A hard look at the future.

As Yogi Berra once said, "The future ain't what it used to be." That being the case, members of the Canadian Foundry Assn. (CFA) gathered June 1-3 to learn what the future may become.

The annual general meeting at the Pinestone Resort, Haliburton, Ontario, drew 73 members, suppliers and government representatives to discuss the concerns of the Canadian metalcasting industry as it recovers from the recession.

In addition to CFA's organizational business, the conference featured several different perspectives on the future of Canadian foundries and the manufacturing sector as a whole.

A Positive Panel

To achieve a consensus of the general situation in foundries across Canada, a panel of six foundrymen and suppliers reported on their current activity levels, volumes and employment figures, while giving projections for the coming year.

For this group, total sales volume was up an average of 20%, while most were running at 100% or more of capacity with slight rises in employment. Capital expenditures were related mostly to capacity and environmental compliance, though some plants were investing in process controls for higher efficiency.

These optimistic figures were attributable to increased exports bound for the U.S. and elsewhere. The current favorable exchange rate, coupled with a U.S. recovery and toppling trade barriers, has afforded Canadian foundries some vital markets, even though domestic sales remain mostly flat. When asked to name major sources of opportunity, almost all said new export markets for existing product lines were the key to sustained growth.

Canadian metalcasters face serious problems, however. The difficulty in allocating already hard-to-come-by capital to value-added investment was cited in all cases, as the national economy continues to suffer while government regulation of industry rises.

"Due to all the legislation," said Paul Pope, ESCO Ltd., Port Hope, Ontario, "the capital increase for compliance is staggering."

Economic Realities

"What we are seeing now is a recovery," said Jason Myers, chief economist of the Canadian Manufacturers Assn. "But it's a schizophrenic recovery." According to Myers, Canadian manufacturing growth is three times that of the rest of the economy, again due to a brisk export business linked to the U.S. recovery.

"The recession has occurred only in the domestic market," he said. "Exports have grown by 10% every year and now 55% of all Canadian industry production is exported--42% of that going to the U.S."

Though shipments are up, employment has stayed at recession levels, indicating that Canadian industry is more productive but without the profit margins to show for it. As this trend continues, Myers predicted that many Canadian firms are headed for the U.S.

Once again, according to Myers, government overhead is the major factor in this grim outlook. While businesses must pay for regulatory compliance on top of high payroll and income taxes, taxes on Canadian consumers have risen 45% in recent years, contributing to the paucity of domestic markets. What they're getting in return is clear: increasing socialization. Luncheon speaker Pat Palmer, Ontario Chamber of Commerce drove home the point, saying, "About 25% of all adults in Ontario are receiving some form of social assistance."

Myers' presentation ended with some dour predictions. Pointing to the recent downgrading of Canadian debt, he said at the present rate, the national deficit will be 170% of GNP by the end of the decade.

"We're going to have to take a good look at ourselves," he said. "We're headed for another deep recession and there are going to be serious problems if the manufacturing sector continues to bear the burden."

Individual Remedies

In his talk, "Achieving World-Class Manufacturing Status with NAFTA Considerations," Dan Shunk, Arizona State University, presented foundrymen with operational alternatives to conventional production.

"You are all world-class casting producers," he said. "You wouldn't be sitting here if you weren't. You'd be out of business." His focus was not on product quality, but production time.

Introducing the theory of "10X," Shunk said competitive manufacturers now have a handle on quality and the next step is value-added time. 10X is the objective of achieving new product development in 10% of the time, while removing 90% of all non-value added time from operations. The keys to doing this include:

* understand completely how to make the customer successful;

* simplify everything down to only value-added functions;

* "hurry slowly"--the streamlined process allows more time to focus on quality;

* know the entire process life cycle of your product;

* develop a receptive corporate culture.

The resulting time compression helps companies compete by cutting inventory costs and making sure that every operation installs value in the product. It also allows time for research and deVelopment while getting the product to market in a fraction of the time.

All that adds up to Shunk's description of a modern, competitive foundry: "New, good, fast and cheap."