July 13, 2021

How Canada Can Get Back Some of its Former Glory as a Maker of Things the World Wants to Buy

(FINANCIAL POST) – Kevin Carmichael: Canada’s desire to re-establish itself as an automotive power short on key ingredient: manufacturing talent.

Automotive supply chains are being overhauled to build electric vehicles, and his Brampton, Ont.-based company will be an important node when they solidify since it has emerged as a leading supplier of one of the most important parts: the aluminum cases that protect the batteries, a tricky bit of engineering.

The cases must be both lightweight to help maximize the distance vehicles can travel between charges, and durable enough to keep the battery from exploding in a collision.

We participate in 50 per cent of the (EV) program launches in North America in a meaningful way,” Caputo, chief executive and part-owner, said in an interview.

There’s Tesla Inc., of course, but also Ford Motor Co.’s battery-powered Mustang Mach E, which started selling in Canada last year, Rivian, and he name-drops Daimler AG’s Mercedes and Bayerische Motoren Werke AG (BMW) for good measure.

People think of Tesla and they think of EV, and justifiably so,” Caputo said. But it’s a pretty broad movement. That, I think, is interesting.”

Indeed. Canada, home to a handful of big auto-parts makers, has the look of a contender in the contest to build the next generation of vehicles. Nature bestowed on us the minerals needed to make batteries and we still have steelmaking capacity.

Furthermore, Lion Electric Co. of Montréal and NFI Group Inc. of Winnipeg are pushing hard into the market for electric buses, and Quebec’s BRP Inc. and newcomer Taiga Motors Corp. are gearing up to produce e‑snowmobiles.

Prime Minister Justin Trudeau and Ontario Premier Doug Ford loaned hundreds of millions of dollars to Ford, General Motors Co., and Stellantis NV’s Fiat Chrysler Automobiles to underwrite the retooling of factories for EV production. And the Automotive Parts Manufacturers’ Association of Canada, a lobby group, is sponsoring Project Arrow, which aims to build an electric-powered concept car by 2022.

The hype is real. The growth has been amazing and we’re pretty much in the middle of it,” said Caputo, who a few years ago identified an opportunity to insert himself into the EV supply chain.

Caputo, who made a name for himself managing publicly traded companies, had grown tired of the noise” that comes with trying to please analysts and short-term investors while building a durable business. He teamed with TorQuest Partners, a private-equity company, in 2016 to purchase Can Art, a good company that Caputo thought could be taken to another level. He made a plan to double production to 100 million kilograms of aluminum per year while targeting the most important buyers in automotive, architecture and consumer products.

We went from quotes to proposals,” said Caputo, who is on the verge of meeting his production target. We designed the future for ourselves and we grew into it.”

That plan is paying off, and he can’t help but wonder if policy-makers and industry leaders have an opportunity to restore some of Canada’s former glory as a maker of things that the world wants to buy, which would boost the country’s ability to generate wealth and support better-paying jobs.

I’m not saying a whole revamp of the industrial base,” he said. I’m just saying, where we have these nuggets, like EV and other things, if we nurture them, maybe it will serve multiple purposes.”

Caputo’s thoughts all make sense in the abstract. Now, we just need to keep pace, which will be harder than it seems. Can Art’s experience suggests that Canada’s desire to re-establish itself as an automotive power is short on a key ingredient that can’t be found by digging a deeper hole: manufacturing talent.

The decline of manufacturing over the past few decades has left a dearth of people who know how to make things. There were some 1.9 million factory workers in Canada at the start of 2001, representing about 15 per cent of the workforce, according to Statistics Canada’s monthly payroll survey. That number had deteriorated to about 1.5 million by 2009, which is where it has hovered since, representing about nine per cent of all workers.

Caputo said he was only somewhat concerned about inflation, the main topic of conversation in financial markets and the business press at the moment. His biggest worries remain protecting his 500 workers from COVID-19 and finding enough people to keep the factory running at full tilt.

Anyone can play the violin, but not many people can play it well,” he said. Our people can not only play the violin, they can envision the music.”

But Can Art needs a bigger orchestra: the company currently has about 50 unfilled positions at its main factory in Windsor, Ont. I worry about the availability of skilled tradespeople,” Caputo said. We always have challenges in that area.”

I worry about the availability of skilled tradespeople

– Anthony Caputo

For decades, Canadian kids have been conditioned to equate career success with a fancy degree and an office job. There were about one million people employed in white-collar professions in April, a 57 per cent increase from the start of 2001, more than double the increase in total employment over that period.

Manufacturing still employs more people, but the industry’s trajectory has been in the opposite direction: the total number of positions in the industry was 26 per cent lower than in 2001, the year China joined the World Trade Organization and accelerated the hollowing out of American and Canadian factory towns that couldn’t compete with Asia.

Maybe high school guidance counsellors gave up on manufacturing too soon. The Can Art story is a good example of how the right mix of talent and capital can make a go of making things in a relatively high-cost jurisdiction such as Canada.

But the company is now growing faster than the pool of potential workers. It’s a problem that also afflicts the red-hot information-technology industry, which has sought to offset a chronic talent shortage through immigration and, more recently, by taking the training of the next wave of workers into its own hands.

There are lessons there for makers of tangible goods, but Caputo also wonders if his industry needs a better story. Can Art heats aluminum at 1,000 degrees,” so he acknowledges that a job on his factory floor isn’t for everyone. Still, what’s more rewarding: writing code for random video games or building parts for the green revolution?

We’re not software, we’re not very cool, except what we do goes into very cool things,” he said.

If that doesn’t work, Caputo might try advertising how much money you can make in manipulating aluminum. The 10,700 people left in this sub-sector of manufacturing made an average of about $2,000 per week in April, roughly the same as stock traders and 10 per cent more than software designers.

You have to pay what everybody else does,” said Caputo. We do that.”

Financial Post