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Engineering firm learned from the '82 recession.

Tough times nine years ago helped shape S & E Mechanical into the success that it is today, says company owner Gord Barnhart.

The Timmins-based mechanical engineering firm operates a second office in North Bay, has slightly fewer than 100 employees and anticipates $8 million to $10 million in sales this fiscal year.

But Barnhart, a mechanical engineer, has learned that determination, a solid reputation and satisfied employees are more important to good business than sales figures.

The business, 90-per-cent owned by Barnhart and 10-per-cent owned by Doug Kerash, who manages the Timmins office, started in 1981. Barnhart bought the assets of a predecessor company called Smith and Elston Co. Ltd.

In the course of the year business boomed, and he went from eight employees in 1981 to 285 employees in 1982.

In 1982 the economy went flat and "there were substantial bankruptcies in the country." Included in those bankruptcies were three southern Ontario general contractors involved in three major projects with Barnhart's company. Between them they owed his company several hundred million dollars.

Barnhart's business nosedived, but he refused to declare bankruptcy. He put claims against the general contractors' properties to try to recover his money. Then he approached his creditors and promised that if they did not bankrupt him, he would work until he paid them back.

After two and a half years in court he recovered varying amounts, ranging from full payment on one project - minus interest and legal fees - to about 35 cents on the dollar for another.

Barnhart paid off his creditors, who then, impressed with his work ethic, became his bank, he says.

"What made my company recover so quickly was the confidence I had gained from my creditors," he acknowledges.

By 1986/87 the business books were healthy, there were 85 employees and a strong relationship was developing between Barnhart and the Bank of Montreal.

The tight early years proved a benefit for the expanding company.

"It hurt at the time, but we are so much more cautious," he says. Part of being cautious now includes keeping tight controls on finances. The company supplies monthly financial statements to the bank, which is a must, in Barnhart's opinion, for a growing company.

S & E Mechanical operates on a six-week, six-month and annual forecasting schedule in the form of a pro-forma statement. This provides projected cash requirements, as well as profit and volume goals for the year.

The six-week analysis monitors movement towards the target, and the six-month analysis offers an opportunity to restructure work to fit the goals.

Barnhart likes a steady pace. "We expand slowly, but when we do it is in a permanent fashion," he says.

He believes many companies expand for expansion's sake without realizing that profit margins are reduced with expansion. They run short of top-notch people, increase overtime costs and face employee fatigue and resulting morale problems.

"We would rather have slightly less than our objective in work, look after it well and make our projected profits, than do 50-per-cent more than our objective, not look after it and suffer losses," he says.

One of the keys to stability in his company is the fact that S & E Mechanical has developed clientele in two markets.

"We do about a 60-40 split in large commercial and industrial work," Barnhart says.

Large commercial projects include schools (such as the first phase of St. Joseph-Scollard Hall in North Bay), hospitals (such as Hornepayne and Iroquois Falls), industrial projects (such as the TransCanada Pipeline station), malls and inns.

Much of the company's industrial work is done for mining companies such as Lac Minerals Ltd.'s Macassa division in Kirkland Lake, Falconbridge Ltd.'s Kidd Creek division in Timmins, as well as for lumber companies such as Malette Inc. S & E Mechanical has also built several water and sewage treatment plants.

However, S & E Mechanical does not bid on small commercial or residential projects.

"We are engineers, not plumbers," Barnhart says. "We are looking for more complex construction than the average plumber would want to do."

The company-owned former Hollinger Mine buildings in Timmins house S & E Mechanical's head office, pipe fabrication shop, metal fabrication shop and warehouse.

Barnhart moved to North Bay in early 1990 to open up an office in his home. It has recently moved to rented premises in the industrial part area of Seymour Street.

Barnhart estimates that his company now does 40 per cent of its mechanical work in North Bay. The next step will be to hire a general manager in North Bay to free Barnhart for supervision of both operations.

He says his wife, Gail, has been invaluable in helping him maintain his perspective in the human resources aspect of the business.

The motto that best suits his management philosophy is, "You can attract more people with honey than with vinegar."

"I've always tried to treat my people that way because a company is only as good as the people who work for it," he explains.

One of his major concerns, from a supply point of view, is the effect free trade is having on Canadian manufacturers.

An increasing amount of manufactured equipment must be ordered from the United States because it cannot be obtained in Canada. And with that change comes newly dictated credit terms from large American companies that do not have a clue who S & E Mechanical is.

Barnhart says he makes his purchases locally, whenever possible.
COPYRIGHT 1991 Laurentian Business Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Report on Timmins; S & E Mechanical
Author:Smith, Marjie
Publication:Northern Ontario Business
Date:Oct 1, 1991
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