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Hideo Kitawaki, centre, CEO of Hitachi Construction Truck Manufacturing Ltd. in Guelph Ont., talks with engine assembler Ralph Schmidt, left, near one of their 3,000-horsepower motors used in dump trucks such as the EH 5000 trucks with load capacity of more than 300 tons. (Glenn Lowson for The Globe and Mail/Glenn Lowson for The Globe and Mail)
Hideo Kitawaki, centre, CEO of Hitachi Construction Truck Manufacturing Ltd. in Guelph Ont., talks with engine assembler Ralph Schmidt, left, near one of their 3,000-horsepower motors used in dump trucks such as the EH 5000 trucks with load capacity of more than 300 tons. (Glenn Lowson for The Globe and Mail/Glenn Lowson for The Globe and Mail)

manufacturing

Hitachi Construction has big plans for its big trucks Add to ...

In an unremarkable industrial park in Guelph, Ont., sits what Bruce Murray calls Ontario’s best kept secret – if it’s possible that eight-metre-high orange trucks that can haul more than 300 tons of earth can be hidden.

Mr. Murray is the executive vice-president of Hitachi Construction Truck Manufacturing Ltd., a company that is doing something rare in the battered heartland of Canadian manufacturing: growing. The global giant is expanding its Canadian operation by more than doubling the size of its work force in Guelph, and boosting its output of giant mining trucks by almost 100 per cent.

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A key reason for expanding here rather than in Mexico or another location with lower labour costs is equally unusual: the presence of a skilled and veteran work force at the plant, which Hitachi purchased in 2000.

“There’s a lot of complex technology between the key and the back axles and it takes a long time to develop those skills,” Mr. Murray pointed out. “Welding is an art when it comes to dealing with equipment this large.”

On both counts, the Japan-based company’s strategy stands in stark contrast to the wave of plant closings that has swept southern Ontario recently – notably the shutdown by Caterpillar Inc. of its Electro-Motive Diesel Canada locomotive factory in London, Ont., after a bitter lockout and a union’s rejection of up to 50-per-cent pay cuts and drastic cuts in benefits.

That same union, the Canadian Auto Workers, represents about 400 workers at Hitachi, whose mining trucks built in Guelph compete directly with Caterpillar mining trucks assembled in Decatur, Ill.

The Hitachi expansion stands out not only as a counterpoint to Caterpillar and the trend of plant closings, but also because it’s one manufacturer in Canada benefiting from the global commodities boom that is driving up the Canadian dollar and causing havoc in the country’s industrial heartland.

It’s also doing something else that turns conventional wisdom upside down. Hitachi is exporting made-in-Canada products to low-cost and growing markets instead of shifting to those areas and making its products there, signalling that manufacturers here can compete.

Japan-based Hitachi has Caterpillar in its sights. The U.S. giant is the leader in the growing market for giant mining trucks, which is being bolstered by the commodities boom and expanding economies in China, Brazil, India and Russia.

Caterpillar holds about 50 per cent of the worldwide market, while Komatsu Ltd., also based in Japan, has about 40 per cent and Hitachi 8 per cent, said Hideo Kitawaki, chief executive officer of Hitachi’s Guelph-based Canadian unit.

“Those two are giant and we are a baby,” Mr. Kitawaki said in an interview. But the baby wants to grow. “We’d like to reach 40 per cent market share. That is very aggressive.”

Both he and Mr. Murray consider the plant’s skilled work force a crucial advantage in reaching those goals. Finding the same skills in another area with lower labour costs would be difficult, and training new workers would be expensive, Mr. Kitawaki said.

CAW officials said welders are paid about $25.50 an hour, while production workers are paid about $24.50. The benefits plan includes a defined benefits pension plan.

The skill of the workers enables a level of quality that is essential for Hitachi to compete, Mr. Murray said.

Mine managers want trucks that are available constantly and not sitting idle awaiting repairs, he noted. “They’re moving money. They want them moving all the time.”

Large castings that arrive from suppliers, such as the front spindles for the biggest of the trucks, the 320-ton capacity EH5000, are examined by workers wielding ultrasonic scopes to make sure there are no cracks, cavities or porous areas in the steel.

“Imagine dumping over 300 tons of material on the axles. If those castings have any cracks in them or are not robust enough in terms of design, they don’t last very long. They basically break and thus the truck is now unavailable to work,” Mr. Murray said.

Every spindle – part of the front wheel assembly – is tested this way. Each 240-ton frame on the 150 trucks the plant assembles annually undergoes electronic analysis to ensure it is properly aligned.

The biggest trucks are assembled in Guelph, then taken apart and shipped on eight flatbed trucks to Baltimore, where they are loaded aboard ships to head to coal, copper and other mines. While the rise in the Canadian dollar has pummelled manufacturers, it is an advantage for Hitachi in Canada. The plant has a global supply chain.

The giant 16-cylinder, 3,000-horsepower engines that power the beasts come from U.S.-based engine makers, so a higher Canadian currency makes them less costly.

Expanding the Guelph plant, which is now shipping mining trucks to Colombia, Indonesia and other export markets, is part of a shift in strategy that also involves boosting production at a plant in Japan that also makes them. The strategy includes updated versions of the behemoths, one of which is already on the assembly line in Guelph.

Japan will supply Asia and Oceania, while Guelph becomes the centre for shipments to customers in North and South America, Western Europe and western Africa.

The Canadian unit does not ship trucks to Western Canada’s oil sands, but Mr. Kitawaki sees it as a key market.

Mining equipment manufacturers such as Hitachi, Caterpillar and Komatsu are now trying to supply the complete line of equipment in a pit, from drills to giant shovel excavators to trucks, said Mike Currie, an independent industry analyst based in Kelowna, B.C.

“Hitachi has a very strong shovel line and a very strong truck line,” he said. “By expanding their truck capability, they will be a strong competitor.”

The market for trucks should grow, he added.

“In the past 10 years, the growth in China, India and the demand for base metals and precious metals has been fantastic. A lot of the existing mines are either expanding or have exhausted their ore bodies so new mines are being created every day.”

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