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Volume 69, No. 07 November/December 2010

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COMPETITIVE Are you ready to take EDGE on the new world order? Return undeliverable items to Plant Circulation Dept., 8th Floor, One Mount Pleasant Road, Toronto ON M4Y 2Y5 PM 40070230

Survey says SMEs are optimistic, but there’s some work to do

HIGHLIGHTS ICI commercializes its innovation New life for old chemicals Gearing up turbine maintenance More money for US states Robot arm goes nuclear

12 14 17 18 20


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Cash flow + R&D = innovation

T

he September numbers for manufacturing shipments were a bit of a downer. Statistics Canada reported a 0.6% decrease with 13 of 21 industries registering lower sales. This has pundits wringing their hands over how manufacturing’s ongoing malaise is going to mess up the Bank of Canada’s growth forecasts. Manufacturing took quite a clobbering in the final innings of last year’s recession. The sector, concentrated in Ontario and Quebec, shrank by 28% and more than 185,000 workers were laid off. Plants have recovered about 45% of their production, but the sector is still off by 18% compared to pre-recession levels. You’d think the SMEs, who comprise the biggest share of our manufacturing world, would get the hint and feel more pessimistic about their prospects, but according to the results of PLANT’s Business Outlook: 2011 survey, senior executives at 384 Canadian firms are feeling pretty good about things, thank you very much. They’re expecting orders and sales dollars to increase (prices and profits to a lesser extent). Most are almost exclusively serving the domestic and US market, but a growing number of them are planning to jump the fence and see what the rest of the world has to offer. They’re also looking at expansion: more hires, plant capacity and new lines of business. Incidentally, almost all of them intend to invest next year in process improvement, plus some training, machinery and equipment, and R&D. It’s generally acknowledged that for manufacturers to make their way in the world, they’ll need to be more productive and place greater emphasis on innovation. If they need persuading, a comprehensive Canadian Manufacturers & Exporters (CME) study of product design and development proves the point. It shows best in class firms derive more than 35% of their revenues from new or significantly improved products. They invest more than the laggards in R&D, commercialization and market research. SMEs have some work to do in that regard. They’re proud of the quality they produce and consider it a competitive advantage, but the PLANT survey shows innovation is well down their list of competitive advantages. Of course, it takes money to be innovative and that’s hard to come by, what with tight bankers and economic meltdowns interfering with cash flow and good intentions. During a PLANT-hosted roundtable, Al Diggins, president of the Excellence in Manufacturing Consortium, noted SMEs have ideas and they have patents, but many opportunities have slipped away because they couldn’t secure financing. That’s precisely the kind of thing that’s bugging CME president and CEO Jayson Myers. He’s tired of government lecturing businesses on the need to innovate and improve productivity. Government, he says, needs to help improve the investment environment by leaving more cash in manufacturers’ hands. It’s federal budget time. CME wants government to extend the write-off for machinery and processing technologies, and to make the SR&ED tax credit refundable. That might be a bit of a hard sell to a cash-strapped, minority government wallowing in deficit, but Stephen Harper and friends should consider the impact a floundering manufacturing sector has had on the economy during the past two years, and view such measures as a wise investment. Joe Terrett, Editor Comments? E-mail joe.terrett@plant.rogers.com.

Editorial Advisory Board: Robert Hattin, Hattin Holdings • Ron Harper, Cogent Power • Greg MacDonald, Wentworth International Services • Roy Verstraete, Anchor Danly

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Vol. 69, No. 07, November/December, 2010 Publisher: Tim Dimopoulos 416-764-1499 tim.dimopoulos@rci.rogers.com Group Editorial Director: Lisa Wichmann 416 764-1491 lisa.wichmann@rci.rogers.com Editor: Joe Terrett 416-764-1546 joe.terrett@plant.rogers.com Features Editor: Noelle Stapinsky 416-764-1449 noelle.stapinsky@rci.rogers.com Contributing Editors: Ron Richardson, Steve Gahbauer Art Director: Kathy Smith 416-764-1542 kathy.smith@rci.rogers.com Junior Web Producer: Jessica Mirabelli 416-764-1316 jessica.mirabelli@rci.rogers.com Director of Sales, Marketing and Customer Service: Laura Goodwin 416-764-1492 laura.goodwin@rci.rogers.com

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ROGERS BUSINESS & PROFESSIONAL PUBLISHING Senior Vice-President: John Milne Vice-President, Financial Publishing, Brand Extensions & Online Services: Paul Williams Director of Audience Development: Keith Fulford 416 764-3878, keith.fulford@rci.rogers.com Executive Publisher, Industrial Group: Tim Dimopoulos CORPORATE SALES General Manager, Corporate Sales: Sandra Parente 416 764-3818, sandra.parente@rci.rogers.com WEB General Manager, Online Operations: David Carmichael 416 764-3820, david.carmichael@rci.rogers.com RESEARCH Senior Director, Rogers Connect Market Research: Tricia Benn 416 764-3856, tricia.benn@rci.rogers.com EVENTS General Manager, Conferences & Events: Stephen T. Dempsey 416 764-1635, steve.dempsey@mtg.rogers.com

11

PHOTO: iSTOCKPHOTO

Editorial

12

Features

>> TRENDS

10 Automotive Production is up but the Canadian industry needs to expand its markets beyond North America. 11 Business Outlook Manufacturers are optimistic about their prospects, but there’s work to be done sharpening their competitive edge.

>> INNOVATION

12 New Materials Innovative Composites International is moving from R&D to commercialization of its new composite materials. 13 Engine Technology Auto21 researchers are working with industry on cleaner engine alternatives.

>> SUSTAINABILITY

14 Industrial Recycling Fielding Chemical Technologies is giving new life to used chemicals and promoting green chemistry. Green Manufacturing Cash in on easy energy savings by doing more than turning off a few lights.

>> OPERATIONS

16 Maintenance As more wind energy comes on line turbines and other components will need attention.

Think Lean “Stand in the circle” to understand reality and maximize value stream mapping.

>> MANAGEMENT

18 Finance States struggling with budget shortfalls are taking a closer look Canadian firms operating in the US. 19 Exporting Success in a new market depends on making the right decision on how to enter it.

>> TECHNOLOGY

20 automation OPG gets a 360-degree view inside its reactors with MDA's nuclear robotic arm.

Departments

4 Industry View 6 Events 7 PLANT Pulse 8 Labour Relations 21 Product Showcase 22 Postscript

Subscription Department: For subscriptions services e-mail: rogers@cstonecanada.com 416-932-5071 Fax 416-932-1620 Outside Toronto 1-866-236-0608 Mail: Canadian PLANT, Circulation Dept. 7th Floor, One Mount Pleasant Road, Toronto ON M4Y 2Y5 Subscriber Services: To subscribe, renew your subscription or to change your address or information, please visit us at www.rogersb2bmedia.com/plnt. Mail Preferences: Occasionally we make our subscriber list available to reputable companies whose products or services may be of interest to you. If you do not want your name to be made available, please contact us at rogers@cstonecanada.com or update your profile at www.rogersb2bmedia.com/plnt. Canadian PLANT—established 1941, is published by Rogers Publishing Limited, a division of Rogers Media Inc., One Mount Pleasant Road, Toronto, Ontario, M4Y 2Y5. Montreal Office: 1200 avenue McGill College, Bureau 800, Montreal, Quebec, H3B 4G7. Subscription Price: Canada $69.00 per year, Outside Canada $141.00 US per year, Single Copy Canada $5.50. Plant is published 8 times per year except for occasional combined, expanded or premium issues, which count as two subscription issues. Contents of this publication are protected by copyright and must not be reprinted in whole or in part without permission of the publisher. Publications Mail Agreement #40070230. U.S. periodicals registration no. 0010-881 at Lewiston, N.Y. US Postmaster: Send address changes

16 to Rogers Media, PO Box 4541, Buffalo, New York, 14240, USA Performance claims for products listed in this issue are made by contributing manufacturers and agencies. No responsibility for the accuracy of these performance claims can be assumed on the part of Canadian PLANT or Rogers Media and its agents or distributors. Contents copyright© 2010 by Rogers Publishing Limited, may not be reprinted without permission. Canadian PLANT receives unsolicited materials including letters to the editor, press releases, promotional items and images from time to time. Canadian PLANT, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such unsolicited submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. This statement does not apply to materials/pitches submitted by freelance writers, photographers or illustrators in accordance with known industry practices. Our environmental policy is available at www. rogerspublishing.ca/environment. We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund CPF for our publishing activities.

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Canadian PLANT 3


Departments

>> Industry View

>> Bulletins Rio Tinto Alcan plans to invest US$10 million to expand a bauxite residue containment site at its alumina refinery in Jonquiere, Que. The global miner said the expansion at the Vaudreuil Works will help extend the life of the plant. Work will be carried out over three years. The Vaudreuil Works is the largest inorganic chemicals centre in Canada, producing 1.5 million tonnes of alumina and specialty chemicals each year. Cineplex Entertainment, Canada’s largest motion picture theatre exhibitor, is adding 250 DBOX MFX seats made by D-BOX Technologies Inc. in 10 theatres across Canada with an option for 10 additional locations on the same terms. D-Box, based in Longueuil, Que., makes seats that move in synchronization with the action onscreen. Toronto-based Maple Leaf Foods Inc. has sold its pork processing operation in Burlington, Ont. to an affiliate of Sun Capital Partners Inc., a private investment firm, for $20 million. Peak Energy Services Trust has won a second wastewater treatment contract worth $3.3 million with a major international oil and natural gas producer located on the north slope of Alaska. Its subsidiary, Calgarybased Sanitherm Inc., is in the final stages of constructing a water and wastewater treatment system to support drilling camps for an unnamed customer.

CEOs call for energy strategy, carbon pricing OTTAWA: Canada’s CEOs are calling on all levels of government to come up with a workable, consistent national energy strategy that includes carbon pricing to address the climate change issue. A policy paper by the Canadian Council of Chief Executives (CCCE) says energy stakeholders need to be pulling in the same direction to successfully compete with other countries for the significant investment needed to make Canada an energy and environment leader. It outlines five steps Canadian governments should take: • Work with business and other stakeholders to develop a national strategy for energy policy, building on each region’s strengths and opportunities. • Negotiate a broad Canada-US energy and environmental accord that strengthens the current arrangements on energy, aligning regulatory and other standards where appropriate; and enhancing current efforts on cross-border technology cooperation. • Commit to a national approach to climate policy and carbon pricing, instead of the current patchwork approach. Carbon pricing should be broadly applied across the economy and to consumer end-use, but it would have to be phased in over an adjustment period to avoid unnecessary impacts on competitiveness. • Work with key business sectors on a national strategy to develop and deploy new generations of energy and environmental technology. Success will

$50M for clean tech

Suncor Energy oil sands operations in Alberta.

require increased private-sector commitment to energy R&D, greater industry-university collaboration and strategic public investments. • Strengthen efforts to build a conservation ethic and engage Canadians in a national dialogue on the costs and benefits of various energy choices. The CCCE is an Ottawa-based non-partisan organization with 150 members that engages in public policy research, consultation and advocacy. Download Clean Growth 2.0: How Canada Can Be a Leader in Energy and Environmental Innovation at www.ceocouncil.ca. PLANT

PHOTO: GLOBAL FOREST WATCH CANADA

$16.4M for landing gear components LONGUEUIL, Que.: HerouxDevtek Inc. has been awarded contracts worth more than $16.4 million for additional orders of landing gear components for the US Air Force. The manufacturer of aerospace components based in Longueuil, Que. said most of the orders, mainly for the B-1B, C-130, C-5 and F-15 aircraft, were obtained by newly-acquired Eagle Tool and Machine Co. in Ohio, also a manufacturer of landing gear components. Production will be spread out over the next four years. PLANT

IMP consolidates machining in amherst AMHERST, NS: Nova Scotia-based IMP Group is closing a machine shop in the Dartmouth industrial park and moving it to Amherst, NS. The company is consolidating operations to develop new machining capability for its aerospace division. About 25 jobs will be created and those working at the Dartmouth operation will be offered positions in Amherst. The move is to be completed by the end of March, bringing the workforce at the Amherst operation to about 350. About 45% of Amherst’s work is for the military, including the P3 Orion and Chinook helicopter programs. Amherst News

EDMONTON: The Climate Change and Emissions Management Corp. (CCEMC ) has made $50 million available for the funding of renewable energy projects. The not-for-profit CCEMC, which gets its funding from industry that’s collected through the Alberta government, invests in discovery, development and the operational deployment of clean technologies. “We’re looking for projects that have strong potential to make significant, verifiable and sustainable reductions in GHG emissions through the generation and use of renewable energy in Alberta,” said Eric Newell, CCEMC’s chair. Newell said CCEMC expects to see proposals from industry, municipal utilities, research and development organizations, technology developers and service providers. The maximum contribution to a single project of up to five years will be $10 million. This is the third call for proposals. In June the organization committed more than $71 million to 16 clean technology projects from its first call for proposals. A second call for projects with funding of up to $40 million closed in August. Fifty-two proposals were received from industry with project budgets totalling $591 million. Seventeen projects have been approved to go to the full proposal stage. Visit http://ccemc.ca for details. PLANT

>> PLANT Off-Site (9 05 )6 62 -4 97 9

O’BRIEN Installations Limited Is Ontario’s Leader In providing Turn Key Material Handling Solutions For More Than 45 Years. • Overhead Cranes ¼ Ton – 120 Ton Capacity • Jib Cranes ¼ Ton – 30 Ton Capacity • Wire Rope Hoists and Chain Hoists. (Electric, Pneumatic, Manual) • 24/7 Service • Ontario’s largest inventory of spare parts for all makes and models • Modifications, Modernizations, and Engineering • Maintenance, Inspections and Certifications w w w. o b r i e n i n s t a l l . c o m 4 Canadian PLANT

George Tritidis, vice-president of operations at Expresso Foods in Montreal, takes PLANT along during his vacation in Positano, Italy. Appear in PLANT Off-Site and win $50! Have a photo taken of you reading PLANT in a remote, interesting or exotic location. Send photos with name, title, company, address and phone number to Off-Site, Canadian PLANT, One Mount Pleasant Rd., Toronto, Ont. M4Y 2Y5. Sorry, we can’t return them. Digital photos should be 5x7 inches and 300 dpi. Send them to joe.terrett@plant.rogers.com.

November/December 2010


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Departments

>> Industry View

>> Careers ARISE Technologies Corp. has a new CEO. Daniel Shea comes to the Waterloo, Ont.-based solar technology firm from Research in Motion in Waterloo where he was a senior vice-president. Prior to that he spent 27 years with IBM/Celestica in progressively senior management positions. Alberta Oilsands Inc., a Calgary-based energy company, has appointed Andrew Constantinidis vice-president of finance and business development. Prior to this appointment he was vicepresident and CFO of Calgary-based Eurogas Corp. Stephen Frasher has resigned as president and CEO of Western Forest Products Inc. in Vancouver. Board chair Dominic Gammiero has taken over as CEO. Western Forest Products has eight sawmills and four remanufacturing plants. Ven Côté has retired as president and CEO of ZCL Composites Inc., an Edmonton-based manufacturer of fibreglass underground storage tanks. Succeeding him is Rod Graham, a director and vice-president of the company.

$597,000 for online EMC innovation network OWEN SOUND, Ont.: A group of online innovation networks for Ontario manufacturers has received a federally funded $597,000 cash injection. The Interactive Manufacturing Innovation Network (iMiN), spearheaded by the Excellence in Manufacturing Consortium (EMC), aims to bring together manufacturers, industry sectors, community partners, academic institutions and other stakeholders into a province-wide series of networks that will promote and facilitate awareness, excellence and innovation throughout the province. The funding, which will go towards the first phase of the initiative, is coming from the Federal Economic Develop-

ment Agency for Southern Ontario (FedDev Ontario), through its Community Adjustment Fund. The first networks will be set up in Eastern Ontario (Brockville, Greater Napanee, Arnprior, Cornwall, and Ottawa Valley); Chatham-Kent, Oxford Region (Ingersoll, Tillsonburg and Woodstock); and Windsor-Essex. “Bringing together the entire spectrum of organizations and subject-matter experts that enable manufacturers become more competitive and viable here at home is key achieving long-term retention and expansion,” said Al Diggins, president and general manager of EMC, a not-for-profit manufacturing consortium with 900 company members across the province. Development is well underway and EMC plans to launch each local iMiN before the end of the year. The deployment phase will conclude by March 31. PLANT

>> Events Lean Maintenance in Challenging Times New Standard Institute Dec. 16-17, Orlando, Fla. The session features consultant Joel D. Levitt’s latest book. A lean company can be flexible, react fast to the marketplace, lower prices and stay profitable. Visit www. newstandardinstitute.com. PLC Troubleshooting I CD Industrial Group Jan. 24-25, Kamloops, BC Hands-on program focusing on PLC5 and SLC500, featuring simulations, lab activities with hardware components and basic PLC programming activities. Visit www. carldyke.com. Decor Cabinet Co. Plant Tour Innovation Insights/CME Jan. 25, Morden, Man. An Innovations Insights plant tour at Decor Cabinet Co. where you will learn about manufacturing semi-custom cabinets in a small environment. Presented by Innovation Insights through Canadian Manufacturers & Exporters (CME). Visit www.tvp-ii.org. New Flyer Plant Tour Innovation Insights/CME March 8, Winnipeg An Innovations Insights plant tour at New Flyer where you will learn about 5S, point of use inventory and continuous improvement. Presented by Innovation Insights through Canadian Manufacturers & Exporters (CME). Visit www.tvp-ii.org. Western Manufacturing Technology Show SME June 14-16, Edmonton The Society of Manufacturing Engineers (SME) present the Western Manufacturing Technology Show (WMTS), a showcase for manufacturers of products ranging from machine tools, welding equipment, design engineering and plant maintenance to process control and automation. Visit www.wmts.ca.

6 

November/December 2010


Economy << Departments

Job creation slows, economy limps ahead BY PLANT STAFF

O

ECONOMIC DEVELOPMENTS AND TRENDS GROWTH IN HOURS WORKED LAGS EMPLOYMENT GROWTH hours in thousands employment hours in thousands 17,300 585,000 Total actual hours worked Employment

580,000 575,000

PRICES FOR INDUSTRIAL GOODS INCREASE AGAIN (2002=100)

index 125

17,200

120

17,100

115

17,000

110

16,900

105

16,800

100

16,700

95

Industrial Product Price Index (IPPI) IPPI excluding petroleum and coal products

570,000 565,000 560,000 555,000 550,000

J

J 2008

J 2009

O

S

2010

J 2007

Total hours worked fell 3.7% during the economic downturn but picked up by 2.9% in October. Unlike total employment, the number of hours worked in the month remained 0.9% below the October 2008 level.

S 2010

RAW MATERIALS PRICES DECLINE

INDUSTRIAL SECTORS’ CONTRIBUTIONS TO GDP index 230

All industries

(2002=100)

220

Agriculture and forestry

Raw materials price 1ndex (RMPI) RMPI excluding mineral fuels

210

Mining and oil and gas

200

Utilities

190

Construction

180

Manufacturing

170

Manufacturing

160 150

Retail

140

Finance and insurance

130

Public sector

120

Others

110 0.0

0.1 0.2 percentage points

0.3

Real gross domestic product increased by 0.3% in August, up from a 0.1% decline in July. Manufacturing grew 0.5% with 13 of the 21 major groups advancing. Non-durable goods – notably chemical products – increased production 0.8%. Durable goods advanced 0.2% led by fabricated metal products, furniture, machinery and non-metallic mineral products. Primary metal products decreased after a gain in July.

www.plant.ca

J 2009

The Industrial Product Price Index (IPPI) increased 0.2% in September following a 0.4% gain in August. Prices were led by primary metal products (up 2%) and to a lesser extent, petroleum and coal products (up 0.5%). The index’s upward trend began in November 2009, although the movement during this time was a moderate 0.9%.

CHARTS: STATISTICS CANADA

-0.1

J 2008

100

S

J 2007

J 2008

J 2009

S 2010

A 3.3% decline in mineral fuels prices helped trim the Raw Materials Price Index (RMPI) in September by 0.4%. Higher prices for non-ferrous metals (4%) and vegetable products (5.5%) moderated the decline. Excluding mineral fuels, the RMPI increased 2.2% following a 2.9% advance in August. The price movement reinforces the upward trend and returns the index to the same level as in September 2008.

nly 3,000 new jobs were filled in October, yet another indication that the Canadian economy is moving forward, but with a limp. Statistics Canada’s labour report showed the employment rate unchanged for the second consecutive month with 47,000 full-time jobs pulling ahead of 44,000 part-time positions. The unemployment rate, running at 8% for the previous seven months, shaved off 0.1% from September slipping to 7.9%, although fewer Canadians were out looking for work. Since October 2009 total employment rose by 2.2% to 375,000. The last time Canada saw robust employment was in June when the economy added 93,000 workers. Since then, job gains have averaged 5,700 a month, about one-third of what is required to keep up with population growth. Construction racked up the biggest gains with 21,000 jobs followed by manufacturing with 10,000. Service sector jobs declined by 33,000, with much of the erosion coming from retail and wholesale trade. However, manufacturing has sustained significant losses in Ontario and Alberta with job levels remaining 10.8% below pre-crisis levels. Transportation and warehousing jobs were also down 5.4%, and employment in natural resources declined 2.6%. Derek Burleton, vice-president and deputy chief economist for TD Economics, called the shift toward full-time positions and ongoing growth in total hours worked bright spots. He said the overall trend is consistent with modest economic growth in the 1.5% to 2% range. “On a go-forward basis, we expect the trend rate of job creation to continue to head lower in lockstep with sluggish monthly gains of 5,000 to 15,000 per month. Some pickup is expected on the horizon, but not until the mid-part of 2011,” he said in a published bulletin. The scope for a further decline in the unemployment rate and rise in the employment rate are limited, implying only slight increases in average wages. But he said employers are likely to put more emphasis on raising productivity, which could be a boon to business investment. “On the industrial landscape, we foresee job growth in private services and in manufacturing, which are likely to counterbalance softness in construction and public services,” he said. Statistics Canada noted job gains were strongest in Alberta, with 17,000 additional workers, while Nova Scotia fared the worst with a loss of 8,600 jobs. Hourly wages increased by 2.1% over last year. Since employment peaked in October 2008, the country lost 417,000 jobs during the slump while recouping 423,000. Files from Canadian Press

Canadian PLANT 7


Departments

>> Labour Relations

Auto workers are saying, “Enough” By Ken Lewenza

I

t’s been two years since the financial sector’s recklessness and greed plunged the world economy into recession and cost millions of people their jobs. Now we face stark choices about the kind of future we want. With high unemployment and a weak global economy, employers worldwide are telling workers to cut wages as governments target social programs. They’re counting on workers joining this retreat from progress, but many are saying no.

During the turbulence, auto parts workers provided painful “cost savings through wage freezes and cutbacks… ”

average Canadian wage. On Oct. 27, auto parts workers sent two strong messages. First, we reminded auto assemblers that throughout the recent crisis workers have been part of the solution. We didn’t re-negotiate our agreements with assemblers so they could relentlessly drive down conditions for parts workers. We will fight to keep work in our parts plants. Second, we told auto parts suppliers to

Consider recent events in Britain and France, while in Canada 15,000 auto parts workers demonstrated on Oct. 27 at more than 100 workplaces to defend good jobs in our communities and say: Enough is enough! A job in an auto parts plant is hard work. Workers deserve to earn a decent wage to support a decent standard of living. An autoworker’s average pay is about $19 per hour – slightly below the

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Such attentiveness is what makes these companies successful in the first place. The challenge, though, is having enough time to craft a plan to take your enterprise to the next level. Many small business owners aim to grow their customer base, while balancing cash flow and inventory levels. Others strive to enter new markets. Though the end goal might be different, there’s one key commonality: each business requires its own unique plan, developed through research, networking and a clear vision of the company’s ideal trajectory. On that note, David Wilton, director of small business banking with Scotiabank, sees immense value in careful planning. Scotiabank’s advisors across the country work with small enterprises from all callings—manufacturing to retail to services—and have noticed the all-toocommon hitches faced by small companies. “With growth often comes cash flow challenges,” Wilton says. “That’s why it’s important to have a strong business plan that you use as a roadmap to deal with challenges and opportunities as they become evident.” One company keeping an eye out for those opportunities is GRI Simulations Inc.

Although it was founded only seven years ago, this developer of software and computer modeling technology for underwater operations has found its niche. “There isn’t another company in the world doing what we’re doing,” reflects Russ Pelley, co-owner and president of the Mount Pearl, Nfld. based company. “That in itself was a challenge—trying to project what our income would be.”

50 per cent, how much incremental cash flow would I need to increase inventory and receivables 50 per cent?” With receivables, you could review policies, payment terms and methods— cheque, Visa or a number of other mechanisms—that might allow remittances to grow at a slower rate than revenue growth, thereby protecting cash flow.

“With growth often comes cash flow challenges. That’s why it’s important to have a strong business plan that you use as a roadmap to deal with challenges and opportunities as they become evident.” Cash flow was another pressing issue, in part because growth in international markets required the company to be present at trade shows in the U.S., Europe, Central and South America. To help forge a game plan, Pelley brought in Scotiabank. “My philosophy is let your bank know pretty much everything you’re doing,” he says. In fact, regular communication with a trusted advisor underpins any successful expansion plan, adds Wilton. Growth is typically more complex than it first appears, so getting the right advice, and making use of tools such as business plan writers and forecasting guides are key steps. “These tools allow you to investigate the natural outcomes of various levels of growth. They include a ���nancial projection tool that let’s you play ‘what-if?’ So, for instance, it lets you model questions, such as ‘if my revenue were to increase

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Invest in productivity The success of our parts industry is based on its highly skilled workforce, high productivity and top-level quality. Production costs are in line with other advanced auto-producing regions, so arguments that we should follow a low-wage path to compete with Mexico and China are absurd. We need to continue investing in technology and productivity instead, the goal being progress for workers around the world – not a race to the bottom. We also need to focus on the industry’s real problems. Auto trade remains a one-way street for Canada, with offshore imports reaching a record market high of 26% last year, while we send nothing the other way. The solution is managed and balanced trade, not more one-way free-trade deals. To make matters worse, the Canadian economy has been too closely linked to oil, making our dollar soar, which is pricing many manufactured goods out of their markets. We need policies that will encourage a lower, more stable dollar and we need sustained industrial policies aimed at growing the auto industry. However, it’s likely an auto parts employer will test our resolve. We don’t want confrontation, but we will mobilize all our resources to resist employer demands, including demonstrations, occupations, plant shutdowns, and refusing to handle disputed auto parts in our assembly facilities. While we don’t know where our efforts will take us, we know what kind of future we’ll have if we don’t fight back. Ken Lewenza is the president of the Canadian Auto Workers Union, which represents 225,000 workers. E-mail cawcomm@caw.ca. Comments? E-mail joe.terrett@plant. rogers.com.

8 Canadian PLANT Scotiabank_SB_C.indd 1

“stop pushing!” We will work to secure investment and build high-quality and productive workplaces, but we’re not going to cut wages or pensions, nor will we sign two-tier agreements that will permanently lower conditions for the next generation of workers. We did not go down that road during the worst of the financial crisis, and we are not going to head down that road now. The very existence of the automotive industry was at stake last year. Canadian governments understood that a halfmillion jobs were on the line, but their short-term relief was meant to save good jobs, not help turn them into bad ones. During the turbulence, auto parts workers provided painful cost savings through wage freezes and cutbacks to benefits, work rules and time off. Profitability is now returning to the industry, and auto production is up strongly in Canada – by two-thirds so far this year – and it’s expected to return to pre-crisis levels within two years.

November/December 2010 5/4/10 2:58:35 PM


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Trends

>> Automotive Industry

Missing the

Emerging markets will provide the most opportunity for global automotive sales.  PHOTO: iSTOCKPHOTO

BOAT

Canada must do more to tap emerging markets By Joe Terrett, Editor

S

everal months of weak global car sales ended in September with the strongest year-over-year increase since May and Scotia Economics is forecasting sales this year will top 56 million units, a 5-million unit improvement over 2009. The Canadian auto industry is riding the wave, with vehicle production up 56%, and it’s outpacing US growth by 6%, but Scotia Economics’ Global Auto Report attributes much of the global turnaround to Russia, India and China. Indeed, it’s the developing economies that offer the most opportunity for future growth. That presents a problem for Canada with vehicle exports tied almost exclusively to the US, a market chief economist Carlos Gomes describes as having “limited upside.” “In fact, Canada is the only major auto manufacturing nation that relies almost exclusively on one export market, and is not diversified and well positioned to benefit from rapid sales gains in emerging markets,” he noted in the report. As of last year, Canada has dropped out of the top 10 vehicle producers in the world from eighth place, even slipping behind Mexico’s 18% of the North American market’s assemblies with 17.4%. Unlike Canada, Mexico is diversifying its export base. Over the past 10 years it has been reducing the number of North American-bound assemblies from 95% to 70%. Almost 9% of its car and truck exports are going to South America, 12% to Europe and 4% to Asia. The US is also looking farther a field with nearly 60%

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of its output heading overseas, up from 20% 10 years ago. Most of its exports have gone to Germany, Saudi Arabia, the United Arab Emirates and the UK, but the report notes sales to China have climbed nearly fivefold, surpassing Germany as its third-largest market. Now China, Brazil, Russia and India account for nearly 10% of overall US vehicle exports, up from virtually nothing a decade ago. Even India, the world’s seventh largest vehicleproducing nation, and twenty-second in automotive exports, has an Automotive Action Plan that aims to boost exports from about $4.5 billion annually to $12 billion by 2016. Gomes cited Ford Motor Co.’s plans to export the mid-sized Edge crossover made in Oakville, Ont. to China, but initial annual quantities will be just 4,000 to 5,000 units. “The Canadian industry should continue to seek opportunities to redirect some of their output to the fastgrowing emerging auto markets, to keep Canada from slipping further down the global production ladder.” Auto parts suppliers are doing just that. The Automotive Parts Manufacturers’ Association (APMA) recognizes the need to break out of the North American market and Steve Rodgers, the trade group’s president, has been on the road promoting Canadian export opportunities, a journey that has taken him to China, Mexico, and a technology show in Wolfsburg, Germany. He also made a return trip to Wolfsburg for the Automotive Excellence Awards where two Canadian suppliers have won innovation awards. “This is the first year that Canada has ever been allowed to compete in this prestigious competition and we went after that right to

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get visibility for Canadian technology and to increase the business opportunities,” says Rodgers. But raising Canada’s export profile beyond the North America is not a simple matter. “We have to remember that the automotive industry is still generally a just-in-time, very competitive business where local suppliers always have a cost advantage over those shipping from a distance,” says Rodgers. He doesn’t think a national automotive trade strategy like India’s would change the export dynamic much. “Virtually every country requires a certain amount of local content. In NAFTA we have a very integrated trade model. A national strategy that might attract an engine and transmission plant here would not necessarily increase exports. Key components probably would logically come from the US and Mexico, dropping us below the threshold where the engine or transmission could be shipped duty free back to a European country. This further reduces competitiveness.”

Invest in emerging markets Peter Hatges, head of KPMG in Canada’s corporate finance practice, acknowledges North America is one of the most saturated markets in the world, but he thinks the question for parts suppliers is less about exporting product to China and more about whether Canadian companies are willing to make the necessary investments in emerging markets. “Magna doesn’t necessarily supply its European operations from Canada. They have plants all over the world. Are Canadian firms as global as they should be?” He says the future of automotive production for parts suppliers and OEMs will be coping with global expansion and being meaningful suppliers on a global scale. Off course, another factor hampering wider global export is the fact Canada doesn’t have its own car companies and the global companies that own the plants aren’t thinking about Canada’s exports. “They put a plant in Canada to service certain needs and goals of the company...They view us as part of the North American market and that’s what the plants are here for,” says Jim Stanford, chief economist for the Canadian Auto Workers union (CAW). He considers trade policy to be a significant issue for the Canadian industry, citing the $12.1 billion disparity between the number of vehicles shipped out of North America and the number that came in last year. North America is perhaps the most open vehicle market in the world (30% is imports), but he says trade policies in Asia have very effective limitations on imports. Even Europe limits imports to less than 10%. There are measures the government could take other than free trade agreements to aid vehicle exports. Stanford suggests incentives for capital costs that could build capacity for offshore trade and there are policy initiatives that could be implemented. An example is a duty drawdown system that would give a company credit on import duties it pays on vehicles it brings into the country reflecting based on the Canadian-made vehicles being exported offshore. “Japan, China and Korea don’t practise free trade,” says Stanford. “They do what they need to do to build their domestic markets. It’s time Canada took off the Boy Scout uniform.” Comments? E-mail joe.terrett@plant.rogers. com.

10 Canadian PLANT

November/December 2010


SMEs are optimistic By Joe Terrett, Editor

Business Outlook 2010 << Trends

sales and being competitive (both at 33%); training and finding skilled workers, and new product innovation (both 30%); and managing growth (29%). Expansion over the next three years is on their minds: 44% are planning to hire new employees, 31% are adding new lines of business, 33% intend to enter new geographic markets and 23% say they will expand their plants. This year’s respondents are as North Americabound as last year’s group. Most of their business comes from Canada (almost 70%) and the US (22%), with BRIC countries placing a distant third (2%), followed by Western Europe (1.6%). Of the 163 companies planning to explore new markets, 56% will focus on the US, 50% on Canada, 27% on Western Europe, 18% on Central/South America (excluding Mexico and Brazil), 16% on China, 15% on Brazil, 11% on India and 6% on Russia. Transportation issues (39%) and competition (39%) are the main barriers to growth outside North America, followed by currency fluctuations and market demand (24% each); however, financing appears to be a major issue for just 14% of respondents. Most of the companies (96%) are dealing with productivity this year by investing more heavily in training (58%) than technology (50%), automation (33%) and outsourcing (23%). Next year training is on the agenda for 22%, technology for 26%, automation for 20% and outsourcing for just 9%. David McPhail, president of Memex Automation Inc., notes the respondents’ lower priority for technology and observes Canadian companies are less receptive to his product than US customers. The Burlington, Ont. company makes hardware and software that helps companies improve the efficiency of their machinery by a proven 20% to 50%. Return on investment is between 30 to 60 days. “Sight unseen, we sell it to US manufacturers with a simple webinar. In Canada we have to go through an arduous process followed by capital expenditure approval. It’s a six- to nine-month sales cycle, while in the US it’s three months,” says McPhail. He sees their reluctance to adopt such technology as a cultural issue. “How we change that is a problem we struggle with as a manufacturer.” Collectively, investments in facilities will average more than $1.2 million, about 12% more than the $1.1 million planned for machinery and equipment. Those not investing or developing new products are more concerned with keeping their companies afloat. Looking beyond near-term concerns, Menzies sees endless opportunity for manufacturers that can continue to grow, improve their productivity, proactively manage their risks and implement sound strategies. 

Survey says orders,

T

he global economy is coming back to life after last year’s economic meltdown, and Canadian manufacturers are getting back in the game. But they're facing a very different business and trade environment. The US economy remains sluggish as it detoxifies from the effects of the downturn, and it turns out some of the best opportunities for business reside outside of North America in parts of Europe, Asia and South America, where Canadian companies, most of them small and medium-sized enterprises (SMEs), have virtually no presence. So how confident are SMEs about current market conditions and the competitive challenges they will face over the next few years as manufacturers from around the world compete for their customers? Are Canadians productive enough? Are they innovative enough? Will they be competitive? That’s the focus of PLANT’s Business Outlook survey for 2011, which polled 384 senior manufacturing executives from across Canada. Most (83%) are SMEs, 80% of them are privately owned, and 63% of those firms are family owned. Their annual revenues will average $58.6 million this year and $67.7 million next year. This year’s executives are more optimistic than last year’s group. They expect business to be better on all fronts: 64% are predicting orders will be up, an improvement over last year (58%); and 63% are expecting the dollar value of sales to increase, but only 31% see prices increasing while 43% are looking forward to higher profits. “Manufacturers know they produce high quality products; however the costs to produce that quality need to be lowered to enhance their competitiveness,” says Jim Menzies, national leader of Grant Thornton LLP’s manufacturing and distribution practice in Toronto, a sponsor of the survey.

sales, prices and profits are on

Focus on longer-term strategy

PHOTO: iSTOCKPHOTO

the way up

Although manufacturers realize expanding to new geographic markets will open up significant opportunities to increase their revenues, Menzies says the uncertainties that come with foreign expansion such as transportation and logistics issues, currency fluctuations, plus a lack of market knowledge and experience, all make it an anxious proposition. “They also realize they need to focus on longer-term strategy and risk management, however many of them have been focused primarily on ensuring that the company continues to operate in the near term, hampering their ability to truly focus on their longer term objectives.” Earlier this year, the Conference Board of Canada – in a comprehensive innovation Comments? E-mail joe.terrett@plant.rogers.com. report – gave Canada an overall mark of "D". Share of global patents filed contributed to the poor grade, with Canada holding just 1.36% – way behind the US with 30%. But there are other ways to demonstrate innovation. ® “In our business a lot of brilliant things have been Special Line SGP copyrighted. It protects you as well, but you don’t have to go through the same turmoil as [you would] with a ■ Smooth finish allows easy visual inspectiofor POLIFAN®-CURVE is a new PFERD innovatiodesigned to quickly defects, such as porosity and inclusions. achieve a smooth, consistent surface finish ofillet welds. patent,” says Bjorn Tranebo, vice-president and gener■ Ideal for repair applications to remove defects without damage to al manager of the Wheelabrator Group, a manufacturer adjacent areas. Leaves ample room for new weld bead. The unique radial constructioshape (PFR) offers a superior solutiofor ■ Excellent tool life, including the radius edge of the disc. this commotask. of surface preparation machinery in Burlington, Ont. ■ Multi-purpose – may be used as a conventional flap disc, and also Al Diggins, president and general manager of the Exfor underhand applications using the top of the disc. ■ Tough and aggressive - removes scale and bead from all metals: steel, stainless steel, aluminum and alloys. cellence in Manufacturing Consortium (EMC), identified Recommendatiofor use: ■ Works faster thagrinding wheels without the risk of undercutting a ground-level impediment that slows the flow of CanaThe best results are achieved ohigh-performance angle grinders the workpiece. Medium for fillet weld widths > 3/16”(5 mm) ■ Precise grinding out of fillet welds provides a superior surface dian innovation. “SMEs have ideas and they have patLarge for fillet weld widths > 5/16” (8 mm) finish. ents; what they don’t have are sympathetic bankers who Steel/Stainless steel (INOX) will provide the financing to get those ideas to market. Type SGP-ZIRKON-CURVE The POLIFAN® SGP ZIRKON-CURVE is a high-power tool for demanding grinding work with particularly high machining capacity. We’ve seen many opportunities come and go because we’re dealing with banks that are very resistant.” Abrasive: Zirconia alumina Z: Grit size: 40 The survey asked SMEs to list their competitive Workpiece materials: Steel, stainless steel (INOX) advantages. Innovation was well down the list at 6%. Application: Fillet weld grinding, chamfering, deburring Quality (24%) was the first choice, followed by customer services (16%), unique products/service/niche (14%), Diameter Disc Thickness Fillet Weld Width Grit Unthreaded Arbor Hole Threaded Arbor Hole Max. expertise/experienced workforce (12%) and custom(inches) (inches) (inches) size Bore (inches) EDP No. Thread EDP No. RPM ized /personalized/flexible solutions (9%). The chief 4-1/2 9/16 Medium > 3/16 40 7/8 67192 5/8-11 67212 10 13,300 competitive disadvantage identified by 18% is cost. 5/8 Large > 5/16 40 7/8 67339 5/8-11 67359 10 13,300 4-1/2 Topping the list of SME’s concerns for 2013 are 5 9/16 Medium > 3/16 40 7/8 67196 5/8-11 67216 10 12,200 business development and expansion (35%) and con5 5/8 Large> 5/6 40 7/8 6743 5/8-11 6763 10 12,200 trolling costs (34%), closely followed by increasing

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Innovations

>> New Materials

By Noelle Stapinsky, features editor

C

anadian manufacturers are certainly capable of coming up with innovative ideas, but commercializing them can be – and often is – quite a challenge, especially for smaller firms. It has never been easy for Innovative Composites International (ICI), but its founders stick to a tried and true formula learned while developing and commercializing new technologies for the automotive industry. About three years ago, this group of managers and engineers decided it was time for a career change. Founder and president Terry Ball has 25 years of technology commercialization expertise, specializing in manufacturing processes for plastics and composites. That includes 18 years at Magna International and as the former president of Magna’s Decoma Exterior Trim division. Fraser Wray, ICI’s executive vice-president, was a former president and CEO of Decoma International and a vice-president at Magna, with extensive expertise in financial advisory services. And John Sorge, ICI’s vice-president of sales and marketing has about 24 years of experience doing marketing for thermoplastic-manufacturing companies. They established Toronto-based ICI with a strategy to develop thermoplastic composite materials and technologies. Today, it’s a rapidly growing business commercializing two patented product lines and forecasting sales of about $4 million for 2010. Its Structure Lite panels are application-ready structural composites and the Hero 451 line is an environmentally friendly fire inhibitor and suppressant. “We felt that the composite industry was really underdeveloped and it was an emerging market,” says Ball. But simply having a great product is not enough—just ask the guys who invented the Beta videocassette.

Taking risks “Nobody wants to take risks these days,” says Ball, who notes the industry is still focused on old technology. “It would be nice to believe that you can get a bunch of cash from a customer, but it’s not practical. To get a customer to take a risk you really have to show them a significant advantage.” It starts with establishing a solid technical base and understanding your product’s advantages and attributes. Ball recommends building a bank of data and backing it up with third-party testing, proving how the product benefits a customer, before pitching the idea. “Once you have the customer interested in a product, build a prototype,” says Ball. “When [the customer] can see it, feel it and touch it, that’s when you’re really going to sell new technology,” says Ball. “The customer has to see a significant advantage; how will it improve market share and grow their business?” Getting start-up funds as a new company wasn’t easy either. ICI did some fundraising in Canada, acquiring about $2 million, part of which came from a publicly traded

12 Canadian PLANT

Taking a winner to

market

ICI commercializes

its innovative composites

material to construct and build portable or temporary emergency houses for areas that have experienced a natural disaster.” All of the panels, which vary in size and thickness, are manufactured on the same production line. In fact, ICI’s custom machinery is capable of producing each of these panels, one right after another. By adjusting the settings to accommodate multiple sizes, the machinery will change pressures and temperatures automatically for each type of material. “The whole idea is that [our production equipment] needs to be very flexible with no changeovers,” says Ball. “This is something we designed based on our experience in the automotive business—where you always needed to be more flexible.”

Reaping the benefits

ICI founder and president Terry Ball with a small section of FRT panel that has stopped a 44-calibre Magnum round. The fibre slows and dissapates the impact. PHOTO: NOELLE STAPINSKY

company. And when ICI became a public company it raised an additional $2 million through convertible debentures held by Windsor-based Toldo and Magna JV. All of this effort has resulted in ICI’s value proposition, fibre reinforced thermoplastic (FRT) composite panels that are a less expensive, more efficient, lighter and a stronger structural alternative material for use in the construction, defence and transportation industries. Of course, the next big challenge was manufacturing the equipment it needed to produce the composite. “Basically, we took a laminator and reengineered it in such a way that it was parallel, had good temperature controls and was consistent in its ability to apply pressure across a wide, long panel,” says Ball. The panels consist of a composite material called X-Ply Skin—bonded thermoplastic molecules with structural fibres such as fibreglass or Kevlar, which laminates to a variety of core materials. One of ICI’s brands, Structure Lite, is designed as an alternative to wood, plywood, particleboard, steel or aluminum. Such panels could also be used for transport truck trailers, offering the strength and durability of steel, only lighter. Consolidating many layers of the con-

tinuous fibre thermoplastic also makes the FRT an effective ballistics material. There’s a molecular web between the continuous strands. When a bullet strikes the material, the ballistic panel pulls from a very large area, spreading the impact as the thermoplastic gums up the end of the bullet. “Most police cars in North America will need to have ballistic panels installed in the front doors,” says Ball. These doors currently use high, hardplate steel with a ceramic front, which makes them heavy. ICI’s panels are a quarter of that weight, so there’s no need to redesign the door, making the whole system more cost effective. ICI is also targeting the housing construction market. Its panels are strong enough to replace everything from drywall and wall studs to insulation and siding. Depending on the exterior and interior finish, ICI can manufacture the panels to customer specifications. “There’s an extremely large market worldwide for affordable housing that’s energy efficient. We’re prototyping our new patent design for affordable housing. Two people with wrenches will be able to put this house together in less than a week,” says Ball. “We’re also using the same

With this unique manufacturing process, the possibilities are unlimited. For instance, ICI built a collapsible portable container prototype for Connecticutbased Universal Storage Containers. Using its Structure Lite panels, this container folds down flat, can be constructed by two men in about five minutes and holds up to 10,000 pounds. ICI’s HERO 451 product is sold in Home Outfitters and Hudson Bay stores across the country. When the unique water-based, non-toxic fire inhibitor and suppressant is sprayed on a flammable item such as Christmas tree, not even a blowtorch will ignite it. “As a team we wanted to improve the fire resistance of plastic,” says Ball. “We’ve had some breakthroughs and have new materials and developments coming up.” Indeed, ICI is reaping the benefits of its research and development with its first purchase order coming from Universal Containers International for 20 composite containers to be used as demos for strategic customers. ICI says USC expects to place significantly larger follow-up orders that will be the beginning of full commercial production. A manufacturer of livestock trailers has also placed an order for panels and ICI has shipped a 100-foot long composite pedestrian bridge ordered by Engineered Plastics Inc., part of the reconstruction of the Chicago area transit system, with more orders likely to follow. Working with consortium partners 3D Global Solutions and Barclays Gedi Group (both privately held US companies), ICI is also a finalist in Haiti’s Building Back Better Communities housing competition. And it’s in talks to participate in other affordable housing projects on several continents. Having a crack creative team like ICI’s automotive engineering group to develop its innovative composite products certainly helps to get the commercial wheels turning, but the bigger challenge lies ahead as the company begins its quest for success within multi-billion dollar markets over the coming two years. Comments? E-mail joe.terrett@plant. rogers.com.

November/December 2010


Engine Technology << Innovations

R&D is energizing modern

Solutions when you need them.

powertrains

Never leaving risk to chance.

Cleaner alternative engine options By Peter Frise

T

he car has influenced everything from city planning to how families spend their holidays. People use their cars differently and it has been difficult for automakers to match their vehicles with their lifestyles. An individual’s driving cycle depends on location and personal needs. For example, a farmer in Alberta uses a vehicle very differently than a lawyer living in Oakville and commuting to downtown Toronto each day. In the earliest days of the auto industry, cars were either custom built for the wealthy or they were basic products with few choices. When Henry Ford began selling Model Ts, he famously proclaimed “any customer can have a car painted any colour that he wants so long as it is black.” There were electric and even steam powertrains, but both disappeared as the industry converged on gasoline and diesel internal Auto 21 researchers are engaged in R&D that will make the internal combustion engine cleaner and combustion engines. more efficient. PHOTO: iSTOCKPHOTO Since then, consumer choice has greatly expanded with options based on convenience, comfort and mandated safety Waterloo, Windsor and several other universities are supported enhancements; however, vehicle powertrains haven’t changed by the auto industry as they study the complexities of lithium much until recently with the availability of hybrid and some elecbatteries and the challenges that will inevitably arise once tric vehicles. And more change is coming as Canadian automotive they’re used in real-world situations. researchers engage in more advanced powertrain R&D. When AUTO21 began operations nearly 10 years ago, much of The internal combustion engine has proved to be a steady and the R&D attention was on fuel cells and the hydrogen economy. reliable source of power using relatively inexpensive and readily In an ideal world, fuel cell vehicles emitting only water would available fuel. Driving ranges are long and the fuel infrastructure be the only choice. Research remains active with development offers people the freedom to travel almost anywhere. Indeed, fleets numbering hundreds of vehicles globally, but numerit will likely continue to meet the needs of most drivers for the ous hurdles need to be addressed before hydrogen becomes foreseeable future. But current R&D will make the internal a reality. Cost, durability, and on-vehicle fuel storage issues, a combustion engine even more efficient and cleaner with direct completely new fuel infrastructure and vehicle performance all injection and turbo superchargers. require attention, but one day drivers will have even more choice The AUTO21 Network of Centres of Excellence, in partnership and cleaner travel options. with major automakers, has supported several projects focusing on internal combustion engine technologies since 2001, together Peter Frise is the scientific director and CEO of the AUTO21 directing $19 million into powertrain and fuels research, which Network of Centres of Excellence. Visit www.auto21.ca. is nearly 20% of the organization’s total research budget. Comments? E-mail joe.terrett@plant.rogers.com.

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Many automakers are also investing heavily in clean diesel technologies. Today’s diesels are nothing like their noisy, exhaust-belching predecessors that turned off North Americans in the 1970s. They’re clean running and produce tremendous torque, quietly and with remarkable efficiency. The University of Windsor’s clean diesel laboratory supports some of the world’s best research in clean diesel technology. This facility, partnering with several automakers and suppliers and university researchers across Canada, has received more than $10 million in equipment and personnel support. Today, homogenous charge compression ignition (HCCI) is gaining traction as a means of combining the best features of diesel and gasoline engines for future models. Hybrid technologies are also an emerging force. With several generations of traditional hybrids already on the road, the technology has proved useful for many drivers, particularly those who drive in stop-and-go city conditions. The next big development is plug-in electric vehicles (PHEVs), with several models poised for commercialization thanks to advances in the development of lithium batteries. AUTO21 researchers at Laval, McMaster, Manitoba,

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Canadian PLANT 13 PFERD1.indd 1

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Sustainability

>> Industrial Recycling

>> Green Manufacturing Easy energy savings By Brett Wills

P

lants use a lot of electricity and it’s getting more costly, but harvesting worthwhile energy savings involves more than turning out a few lights. If you are going to reduce energy costs, you must understand how your company is billed. The two main drivers influencing the heft of your bill at the end of the month are the consumption and peak demand charges. Consumption is straightforward: it’s the amount of kilowatt-hours (kWh) consumed within the billing period multiplied by the cost per kWh. For example, if company XYZ has 10 100-watt light bulbs and each one of those light bulbs is on for one hour each month, this would equate to 1 kWh of energy consumption (10 bulbs x 100 W per bulb = 1,000 W or 1 kW x 1 hour = 1 kWh). Therefore, if the price of electricity is $0.10 per kWh (roughly the price in Ontario), the consumption cost for the billing period would be $0.10 (1kWh x $0.10). Peak demand is trickier. Demand in itself is a measure of how fast energy is consumed at any one time. Peak demand is the highest level during the billing period. In other words, it’s the largest one-time draw of energy in a given month and is measured in kW not kWh because it does not matter how long it’s drawn. So it’s the amount of kW multiplied by the peak demand cost per kW. If company XYZ has 10 x 100 W light bulbs and each one of those light bulbs is on for one hour in the month, making sure to only have one light on at a time, the largest demand (peak demand) in the month would be 100 W. If the peak demand cost is $6.20 per kW, the peak demand charge for the billing period would be $0.62. (100 W = 100 kW x $6.20 = $0.62). So the total billing costs for the month would be $0.72 ($0.10 consumption charge + $0.62 peak demand charge). However, if company XYZ turns on all 10 light bulbs at the same time, the largest demand (peak demand) for the month would be 1,000 W or 1 kW (10 x 100 W). Assuming again the peak demand charge is $6.20 per kW, the peak demand charge for the billing period would be $6.20 (1,000 W or 1kW x $6.20). Therefore in this scenario, the total billing costs for the month would be $6.30 ($6.20 + $0.10). Note the dramatic difference. Give your bottom line a break and be aware of how much energy is being used at any one time. Managing energy use more acutely will drastically lower energy costs with little to no investment. Brett Wills is the director of the Green Enterprise Movement and a senior consultant with High Performance Solutions in Cambridge, Ont. He is also the author of Green Intentions: Creating a Green Value Stream to Compete and Win, published by Productivity Press. E-mail bwills@hpsinc.ca. Comments? E-mail joe.terrett@plant.rogers.com.

14 Canadian PLANT

Green chemistry

Fielding gives new life to used chemicals By Kim Laudrum

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t burns Ellen McGregor to see manufacturers send chemical waste to be incinerated. Organic chemicals are derived from oil, says the president of Fielding Chemical Technologies Inc. “When a manufacturer chooses to burn their chemical waste, they are burning a non-renewable resource.” Spent chemicals, such as those in the gunwash used to clear paint guns in the automotive industry, isopropyl alcohol used in making pharmaceuticals, or even harmful refrigerants, can be recycled— some restored like new—says McGregor. “It’s better for the environment to recycle chemicals than to incinerate them or use them to fuel cement kilns. It leaves more of a carbon footprint to produce virgin chemicals. It leaves more of a carbon footprint to continue to mine our lands for oil. So, if you’ve protected that non-renewable resource in a way that’s responsible to the environment, you have served the environment in a better way than to use it for fuel.” The company has been recognized for its enviromental focus and green efforts, winning Deloitte’s 2010 Canadian Technology Green 15 award which acknowledges any technology that promotes more efficient use and reuse of resources in industrial production or consumption. Not surprisingly, McGregor is a proponent of green chemistry, a relatively new, burgeoning sector within the $3-trillion global chemistry industry. Driven by sustainability and climate change challenges, green chemists aim to design products and processes that eliminate or minimize damage to the environment while reducing waste and energy consumption. For example, the patent holders of painkiller Ibuprofen revisited their formulation in the 1990s, substantially reducing the use of solvents per kilogram of drug produced by using green chemistry. This reduced the waste generated and substantially improved their profitability. A chemical recycling business since 1955 when Ellen’s father Jack McGregor convinced Ford Motor Co. of Canada to reclaim its gunwash, Fielding continues to pursue environmental solutions for manufacturers. The solvent and refrigerant recycler’s credentials include registration to the environmental management standard ISO 14001 and the quality

standard ISO 9001. The Mississauga, Ont.-based company, which has 60 employees, is a member of both Ontario’s Environmental Leaders and the chemical industry’s Responsible Distribution programs. And it recently mentored Rejuvenate, a green chemistry startup that has since sold one of its innovations. Fielding is one of eight industrial sponsors of GreenCentre Canada, a national Centre of Excellence established at Queen’s University in 2009 for commercializing early-stage green chemistry discoveries. GreenCentre Canada brings together researchers from universities across Canada, teams them up with private investors, provides laboratory facilities and funding with the intention of bringing innovations to the commercialization stage. To date, 160 disclosures from 68 research groups at 23 institutions have been identified. The centre has secured $24 million in funding and created 18 highly skilled jobs at its 10,000 square-foot facility. One recent project with interesting potential is the creation of a solvent that changes its polarity characteristics. Rui Resendes, GreenCentre Canada’s executive director, says it’s used to resolve some significant environmental challenges. It could help deal with expanded polystyrene foam or post-consumer motor oil containers that end up in landfill sites.

Back in black While green chemistry is good for the environment, another important driver of innovation is dollars and sense, says Resendes. It makes sense to use less energy, use resources more efficiently, create less waste and require less waste treatment. Recycling avoids penalties and fees for dumping. “Green is becoming increasingly synonymous with a black P&L sheet,” says Resendes. Fielding will pay for some materials that an incinerator firm would charge to burn, because it’s feedstock. “There is a dawning out there that people now do want to explore whether or not they could get paid for material that we will take off their hands. And so often we pay,” McGregor says. “What CEO wouldn’t be interested in reducing their costs and creating a revenue stream?” It can cost a manufacturing company between 15 and 25 cents per litre to incinerate its chemical waste. Fielding will

take it for free or pay for it, depending on the type of chemical, cleanliness and size of the stream. The top three chemicals the company pays for are: isopropyl alcohol, ethylene glycol and refrigerants. Depending on the quality of the material, Fielding can create a new product. For example, it collects material from the pharmaceutical industry and turns it into a press cleaner; and glycol from the aviation industry is turned into antifreeze for the automotive aftermarket. Chemicals can also be reclaimed. Isopropyl alcohol is recycled using fractionation, which removes water from spent solvents. The reclaimed material is within parts per million as of virgin but costs 10% to 20% less. Another advantage of recycling these types of chemicals is a manifest exemption for closed loop streams. Legally, any waste that has to be moved must be tracked and the company must pay a manifest fee unless the product is being recycled. “There is more stability in the cost of closed-loop selling. The price is fixed and stable,” points out Fielding’s marketing support manager Katelyn Gorelle. “If you’re stuck buying virgin chemicals your costs could go up or down depending on market conditions. Prices could skyrocket. It’s a bit like locking in your mortgage.” Health concerns are also driving new regulations intended to encourage

November/December 2010


Let us introduce your drive to the Strong, Silent Type

Giving chemicals new life at Fielding's Mississauga, Ont. plant. PHOTO: FIELDING

tion] will work or not,” says Andrew King, department leader for health, safety and environment in Canada for United Steelworkers. Yet the organization, which formed an alliance with Environmental Defence called Blue Green Canada, applauded the announcement of Ontario’s Toxics Reduction Act. “Clearly the driver for us is carcinogens,” King told PLANT. The majority of deaths resulting from occupational disease come from chemical exposure in the workplace, yet there is no strategy at any political level to deal with the issue. “Given the thousands of carcinogens out there that we do know and the hundreds of thousands that we don’t know, it’s important that a strategy be developed,” he says. “Turn the paradigm on its head. Build into the engineering process non-toxics use. Push hard in green chemistry. Identify alternatives, including other things that could be done in the chemical process and things that could be done without chemicals. Using high heat in autoclaves, for example, is a good alternative.” Clearly the health of workers tops the list of benefits, but the other advantage of transitioning to green manufacturing is the creation of jobs and an economy that will be more sustainable in the long run. manufacturers to reduce toxic waste. Ontario’s Toxics Reduction Act, which took effect on Jan. 1, requires some 2,000 Ontario manufacturers that employ 10 or more people and involve 10,000 kilograms or more of specific substances to report and track harmful chemicals and develop a pollution prevention plan.

The goal is to reduce the creation, use, release and/or off-site transfer of toxic substances and to encourage greener alternatives, including new technologies. Like a successful law in Massachusetts, the implementation of these plans is voluntary. “We don’t know yet if it [the legisla-

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Canadian PLANT 15


Operations

>> Maintenance

>> Think Lean

Maximize value stream mapping UNDERSTAND THE REALITY BEFORE ACTING BY RICHARD KUNST

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unning an enterprise value stream mapping event takes people out of the organization and places them “on” it, and the value will be significantly enhanced with the addition of “outside eyes” from suppliers, customers or other members from your manufacturing consortium. An effective way to observe during a mapping initiative is to “stand in the circle.” Toyota Motor Co.’s Taichii Ohno coached his budding Toyota Production System (TPS) leaders to carefully observe reality by drawing a chalk circle on the floor, and standing in it for several hours observing reality with their minds wiped clean and undistracted by other things. This intensive observation steeped them in kaizen thinking, which was necessary before they could coach others. Kaizen is core to TPS because it’s learning by doing. Developing a few experts helps, but the power of kaizen is multiplied many times if experts coach everyone else to see and solve problems. Process visibility reveals problems to everyone, not just managers. When something is amiss, workers quickly determine the cause and take action. Process visibility also stimulates everyone to think of still more ways to make improvements. Empowered by the method, workers learn to self-manage processes and spontaneously improve them. Thoughtful visibility is a key tenet of TPS. Emptyheaded gawking won’t do. Ohno’s basic problem solving method was “to ask why at least five times,” which means that he didn’t ask people to literally confine themselves to the circle, but to dig through the clutter to see the essential problem. A very small process, such as integrated circuit production, can’t be seen directly, so they are made mostly through data and remote control. Yet even with fully gowned workers and minute processes, visibility reveals a remarkable amount of waste. When flow charting a large process, people must

16 Canadian PLANT

communicate precisely, or someone must travel around to see the reality. And the only way to be sure that a chart is up to date is to review the process frequently. In large processes, such as automotive engineering change systems, someone is likely to be tinkering all the time, so at any instant, no one knows how it really works. Although careful observation can be cultivated into a habit, it’s never simple. Toyota veterans know that observing a process for the first time takes several hours – sometimes days – to develop an initial grasp of it. (And seeing nothing happen can be a marvelous discovery). “Standing in a circle” is taking the time to understand reality before acting. It’s not creating some kind of software or other model, and seeing if it works. It also counters the instinct of managers (and others) with so strong a bias for action that they must always make something. Completing a VSM is seen by many companies as an accomplishment. We must remember it’s just a tool and needs to be used as such. Here are some tips: • Re-do your VSM at least annually. • Use “outside eyes” if possible so you can see the forest instead of the trees. • Constructing your VSM allows your people to be “on” the business instead of being “in” the business for a few days. • A current state map without a future state map is a waste of time. • Quantify and develop opportunities identified during a mapping exercise within your business operations plan. • Revisit your opportunities often to insure they are being implemented. Many organizations with diminishing resources try to rush through mapping exercises when they should be slowing down and observing, which in the end will help them go faster. Richard Kunst is president and CEO of Kunst Solutions Corp., which publishes the “Lean Thoughts” e-newsletter. E-mail rkunst@kunstartofsolutions.com. Comments? E-mail joe.terrett@plant.rogers.com

WIND energy MAINTAINING GEAR TECHNOLOGIES KEY TO POWER GENERATION BY STEVE GAHBAUER, CONTRIBUTING EDITOR

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t least some of our energy future is blowing in the wind. The industry is growing at a quick 25% annually, and net sales have doubled in the last three years for most manufacturers of turbines and components such as gearboxes and bearings. Today, Denmark derives more than one-third of its energy from wind turbines. China’s wind energy market is also booming. Currently, it ranks fifth in the world with 6,000 megawatts of installed capacity but the country’s aim is to have 30,000 megawatts by 2020. Canada trails far behind with only 2,550 megawatts of wind power but by 2015 there should be 12,000 megawatts. There are more than 830 offshore wind turbines operating in nine European countries, and thousands more are being built. Although land-based wind farms are popping up in Alberta and Ontario, there’s not a single offshore wind turbine in North America. However, Vestas, a wind turbine manufacturer based in Denmark, has plans to build some for Ontario’s Great Lakes. Data analyzed by FC Business Intelligence Ltd., England in its Wind Energy Operations and Maintenance Report, states that the average operation and maintenance (O&M) costs are $0.027 per kilowatt hour, and the average lifespan of wind turbines is 20 years. O&M costs do, of course, increase over that lifespan and are associated with generation, drive trains and blades, but mostly with gearboxes, which are the weakest link in the mechanism. There is an ongoing R&D effort related to gearbox reliability, because many of those designed for a 20-year lifespan fail after only six to eight years and they can cost up to $500,000 to fix. Gearboxes must be lightweight and capable of handling large stresses, variable-speed loads, torsion from uneven wind loads and, at least in Canada, extreme temperature fluctuations. Complicating these requirements is the fact that their design is approaching practical limits of available materials. The gearbox connects a low-speed shaft turned by the rotor blade with a high-speed shaft that drives the turbine. The low-speed shaft is typically supported by two large bearings. Lubricants in the gearbox and bearings play a vital role in ensuring that a wind turbine operates effectively. Gearboxes are relatively small, but very complex with their low- and highspeed shaft geometry. Their position in the wind

November/December 2010


In addition to land-based wind turbines, Emerging Energy Research forecasts more than 6,000 megawatts offshore wind energy will be developed in North America over the next 10 years. PHOTO: iSTOCKPHOTO

Increasing power density

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There are also consulting companies that can help with gearbox selection. One of them is Ortech Consulting Inc. in Mississauga, Ont. Under the leadership of its president, Uwe Roeper, Ortech is Canada’s foremost atmospheric science consulting firm, providing technology-based consulting services and expertise in environmental science and engineering. The company works in partnership with Deutsches Wind Energie Institut GmbH in Germany. Key to the development of multi-megawatt units is the need to increase the power density, and that is a challenge for bearing manufacturers. Bigger turbines have longer blades. That means a slower rotational speed. To get the same power rating out of a slower speed requires much greater torque, and that torque increases exponentially. New gear units needed to produce that kind of torque must be lighter and, consequently, the large gear-supporting bearings must be a match. SKF came up with a high-capacity cylindrical roller bearing design that achieves a higher load-carrying capacity in the limited space. Combining this with a planet wheel design and an integrated outer ring creates a very high power density and increases reli-

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turbine mechanism makes them hard to reach. Replacement parts are very pricey as are long-reach cranes needed to move the gearboxes, which can add between $75,000 and $100,000 to the bill. Repair and refurbishment involves taking the machine apart and shutting down the turbine’s operation. Adding to the costs is a loss-of-revenue factor of $1,000 per day. As with every other type of equipment, over the long haul proactive maintenance is cheaper than reactive maintenance. Proactive and preventive strategies should include: • early detection through diligent PM and condition monitoring by remote sensors; • using up-to-date inspection technologies; • managing mechanical loads; and • improving gear lubrication. Since gearboxes are the weakest link and the most expensive component to repair or replace, failures are central to the lifecycle of wind turbines. Diligent care, proper lubrication and adequate condition monitoring are imperative. Equally important is the careful choice of a reputable gearbox manufacturer. There are many to choose from. One of the best is Stiebel Getriebebau GmbH, a privately owned German company in Waldbröl near Cologne. Stiebel designs and builds gearboxes and drives that have earned a reputation for robustness and reliability over three generations.

ability. The design has the outer ring raceway integrated in the turbine. In turn, the information is provided to a into the bore of the planet wheel, and the bearing comes control system in the closed loop, which will instruct with a mounting sleeve that makes installation easy. changes to be made in the rotor blade. Simply, more rollers create more contact area and The key sensors used on the rotor blades are called extend bearing life. accelerometers. They measure the magnitude of wind Extended bearing life, reliability, and long-term operaacceleration by using the piezoelectric effect. A mass tion with minimal maintenance are the chief characterexcited by the acceleration generates a force that istics that large wind turbine bearings must deliver. To impinges on piezoelectric material. The result is the assure these qualities, SKF has built a special test rig in generation of a proportional electric charge that can be Schweinfurt, Germany, in proximity to its factory for measured. wind turbine bearings. The newer 3-megawatt turAn effective lubrication survey for wind turbines enbines are 90 metres high and large bearing systems are sures that gearbox and bearing lubrication is always up required at the heart of the top-mounted mechanisms. to snuff. Start with a criticality assessment and analysis The test rig supports the validation of new designs and of the key operating factors. You also need to include advanced calculation tools for these types of bearings. high maintenance costs due to component location. The trend toward greater installed power brings with A lubrication best practice incorporates details about it the need for larger, yet compact and lightweight machine design, installation and operating mode, such bearings. The most commonly produced main rotor as speed, load, duration and environment. Some of the shaft bearing from SKF is a special double row tapered specific things to keep in mind are the requirements for roller bearing with an outside diameter of 2.40 metres. lubricant type, quantity and frequency of change; conThese bearings are the largest main rotor bearings tamination control; oil analysis; and the planning, then for wind turbines currently manufactured in series scheduling of maintenance. production. And now they can be fully tested at the Wind turbines place special demands on extremely Schweinfurt test rig before they’re installed, without high-torque gearboxes and large double row tapered all the implications of accessibility, tall cranes and roller bearings. As with all equipment, these giant eneasement fees. The bearings test at speeds of up to 60 ergy generators need diligent maintenance. rotations per minute, more than three times the speed of real applications. The test stand also enables close Steve Gahbauer is an engineer, a Toronto-based monitoring of various lubricants, lubricant distribution freelance writer, and the former engineering editor of and lubrication conditions, while the bearing loads can PLANT. E-mail gahbauer@rogers.com. be increased up to two times the load-carrying capacity of the bearing. Comments? E-mail joe.terrett@plant.rogers.com. Wind turbines are not only getting larger, they are also getting smarter. Solutions for clever condition monitoring abound. Wind turbines are now equipped with new sensors that direct rotor blade position changes to better accommodate unexpected or suddenly changing wind conditions. ü High quality The sensors respond to two types ü Corrosion-resistant of wind conditions: quasi-static ü Longest service life wind loading, which represents Heavy duty hose reels ü Most complete the average wind speed or backSeries 7000 product line ground wind; and dynamic wind loading, which includes unexpectCompact dual ed wind events, such as turbulent pedestal hose reels Series DP5000 gusts and shear. Researchers will place sensors on the gearbox to gauge the impact of vibration on bearings and overall performance. p Heavy duty power Heavy duty The function of sensors on the Extra shock and light cord reels protection welding reels rotor blade is to read changes in GFCI box Series L4000 and L5000 Series TW the orientation and deformation of ® the rotor blade caused by the wind loading and to feed that information to the data acquisition system www.reelcraft.com | 800-444-3134

Made in USA

Canadian PLANT 17


Management

>> Finance

Tax TIME in America States are going after more revenue from your US operations By John McCrudden and Lionel Chen

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s America’s 50 states strive to pull their way out of budget shortfalls, many are taking a closer look at Canadian companies doing business in the US. Pre-recession, US corporate earnings contributed hefty income tax revenues to state coffers but with the cash flow decimated by the downturn and the subsequent economic hangover, many states are aggressively seeking other tax revenues. They’re doing more audits, hunting for taxes from more companies with nexus – a company’s connection to the state – and sharing corporate tax information to track businesses with potentially lucrative revenue streams in multiple states. If you’re doing business in the US, be hyper-aware of shifting state tax laws, regardless of where and how long you’ve been doing so. There are recent developments that could impact your corporate tax profile. For instance, there is greater focus at both the US federal and state levels on seeking tax revenue through permanent establishments (PEs) and nexus. Recent changes to the Canada-US Tax Treaty expand the circumstances under which a Canadian corporation is deemed to have a permanent US establishment, and the Internal Revenue Service (IRS) is increasing its scrutiny of PEs. Most Canadian manufacturers have to maintain a permanent establishment in the US for their profits to be subject to federal income tax. A PE is generally a fixed place of business such as a branch, factory, office or the presence of an employee or agent who finalizes contracts in the US on behalf of the Canadian company. However, since Jan. 1, a Canadian corporation may also be deemed to have a permanent US establishment if it also performs services in the US through an individual present in the country for 183 days or more in any 12-month period; where more than 50% of the corporation’s gross active business income is derived from that individual’s rendered services; or services are provided in the US for 183 days or more in any 12-month period for one project or a series of connected projects. If the IRS determines a company has a PE, Canadian and US taxes may have to be paid on profits attributed to it, although Canada would generally allow a foreign tax credit to offset any domestic tax. State income tax may also apply. Incidentally, the Canada-US Tax Treaty doesn’t bind states, although some conform completely (Florida, Illinois), some do in part (Idaho, North Carolina), and others do not (New York, California). State tax requirements are based on nexus and each state has a different threshold that defines what that is. It may include storing inventory; renting office or warehouse

Cash-strapped US states want more of your money  PHOTO: iSTOCKPHOTO

space; providing installation, implementation, warranty or repair services; and even delivering goods in trucks owned by the Canadian company, but the level of activity that constitutes nexus is less than the activity needed to constitute a federal PE. Moreover, these thresholds often change. Last year Michigan signed into law a bill exempting Canadian transborder trucking companies and auto parts manufacturers that do not have a PE in Michigan from having to pay the Michigan business tax (MBT). Specifically, the act exempts foreign persons from taxation under the MBT so long as they’re domiciled in a subnational jurisdiction (such as a Canadian province) that does not impose an income or other business tax on a similarly situated person domiciled in Michigan. Other US states, however, are not so Canadian business-friendly. More states use unitary combined reporting to raise money, including Michigan and Texas in 2008, and Massachusetts, West Virginia and Wisconsin last year. Under the unitary system, a state determines whether a group of corporations under common ownership share a “unitary relationship.” If so, the company must combine income and apportionment factors (property, payroll and sales) to compute state taxable income. This system does not exist in Canada. If you have a parent company with four subsidiaries, you would file five income tax returns. In states that have the unitary system of reporting (and now there are 24 of them), a company files one return on a combined basis. The rise in such regimes increases the risk of Canadian companies facing state income taxation, especially since the definition of a unitary business and apportionment rules vary from one state to another. California has a 80/20 rule: when 20% or more of the average of a foreign corporation’s property, payroll and sales are in the US, all of the company’s income and apportionment factors are included in computing the taxable income of the unitary group. Many states have also stepped up audits, increased penalties and are actively identifying Canadian nonfilers. There are a growing number of informationsharing agreements among the states, with US Customs and with the IRS, so the best way to minimize the impact of state income taxes is to carefully strategize your US business activities. Remember, it’s always tax time in the US!

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John McCrudden (JMcCrudden@bdo.ca) and Lionel Chen (LChen@bdo.ca) are senior tax managers at BDO Canada LLP (www.bdo.ca) in Mississauga, Ont. who work with Canadian and US companies on cross-border tax issues. Comments? E-mail joe.terrett@plant.rogers.com.

18 Canadian PLANT

November/December 2010


>> Exporting >> Marketing

Ensuring success in new markets By Mark Drake

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uccess in a new market often depends on making a correct decision on how best to enter it. Having targeted one or more markets, completed desk research and outlined a marketing plan, how will you promote, sell and distribute your company’s wares, and will you be flying solo or entering into some kind of partnership? The answer will depend on the nature of the market. Is it advanced like the UK, rapidly emerging like China or Brazil, developing like Malaysia and Indonesia or under-developed like Yemen or Chad? Market entry conditions vary enormously. In most developed countries, for example, it’s possible to obtain the necessary permissions and basic services (electricity/telecommunications) for an independent sales/distribution or even manufacturing facility within a matter of weeks. In some emerging countries, it can take up to a year, with many hoops to jump through. In developed countries there is a wide choice of sales and distribution arrangements. Elsewhere distribution may be by bullock cart and sales outlets may operate from a storefront that opens onto a dusty street. Not that these operations are necessarily ineffective for the areas they serve, but good partners can be much harder to find, understand, motivate and train. Here are some of the entry options. Direct branch operations. The great advantage here is control of the location, type of building and environment, recruitment of qualified personnel, their motivation and reward systems and above all the ability to handle poor performance and staff replacement. The main challenges are communications and cost. Internet and video-conferencing have improved long distance management significantly; however, costs can be significant as everything (including local consultants to help with set-up, personnel and labour regulations, rent, salaries, travel expenses, customs clearance) falls to your account. So this choice is usually for large, wellestablished and relatively well-heeled organizations. Distibutors. By definition distributors usually buy the product from the supplier at a special discounted price and resell it to retailers or end users, so success

Export growth to slow in 2011 OTTAWA: The unexpected slowdown of the global economy will mean slower growth next year, particularly for developed economies, according to Export Development Canada’s (EDC) Autumn 2010 Global Export Forecast. Four key drivers will challenge short-term growth strategies: • Big-market consumers frightened into more excessive thrift. • Doubts about the affordability and actual impact of augmented stimulus. • Financial institutions remaining reticent about lending. • Slower growth weighing down key emerging markets. Global growth will be 4.2% this year, but EDC forecasts expansion will slow to 3.9% in 2011. Growth in developed economies will slide from 2.4% this year to 2.1% in 2011. Emerging market economies are expected to grow 6.4% this year and 5.9% in 2011. EDC pegs Canadian export growth at 11% below the pre-recession peak this year, and sliding to 6% in 2011 with exports in most industrial sectors feeling the pinch. A “stubbornly strong” loonie won’t help. Download a copy of the forecast at http://www.edc.ca/gef. PLANT

The best agent is usually one who “works for a limited number of closely related product lines… ” depends a great deal on the partnership agreement. Will the distributor hold inventory for speedy delivery to the end customer? Will pricing be competitive to gain market share, or set to increase margins? Does the distributor have complementary lines of business that salespeople can offer in package deals – usually an advantageous door opener? Are salespeople hungry for business, easily trainable, motivated and experienced in your area of business? All this should be assessed as accurately as possible, and conditions – including performance criteria – included in the distribution agreement. At the same time this agreement must be good for both parties. Distribution partners want to make profits too so beware the export manager who says he’s squeezed a really good deal out of a new partner…the arrangement may turn out to be short-lived. Agents/representatives. They do not buy and resell products, nor do they normally hold inventory. They simply sell the product and then pass the order back for delivery, either from a central local warehouse or the home base, with the invoice and credit risk falling to the supplier. They work on commission (much lower than the distributor’s discount), but take very little risk. Once again the service provided depends on the negotiated agreement. I have worked with agents who were so close to the supplier company that they could almost be considered part of the staff, and they provided aftersales contact and sometimes-technical service to the customer, and gave detailed feedback about market conditions, which is critical for planning. The best agent is usually one who works for a limited number of closely related product lines, and who is qualified enough to gain the customer’s confidence and to provide some limited technical service. Trading houses. These usually buy and sell on their own account, trading in many different products and supplying many different markets. I remember dealing with one in Montreal for a single order received from Egypt. We had no agent there, nor did we plan to attack that market, so a trading house was ideal for a single (but potentially repeatable) and straightforward order. We sold to them and they handled everything else, shipment, customs, foreign exchange and credit risk. They had developed excellent contacts over the years, knew their way around the markets, and were familiar with local customs and bureaucracy. Other partnerships. These can include special joint marketing or production agreements, licensed manufacturing and other types of joint venture or technology transfer. They usually take place once a market has been developed by one of the other means, and often involve investment on the part of the supplier company. For more information check out web sites such as: www.canadabusiness.ca (new general government site for entrepreneurs), www.atmexport.com (for a crash course on marketing) and www.fitt.ca (Global Business Environment, Entering and Maintaining the Market). Mark Drake is former president of Electrovert Ltd. and the Canadian Exporters’ Association. E-mail corsley@ videotron.ca.

Trouble getting customers’ attention?

refocus your marketing message for increased sales By Andrew Shedden

P

icture an average-looking gal standing alone on a basketball court at your high school. A stranger walks onto the court and asks her for a date. Before you know it six more people arrive and are asking for a date. Within an hour the crowd grows to 500 people who are saying pretty much the same thing to get her attention. Overwhelmed by the clamour, she does the only sensible thing–nothing. Now switch out that person for any buyer and the suitors for vendors and you have one of the major reasons why many manufacturers’ marketing strategies aren’t effective. Simply put, nearly every market you can think of is drowning in communication. Television, radio, print, direct mail, the web, video, e-mail, blogs – the list is long and getting longer, yet vendors insist on saying the same thing in their promotional messages with mind-numbing regularity. Visit some web sites and note how many of them mention stellar service, unsurpassed quality and competitive prices. If your marketing efforts aren’t working there is a very good chance you, like many others, are practicing me-too marketing. Here are some symptoms: • Your advertising and promotions generate poor, if any, results. • Your lead generation yields are poor and they aren’t likely to result in sales. • You can’t get that first telephone or on-site meeting. • Longer-term sales prospects are choosing your competitors. • You’re sending out plenty of proposals and getting plenty of rejections.

Be different To succeed you must focus your efforts on standing out from your competition. Apple says, “Think different.” Successful industrial marketers say, “Be different.” Simply abandon inward product- and features-focused marketing and focus on benefits. Show clearly in all aspects of your marketing how your products will positively change your prospective customer’s results. Here are three tips: • To generate more high quality leads start with educational content that helps buyers at the earliest stages of the buying process. Content should help buyers recognize and address early needs and major sources of concern. This positions your company as a thought leader. • Help your prospective customer evaluate options, which positions your company “top of mind” when vendors are being considered. • Stop selling your products first. Gain an understanding of your prospect’s key business drivers, then align the sales message to specific issues and objectives. Be sure the prospect places a specific value on resolving the problem, then deliver your solution. This positions your company as the only logical choice. Concentrate on understanding your customer’s most sought-after outcomes. If your marketing clearly shows how to achieve them, you will close more deals. For the Seven Steps to Manufacturing Profits report visit www.broadfieldcommunications.com/plant.htm. Andrew Shedden is the president of Broadfield Communications, an industrial marketing consulting firm that helps manufacturers increase revenues by updating and improving their marketing and selling methods. Call (800) 353-4447. Comments? E-mail joe.terrett@plant.rogers.com.

Comments? E-mail joe.terrett@plant.rogers.com.

www.plant.ca

Canadian PLANT 19


Technology

>> Automation

>> Plantware Monitor your plant’s pulse The Freedom eWARE suite from MAG America’s e-tekx software group doesn’t leave any holes in your manufacturing data reporting. It covers performance, use and availability feedback from any industrial asset on the plant floor. The modular and scalable software package for data acquisition, condition monitoring, energy monitoring, and cell control generates reports and analytics for maintenance, process optimization and OEE. It’s MTConnect-compliant and interacts with smart phones, tablet PCs and similar mobile devices, displaying machinery status, productivity data and machinery analytics for various systems on a plant network. “Target independent” eWARE collects data from a variety of plant floor assets – without modifying to ladder logic or part programming – and transforms into actionable information. It has five modules – eLOG, eVIEW, eMONITOR, eENERGY and eCELL – plus a control-resident eCONNECT interface for each machine that uses a PC front-end control. For non-PC-based CNCs, PLCs and manual machines, eCONNECT runs on a DIN-rail-mounted PC with discrete I/O connections to specific machine electrics. MAG, a global machine tools and systems company, is based in Mississauga, Ont.

MDA robotic arm goes nuclear a 360˚ view of OPG reactors By Noelle Stapinsky, Features Editor

N

uclear power plants have supplied communities across Canada with electricity since the 1970s and according to the Canada Nuclear Safety Commission there are currently seven in operation using uranium as fuel with heavy water as a coolant and moderator. But it hasn’t been possible to inspect critical components inside the reactors because of high radiation levels – until now. MacDonald, Dettwiler and Associates Ltd. (MDA), a Richmond, BC-based provider of advanced information systems and robotics that perform tasks in such diverse environments as outer space and the human brain, has entered another realm: the inside of Ontario Power Generation’s (OPG’s ) Calandria Vault at the Pickering nuclear station. This robotic arm gives OPG its first close-up, 360-degree view of steel components and structural welds deep inside

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20 Canadian PLANT 2010-UK COL.indd 1

MDA’s nuclear robot arm reaches inside OPG’s Calandria Vault.

the concrete walls of a reactor’s radioactive chambers. Lawrence Gryniewski, the MDA systems engineer who worked on the reactor project, says OPG was looking for a company with a good engineering background. “When we deliver a system, it’s the whole system not just the hardware,” says Gryniewski. The process began with an analytical CAD model to demonstrate how hardware would work inside a reactor and then the model was taken through a series of verification tests. MDA also developed the electronics to run the 14-metre robotic arm, the software (essentially the same used by a robotic arm that performs delicate brain-surgery), and it trained the operators. Of course, it’s one thing to get a robotic arm into a reactor, and quite another thing to get it back out. Gryniewski says one of the biggest challenges was squeezing the arm through a tiny opening and reaching some of the components 14-metres away. “We needed a high level of optimizing to get in there. You have to go through structural analysis to ensure your components are strong enough. And you have to go through kinematic analysis to ensure [the arm] can actually reach the target from your starting point without contacting any components.” Since radiation levels within these reactors is so high, parts of the arm must be changed to complete the inspection. For instance, cameras used to capture images inside the reactor are greatly affected by the radiation. “Some of the cameras are high resolu-

PHOTO: OPG

tion and some aren’t,” he explains. “The cameras that survive the longest are essentially an older version of TV cameras with Vidicon lenses [in style about 25 years ago].”

Robust cameras The lenses are robust and operate easily within a nuclear environment, but the new cameras that capture higher resolution images are more susceptible to radiation and need to be changed more frequently. Working from a remote workstation, the operator controls the dexterous robotic arm from a computer console where he can program auto-scripted modes and use joysticks to drive the joints of the arm. “The mechanical system has 11 degrees of freedom, meaning 11 joints,” says Gryniewski. “Five of those joints are what we consider to be the delivery system at the end of the arm, which has six degrees of freedom.” Several scripted control modes handle the routine task the robot is expected to complete. “We can preplan that and rehearse it in a mock up to make sure we’re not getting close to sensitive components and that there’s no danger of collision,” says Gryniewski. With its technology now being put to practical use in OPG’s Calandria Vault, MDA now has the capability to extend its reach and its grasp beyond even the USS Enterprise’s star trekking capabilities, to go where no man has been able to go before. Comments? E-mail joe.terrett@plant. rogers.com.

November/December 2010 12/9/09 11:24:28 AM


Product Showcase << Departments

Testing, measuring & sensing Continuous edge detection of irregular objects

Fluke 5080A instrument calibrator.

Calibrator ensures instrument accuracy International quality standards and regulations including safety, nuclear and environmental (among others) require a variety of electronic test tools that must be calibrated to nationally recognized standards. Fluke Corp., a manufacturer of electronic test and measurement technology with Canadian headquarters in Mississauga, Ont., has come up with a tool that calibrates both analogue and digital test instruments. The Fluke 5080Aâ&#x20AC;&#x2122;s built-in protection circuitry guards against potentially damaging input AC/DC voltages, handling up to 800 mA with a maximum compliance voltage up to 50 V. Use it for the calibration of analogue meters, panel meters, digital multimeters, watt meters and, with optional accessories, clamp meters, megohmmeters, oscilloscopes to 200 MHz and other instruments. Optional 5080/CAL Software provides automated calibration as well as reporting and record management capabilities. www.flukecanada.ca

SICKâ&#x20AC;&#x2122;s WL27-3 reflex array photoelectric sensor provides reliable detection of irregular shaped objects from 12 mm up with its 50 mm detection height, regardless of object properties or position within the array, including clear materials. Operating in a reflex (retroreflective) mode results in only having to mount and power a single device. And an intuitive alignment/teach procedure ensures the device is operating with the reflector under ideal conditions. The high-resolution version offers a minimum detectable object (MDO) resolution down to 5 mm with a 24 mm detection height. Applications include products with tapered edges (totes), bagged product, warped boards and packaged product, including continuous edge detection of multi-height objects, pallets and containers with holes/gaps. SICK is a Minneapolis, Minn.based manufacturer of sensors. www.sickusa.com

Measure rotating elements up to 120 degrees RSE 1500 rotary position sensors from Macro Sensors measure the position of quarter-turn valves, flue dampers, weir gates, dancer arm tensioners, and other applications involving fractional-turn shaft movements. These DC-operated sensors provide absolute output proportional to shaft rotation over a total range operating in 0 to 30 degrees, and 60-, 90-, or 120-degree ranges. Contactless inductive technology ensures high accuracy and repeatability. Units exhibit a linearity error of less than 0.10% of RSE 1500 rotary full range output while operating over temperatures position sensor.

E-Series linearposition sensors.

Temposonics E-sensors increase protection MTS Systems Corp. has re-designed the Temposonics E-Series of linear-position sensors for position measurement, and has added two new models that incorporate the latest advances in magnetostrictive technology. The E-Series is an alternative to linear potentiometers and multiple limit switches. With the upgrades and compact housings, the company says the E-Series increases protection while providing reasonable accuracy for cost-sensitive applications. All the sensors provide 0.01-mm resolution and repeatability, plus 0.03% linearity deviation with backward compatibility. Rugged construction delivers minimum IP67 ratings as well as 100 g shock and 10 g vibration resistance. They use M12 connector cables and feature analogue (voltage or current) and start/stop output. The analogue model is now capable of reporting two positions simultaneously when using two position magnets. The new stainless steel EL model is a low-profile (15 mm) version for space-critical applications. A stainless-steel EH model provides a compact, rugged rod-style package with either a 7 mm or 10 mm tube. MTS Sensors, a division of MTS Systems Corp. in Cary, NC, makes magnetostrictive linear-position and liquid-level sensors. http://www.mtssensors.com

from -20 to 85 degrees C. Operating from a nominal 24-V DC power supply, the units provide 0 to 10-V DC output. And theyâ&#x20AC;&#x2122;re built for long life in a 1-1/2-in. diameter anodized aluminum shell with a 0.250in. stainless steel shaft running in high performance ball bearings. The aluminum-mounting flange has a 0.750-in. diameter centre pilot for locating centrally in a fixture. Units are also environmentally sealed to IEC IP-66. Macro Sensors is a Pennsauken, NJ-based manufacturer of industrial sensors. www.macrosensors.com

Sensors target objects, ignore background

GLV18 sensor.

Pepperl+Fuchs, a Twinsburg, Ohio-based manufacturer of sensors, has added background suppression to its GLV18 photoelectric line. A mechanically adjustable sensing range cut-off detects all colours at distances up to 120 mm. Black and white test objects are seen to within 6% of the same distance. The sensors come in a M18 threaded cylindrical housing that is up to 50% shorter and power consumption is reduced by up to 50% more than other M18 cylindrical photoelectric sensors. Background suppression allows the sensors to ignore objects that appear beyond the desired target. This eliminates the need for a reflector, or frequent readjustments for sensitivity. Every GLV18 sensor includes a flush-mount bracket for installation on a conveyor. Ball-andswivel and half-clamp mounting brackets are also available. www.pepperl-fuchs.us Improve Efficiency in Drying Operations New catalog from Spraying Systems Co. focuses on ways to reduce air consumption and noise with air nozzles. Included are selection guidelines, technical references, application examples and performance data on nozzles, air knives and amplifiers that use compressed air and air knife packages that use regenerative blower air. Spraying Systems Co. www.spray.com 1 800 95 SPRAY

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Canadian PLANT 21


Departments

>> Postscript

Productivity gains? Invest in literacy By Todd Hirsch

T

he grim warnings roll off the tongues of central bankers and economic gurus: the US economy is in for a painfully long period of slow economic growth. Unlike other postrecession periods, this one is not reacting to the traditional remedies such as lowering interest rates (they’re already as low as they can go), quantitative easing (no one wants to spend the money), or even massive government stimulus spending. The Canadian economy, of

One recent report shows that improving literacy scores by 1% “would increase labour productivity by 2.5%... ” course, will sustain collateral damage if the US continues to languish. With the usual economic tools failing to get consumers spending again, why not focus on businesses? How can companies boost output, reduce error rates, increase team performance, improve labour relations, cut staff turnover, and increase health and safety? There is an app for that: it’s called workplace literacy.

According to the leading research on the subject, four in 10 Canadian workers lack the necessary level of literacy to understand a safety manual, a set of instructions on a new piece of equipment, or a new piece of computer software necessary for them to accomplish their work. One recent report shows that improving literacy scores by 1% would increase labour productivity by 2.5%. Productivity is something the Bank of Canada and

other economists have been tsk-tsking Canadian businesses for years. Abysmally low levels of productivity in this country put us at risk of falling behind the rest of the world, and our standard of living hangs in the balance. Literacy stimulates economic activity in other ways, too. With it comes enhanced creativity and innovation, two things rather useful when encountering problems and challenges on the job. In the best-case scenario, creativity will stimulate better processes, improved design, and even brand new inventions. The big problem with literacy is that few employers identify it as a problem. Poor literacy is often confused with being unable to read. It’s really about being able to comprehend and synthesize more complex text, and being capable of applying those ideas to everyday life and work. Yet rather than ramping up literacy and skills training during an economic soft patch, many employers actually cut their investments in this area. The perception is that it all costs too much money and takes up too much time.

Literacy a must-have By viewing literacy development as an unnecessary luxury that can be chopped when money is scarce, employers are missing the point entirely. It’s not a nice-to-have; it’s a must-have – at least for companies that are serious about boosting productivity, output, and safety. Investing in new equipment and machinery are typically the prescribed solutions to the productivity issue, but what good are these new pieces of equipment if workers lack the necessary literacy skills to put them to proper use? Investing in literacy requires proper action on the part of the employer to identify how a worker would like to progress in his or her job, and then to make sure the right skills training is provided. In the process, literacy skills are developed. The most common excuse employers give for not investing in literacy programs is the fear of eventually losing the newly trained and upgraded workers to competitors. “Why should I put money into improving her literacy skills?” an employer may argue. “What if she leaves?” The better question to ask is: What if she stays? As the modern saying goes, there’s an app for everything. Investing in workplace literacy may not solve the US credit crisis or the public debt problem, but it will improve labour productivity, workplace safety and employee engagement. In this sluggish economy, that may be the most useful app of all. Todd Hirsch is senior economist with ATB Financial in Edmonton. E-mail todd.hirsch@troymedia.com. Comments? E-mail joe.terrett@plant. rogers.com.

22 

November/December 2010


MECHANICAL DRIVES

SEVERE DUTY CORROSION PROTECTION

the

F-SERIES SNUGGLER ®

Parallel Helical Gearmotors SEW-Eurodrive’s F-Series parallel helical gearmotor lives up to its name as the ideal drive for tight space conditions. This compact drive, with its multiple mounting configurations, is a rugged alternative to right angled gearmotors.

SEW-Eurodrive has introduced a new line of aseptic gearmotors to meet the high levels of hygiene crucial to the production of food and beverages, as well as the stringent demands of the chemical and pharmaceutical industries. SEW has solved this challenge with the aseptic design of helical, parallel shaft helical, helical-bevel and helical-worm gearmotors made entirely of smooth stainless steel, cooled by pure convection cooling — eliminating conventional fan and cooling ribs, which prevents the build-up of germs and bacteria on the surface and allows for easy regular cleaning.

CORROSION PROTECTION PRODUCT RANGE Power ratings from 0.34 to 2.0 HP Can be mounted directly onto R, F, K, S-Series gear units in all standard positions

F-SERIES PRODUCT RANGE Power ratings from 0.05 to 336 HP Output speeds from 0.06 to 464 rpm (based on 4 pole motor) Output torques to 159,300 lb-in.

You didn’t compromise when you bought it. Why compromise when you rebuild it?

K-SERIES Helical-Bevel Gearmotors SEW-Eurodrive’s K-Series right angle helical-bevel gearmotors deliver maximum performance and reliability with 95%+ efficiency and high torque density. Durable gearing designed for long service life makes this drive an ideal choice for demanding around-the-clock applications.

K-SERIES PRODUCT RANGE Power ratings from 0.05 to 615 HP Output speeds from 0.05 to 326 rpm (based on 4 pole motor) Output torques to 442,500 lb-in.

S-SERIES

Helical-Worm Gearmotors SEW-Eurodrive’s S-Series right angle gearmotors offer helical-before-worm gearing combining durability with power-packed performance in a compact design that requires no motor belts or couplings.

SEW Eurodrive Service Agreements

S-SERIES PRODUCT RANGE If your SEW-Eurodrive needs rebuilding, it’s no time to compromise on its original quality.

Power ratings from 0.05 to 46 HP Output speeds from 0.05 to 257 rpm

You can depend on the people who built your SEW drive in the first place – the people who are best

Output torques to 35,400 lb-in.

qualified to restore it to its original condition, complete with a comprehensive 1-year warranty. At SEW-Eurodrive, our experienced factory technicians follow strict guidelines developed through years of successful rebuilds. If the existing stator isn’t up to standard, it’s never rewound, but replaced. Wear items, such as bearings, are automatically replaced with the originally specified replacement parts, Complete Drive Service & Maintenance Management Central data collection of your drive

not "will-fits" that may compromise the performance of your drive. Best of all, SEW Service Agreements deliver industry-leading quality rebuilds at an industry-leading quality repair price.

inventory online through our CDM® and CDS® programs greatly facilitates the

AC MOTORS

and Brakemotors SEW-Eurodrive’s squirrel-cage motors and brakemotors deliver exceptional performance and reliability combined with low maintenance. Designed for continuous duty under tough service conditions, these low-noise brakemotors are used wherever fast, safe braking is a major application requirement.

assesment and scheduling of each drive’s maintenance and repair requirements. Real-time condition monitoring can be performed online so that preemptive action can be taken before breakdowns can occur.

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AC MOTORS PRODUCT RANGE Power ratings from 0.25 to 100 HP 2-, 4-, 6-, 8-, 4/8-, 2/6-, 2/8-pole plus others Integral brakes to fit all frames

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