Don Berggren’s family-owned manufacturing company was on a roll until a rising loonie and the global recession clobbered his business.
Sales of its industrial cooling equipment to the automotive and plastics sectors were clipping along until the strengthening Canadian dollar hurt U.S. orders, then plunged as the financial crisis brought the economy to its knees three years ago. Mr. Berggren was forced to slash jobs, taking his work force down to 45 from 110 before the recession.
Today, however, the president of Toronto-based Berg Chilling Systems Inc. has switched gears, finding an opportunity to re-energize his business in Alberta’s vast oil fields.
Mr. Berggren has been working with his industry association over the past few years to win contracts to supply cooling equipment to the booming oil sector in Western Canada. “We were trying to find new markets to make up for the ones that were falling apart,” Mr. Berggren said.
The effort has paid off, with orders from oil sands giant Suncor Energy Inc. and two chemical plants in Alberta. Berg has supplied cooling equipment for Suncor’s oil upgrader and refinery operations to re-use or vent heat. And Mr. Berggren expects to make bigger inroads in the province as the company gains experience.
But as Alberta beckons, Berg is finding it far tougher to compete in the U.S., due to a Canadian dollar that was propelled to parity with the American greenback by the very resource boom he is hoping to capitalize on at home.
The decade-long rise in the Canadian dollar has clearly undermined the competitiveness of manufacturers and other exporters by driving up costs relative to American competitors and reducing Canadian dollar revenues from a sale in the U.S.
Like other Ontario manufacturers, Berg is suffering from a form of the “Dutch disease” in which a booming commodity market undercuts domestic manufacturers by driving up the value of the local currency.
The Canadian version of the disease is particularly debilitating. Fractious provincialism and the regional disparity of the country’s resource riches make it hard to share the wealth. And the ailment threatens to re-ignite smouldering resentments that strain the fabric of the nation.
Those tensions were on display this week when Alberta Premier Alison Redford and Ontario’s Dalton McGuinty quarrelled over Canada’s “petro dollar” and its impact on manufacturers. The discord is a vivid reminder of the stark divergence of interests between the booming oil-rich West, and the battered manufacturing hub in the East.
Simply put, $100 oil prices are a boon to the Prairies and the bane of Central Canada.
The question now for Ontario is whether it can get its fair share of the action out west. If Asia’s boom is the next great opportunity for the West’s vast resources of oil, natural gas, potash and other commodities, will Alberta, British Columbia and Saskatchewan be the next great opportunity for the sputtering manufacturing engine of Ontario?
Business and political leaders say the long-term potential for Ontario is big. But early signs suggest any bonanza for Ontario will take a lot more Don Berggrens to become a reality.
So far, the bounty of the oil sands for Ontario is mostly rosy projections. One claim has frequently been recycled: That for every $1 of money spent in the oil sands, Ontario would see 31 cents in economic benefits. The source for the claim is the website of the Fort McMurray-based Oil Sands Developers’ Group, which represents the producers and their main suppliers. But OSDG operations manager Deborah Farkouh, who initially disavowed knowledge of the figure, said more recent research shows the figure is vastly overstated.
In a report last fall, the Calgary-based Canadian Energy Research Institute (CERI) estimated that the oil sands will generate $3.3-trillion in investment and revenues over 25 years, assuming construction of both the Keystone XL pipeline through the U.S. and the Northern Gateway pipeline through British Columbia.Report Typo/Error