When Rahumathulla Marikkar’s customers order a “double double,” they don’t want coffee. And when they inquire about “home and native land,” the national anthem is not on their minds.
They want carpet tile from Belletile Inc., a startup manufacturer that Mr. Marikkar has deftly wrapped in the Canadian flag with those two brands and another called “far and wide.”
If not for a series of events that began with the Great Recession of 2008, Belletile, which has been producing carpet tiles since February, would not exist at all. In early 2009, Mr. Marikkar’s job as head of technology and environment at the Canadian operations of Interface Inc., the world’s largest maker of modular carpet, vanished along with those of about 90 other employees when the company closed its operation in Belleville, Ont.
Mr. Marikkar took a big risk. At a time when thousands of manufacturing jobs were disappearing every month across the country and factories sat idled and shuttered by the recession that felled Interface’s plant, Mr. Marikkar put together the funding to launch his own business.
Two years on, he’s hiring and expanding.
Mr. Marikkar has found a sweet spot: a high-value product that low-cost producers in Asia have yet to figure out how to make. His carpet tiles are designed to meet stringent North American requirements for high-traffic offices and are made through a process that requires engineering know-how. The niche product has allowed him to escape – so far – the kind of competition from lower-cost producers overseas that has battered so many other companies in Canada’s manufacturing sector.
As the new company emerges from the restructuring of Interface, so is Canada’s manufacturing industry being transformed after the crisis that devastated forest product companies, heavy equipment makers, the auto parts sector and hit virtually every company or factory in Canada that makes something.
For Canadian manufacturers, the financial crisis was the culminating event of years of pain caused by the explosion of competition from China and other low-cost countries, the rise in the value of the dollar and soaring costs for raw materials. A quarter of a million manufacturing jobs were lost in 2008-09 alone. Total employment in the sector shrank back to its 1997 level of two million from an average of 2.3 million between 2002 and 2004; its contribution to the country’s economic output fell to a low of 12.4 per cent from around 20 per cent earlier in the decade.
But beneath the grim statistics that seem to attest to a sector in decline, another set of lesser-known numbers are starting to tell the story of a renaissance for Canadian manufacturing. An analysis of factory output data by Statistics Canada shows that Canada’s manufacturing industry has two faces: one gloomy, the other hopeful. Among 20 industry subgroups, half showed sales declines from 2000-08, while sales in the other half are on the rise. The “expanding group” offers hope because it is made up of companies that are well positioned to exploit the growth areas in the world economy, such as petroleum, chemicals and food. The “contracting group” includes textiles, computers and electronics, and automobiles.
The finding highlights how growth is likely to come from nimble, more flexible companies, whether they are in subsectors that are expanding or contracting. Companies that develop expertise essential to global customers, that build the heft to take advantage of low-cost regions abroad while retaining highly skilled work at home, or are an essential link in a global supply chain are now finding themselves able to compete.
Rising from the ashes are companies such as Belletile, which has exploited engineering acumen and geography; electric-motor maker Elettra Technology Inc. of Hamilton, which produces complex and unique motors; “green” manufacturers in Saskatoon, Calgary and Kelowna, B.C., that are turning out components and pieces for solar and wind energy; and a surge of startup companies in Ottawa, where former employees of fallen giants Nortel Networks Corp. and JDS Uniphase Corp. are instilling an entrepreneurial spirit in a city better known for bureaucracy.
These smaller, more entrepreneurial companies now have an opportunity to tap into any number of supply chains, as makers of complex finished goods all over the world farm out the production of everything from the fabrication of components to the assembly of the final product.
But the competition for this work from lower-cost producers overseas will be fierce, and maintaining a vibrant manufacturing industry in Canada will be an uphill battle. The fastest-growing markets are no longer in Canada’s backyards – they are overseas in Asia, Latin America and Africa. Tapping those opportunities will require doing business in new languages and adjusting to different legal systems and cultural habits.
The success of these companies – and ultimately the sector – matters because manufacturing remains an engine of growth, particularly in Central Canada, and a source of well-paying jobs that are key to supporting a prosperous middle class.