The threat to Dortec Industries at the turn of the century could be summed up in one word: China.
The Magna International Inc. plant in Newmarket, Ont., had been around since 1985, making door latches for cars, trucks and minivans. Latches take a lot of work to put together, they’re easy to package and can be easily shipped anywhere around the world, so Magna’s customers wanted the Canadian auto parts giant to open a plant in China to keep costs in check.
Magna complied with the requests and opened a latch plant in Kunshan in 2001. But it kept Dortec open as well. The boom in North American auto production in the first half of the 2000s ensured there was enough work to go around, and the plant was even able to generate higher profits than the average Magna factory.
By 2006, however, the business was being battered by soaring commodity prices and demands by the auto makers for price cuts. Executives at Magna Closures Inc., which oversees both the Newmarket and China operations, turned for help to a retired Toyota Motor Corp. vice-president to teach the company how to develop a first-rate manufacturing system.
Seven years later, Dortec is at the head of the class. It is also defying the notion that low-cost countries have sounded the death knell for manufacturing in Canada – so much so that side-door latches assembled in Newmarket are shipped from “high-cost” Canada to auto makers in China, Thailand and other low-cost regions.
Its turnaround holds lessons for other Magna plants as the company puts its so-called world-class manufacturing system in place at more than 300 auto parts plants around the world. Dortec is the plant Magna points to any time a chorus of “Canada can’t compete” breaks out. But the factory is also a beacon for other Canadian manufacturers that are struggling to stay competitive as they contend with a high dollar and globalization. At stake are 1.5 million jobs and the billions of dollars those jobs contribute to the economy annually.
“If you’re efficient, if you’re world class, you can compete and your customers will want to use you in high-cost countries to supply their product,” says Frank Seguin, president of Magna Closures.
A visit to Newmarket last December by Benson Wong, the China plant manager, showed just how far Dortec has come.
“He came over to here to benchmark and he saw a latch going together every 3.2 seconds and he says ‘I’m in trouble,’ ” recalls John O’Hara, vice-president of North American operations for Magna Closures. “He left here thinking: ‘I’ve got some work to do.’ ”
To succeed in the way that Dortec has, manufacturers need to focus intently on the design of their products, integrate information technology into all aspects of their manufacturing and harness the knowledge of their employees, says David Wolfe, a University of Toronto public and economic policy professor. “It’s critical if they want to survive,” Prof. Wolfe says.
All those elements are part of Magna’s system, which borrows heavily from the fabled Toyota production system, with its emphasis on lean manufacturing, elimination of waste and relentless focus on quality.
Upgrading all Magna operations to meet world-class manufacturing standards represents a key pillar underpinning the company’s future in the hyper-competitive auto parts business. “Our vision is to be the best manufacturing company in the world in all the operations we have,” Magna chief executive officer Don Walker says in an interview in Dortec’s conference room, where one wall is lined with the various types of latches Dortec employees put together.
“Ultimately ... if we’re not going to be the best, we won’t be successful as a company.”
The Toyota influence
A door latch is among the many unglamorous components of a car that drivers and passengers never see. But a single latch can contain up to 80 individual parts and they have become more complex in recent years with the proliferation of power sliding doors on minivans and power liftgates on minivans and crossovers.
“They’re very, very critical and highly engineered,” Mr. Seguin says.
Magna never discloses publicly the costs of the thousands of parts it sells to auto makers, but on such a small component as door latches, reducing that cost by even a penny makes a big difference. Taking one second out of the time it takes to assemble them also matters. That’s where Yasumasa Sano, the retired Toyota vice-president, comes in. When the Magna Closures executives began to look at the operation in 2006 – before the near collapse of the auto industry in 2008 – Mr. Sano would visit Dortec every three months, giving advice on how to improve quality and put lean manufacturing techniques in place.