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Marty Solcz, COO of Valiant Corp., at one of the Valco factories in Windsor, Ont. (Fernando Morales/Fernando Morales/THE GLOBE AND M)
Marty Solcz, COO of Valiant Corp., at one of the Valco factories in Windsor, Ont. (Fernando Morales/Fernando Morales/THE GLOBE AND M)

Automotive

Auto parts makers target new markets Add to ...

Whenever sections of wings and fuselages for the new Boeing 787 Dreamliner are unloaded from a specially modified 747 in Everett, Wash., a key piece of equipment comes from an auto supplier in Windsor, Ont.

That key tool - a stand that supports the 747's hinged tail while the cargo is unloaded - was designed and developed by Valiant Machine and Tool for Boeing, and is one of five in use by the aircraft company.

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The tail support stand is not only important for Boeing, but is also a crucial tool for Valiant, underpinning a strategic move to find new customers and markets and shift from an almost complete dependence on the auto industry.

"We just know it's not good to have your eggs in one basket," says Marty Solcz, executive vice-president and chief operating officer of the privately held company.

The automotive meltdown over the past year has delivered a blaring wakeup call to Canada's auto parts makers - the need to diversify. The near failures of General Motors Corp. and Chrysler LLC sent shock waves through the North American parts industry as plummeting vehicle production battered business for many companies.

Eager to insulate themselves from any further deterioration in the sector, parts companies are now hitching their fortunes to broader industrial areas by tapping into everything from solar and wind energy technology to consumer products, aerospace and mining equipment.

Auto production cutbacks have put an end to an era when simply shipping to assembly plants in Ontario and the U.S. Midwest was enough.

Valiant has a big head start on its parts industry competitors, having begun its drive to diversify in 2003.

"We started looking at where we were," says Mr. Solcz, one of four sons of Mike Solcz who help run the company their father founded in 1959. "We were doing business with … 67 per cent with one customer, 98 per cent of it was U.S. sales and 98 per cent automotive," he recalls. "We said we've got to do something. We had to diversify our customer base."

Six years after Valiant looked into the mirror, it generates 48 per cent of its approximately $350-million in sales in Europe and just 38 per cent in the United States. The auto industry is still the major customer with 83 per cent of sales, but now 8 per cent of sales come from construction and forestry companies and 5 per cent from aerospace.

The broader diversity of customers and regions balance helped cushion Valiant from the worst of the auto collapse, but Mr. Solcz acknowledges that "there were many sleepless nights for us in November last year," when Chrysler and GM were running out of cash and U.S. politicians were debating a bailout.

One of the niches Linamar Corp. has found is building cordless electric lawn mowers, but alternative energy companies such as solar and wind power companies represent a bigger market.

Linamar is aiming to boost its sales to $10-billion by 2020 from $2.3-billion last year, with $1-billion coming from the energy and heavy machinery industries and about $475-million from other industrial and consumer products.

"Many of the markets we're looking at, the supply base is very fragmented, lots of small shops - oil and gas is a great example - so people in those industries are interested in talking to a larger company that has the capacity to take on bigger and more complex programs," says Linda Hasenfratz, chief executive officer of Linamar, which is based in Guelph, Ont.

One such program is to produce power conversion units for Stirling Energy Systems, which builds solar dishes that convert the sun's energy to electrical power.

Stirling is supplying a solar farm in the Mojave Desert and will begin manufacturing 100 of its SunCatcher units a day next year.

Tapping the expertise of auto parts makers on such projects makes sense, notes Jeff Collins, vice-president of global supply chain for Stirling, which is in Scottsdale, Ariz.

"From a buyer perspective, there is no industry like the auto industry in terms of taking a concept, assisting the customer in developing the concept, incorporating ideas like design for manufacturability, design for assembly [and]design for serviceability," Mr. Collins says.

The contract, which will generate $200-million in revenue annually for Linamar, involves more than a supplier shipping a part, he says.

"It's tapping into their engineering capability, their knowledge of manufacturing, their knowledge of their supply chain and their thinking about how to assemble this in high volume."

Linamar has set up a so-called skunk works team that will do research and development into new products and processes at the technology centre the company opened in Guelph last month.

Senior management has identified the nuclear industry, alternative energy and transportation as representing new markets with lots of potential, Ms. Hasenfratz says, so the skunk works team will do research into products that make sense for those industries.

In another move to tap the auto parts industry's expertise, Stirling has sourced the reflective surface in the SunCatcher's 11.6-metre-in-diameter parabolic dish to metal basher Tower Automotive LLC.

Toronto-based Martinrea, which competes against Tower for auto maker contracts, is using its expertise in metal forming to find new customers.

"You've got a stamping press, it doesn't really care what it's stamping," says chief operating officer Nick Orlando.

"If you want to stamp parts for air conditioners or parts for washing machines, refrigerators, stoves, it really doesn't matter."

The parts for Lennox air conditioners and control arms for Bombardier Inc. snowmobiles and personal watercraft have generated revenue of about $20-million over the past 12 months for Martinrea.

The plan is to double that in the next 12 months, he says.

Follow on Twitter: @gregkeenanglobe

 

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