMW's president and a key shareholder knew that to expand, the company would have to add capacity.

"One of most important reasons customers order from us, is that we can deliver quickly," Marin said. "But if all of our machines stayed busy, it would be harder to fit rush jobs in."

Those daily plant tours led Marin and his partners, Claude Papis and Peter Kind, to invest $1 million in a slew of machinery, including a laser cutter and new steel punching equipment. Surprisingly, much of the new machinery he eventually bought cost less than the older, less efficient models that he was operating.

The difference was a stronger Canadian dollar, which made the U.S. made equipment, which was priced in U.S. dollars, far cheaper than it had been in the past, despite the build up in inflation during intervening years.

For example Groupe GMW's existing laser-cutter, cut steel of up to 3/4" thick, at 290 inches per minute. The newer model worked up to 1" thick at 1,000 inches per minute.

GMW's primary role is as a sub-contractor. The company cuts, welds and machines steel components that are used in a wide variety of products including lighting fixtures, bus shelter benches and fireplace fronts.

The company has been in business since 1935, but Marin only joined in 1986, after completing business studies at HEC Montréal. Since then he and his partners have built the business slowly, growing along with their customer base. In the last five years the company has doubled in size to about 40 employees who generated about $6 million in sales last year.

GMW Group's customer base consists of about 300 mostly-Canadian-based manufacturers, many of which are heavily dependent on U.S. exports. But unlike his clients, many of whom are hurt by the rising loonie which makes it harder for them to compete in the U.S. market, for net importers like Marin it has been nothing but good news.

"Our new laser-cutter cost more when priced in U.S. dollars, but when we converted to Canadian it came out less," Marin said. In fact, the stronger dollar has been a boon to GMW Group throughout its current expansion.

"We made $50,000 on one purchase alone," Marin said. "The dollar rose during the two months that passed between when we signed the purchase agreement and when we paid the bill."

According to Marin, the new equipment is key element in the company's future growth strategy. "We operate in a competitive business. We do small volumes of custom steel parts for other manufactures. Everybody wants everything just-in-time," Marin said. "If we can't deliver on schedule, we'll lose the order."

One man that couldn't be happier about Marin's new investment is long time customer Michel Esnault, president of Design et Réalizations Industries, who uses GMW Group's stainless steel components in the chocolate making equipment that he manufactures. Esnault's clients come from all over the world, but they all have one thing in common: they don't like waiting.

"Everybody orders at the last minute and they want it shipped at the last minute," Esnault said. "So we have to ask the same thing of our suppliers."

Group GMW's experience is typical of many Canadian manufacturers, many of whom have been able to avoid investing in new productivity enhancing equipment, because the cheap loonie, has kept Canadian labour relatively compared to U.S. workers.

But the currency swing during last few years, has begun to change the balance, creating greater advantage for companies who invest in equipment, especially if its priced in U.S. dollars.

According one expert, the currency fluctuation has affected companies differently. "Commodity exporters have done well, because strong commodities prices have kept demand strong despite the fall in the U.S. dollar," said Lorne Switzer, a professor of finance at the John Molson School of Business. "However Canadian exporters that have a local content component could be hurt."

GMW Group seems to have the best of both worlds because it pays for imported machinery with a stronger Canadian dollar, but it can charge its mostly-Canadian clients, in Canadian dollars Switzer said.

Not surprisingly, Marin was optimistic about his retooled plant. "We have the capacity to double sales within the next three years," Marin said. "It'll be tough, but now that we have the right equipment, I think we can do it."

 

Fact Box:
Company Name: GMW Group
Owner: Jean Marin, Claude Papis, Peter Kind
Founded: 1935
Products: Precision sheet metal work
Sales: $6 million
Employees: 40
Phone #: 514-481-7725

 

 

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