Linamar invested $1.1 billion over five years, with federal and provincial support, to boost its R&D and staff training initiatives.

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When it comes to Canada’s auto parts industry, globalization and technological innovation are possibly the two biggest pressures facing parts manufacturers today. “It’s not a struggling sector, but it is rapidly changing,” says Gerry Fedchun, president of the Automotive Parts Manufacturers’ Association. “You have to keep up with those changes, so there [are] a lot of challenges.”

Currency fluctuation, raw material prices, global vehicle platforms and foreign competition are all obstacles that the industry must overcome. Fedchun says Canada’s competitive advantage exists in industry innovation, increasing capacity, human capital and a growing knowledge base being used in R&D.

While other parts makers have fallen victim to such pressures, Guelph, Ontario-based Linamar Corp. – a global manufacturer and supplier of precision metallic automotive components – has grown from a sole manufacturing facility to 36 plants worldwide though acquisitions and new ventures. In 2006, Linamar generated an estimated $2.3 billion (Canadian) in sales.

The automotive powertrain/driveline division represents 45 percent of the company’s business, heavy-duty and commercial vehicles account for 30 percent and mobile industrial products account for the remaining 25 percent. Instead of building one line of parts at one sprawling facility, the company manufactures a limited variety of components at several smaller plants for diverse markets throughout Canada, the United States, Mexico, Germany, Hungary, China, Korea and Japan.

Part of its success is due to its embrace of fresh ideas, products and processes. “Technology innovation is a key element in our strategy to provide our customers with products they need that are processed as efficiently and effectively as possible,” President and CEO Linda Hasenfratz says. “Product and process innovation and R&D [are] the key ... in an increasingly competitive world.”

Innovation as a Commodity
In early 2006, Linamar announced plans to invest $1.1 billion over five years, with federal and provincial support, to boost R&D and staff training. As part of the commitment, the company purchased a 30,000-square-foot building on a 10-acre site in Guelph, Ontario, in mid-2007.

As Hasenfratz explains, the center will provide advanced tooling, fixture and gauging analysis and development, introduce an advanced automotive development and supplier development group and conduct product testing and R&D. Staff training will also be enhanced through the machine tool innovation program, a supplier development center, enhanced apprenticeship and technical skills training and leadership development.

“The center is key to both our innovation efforts and the development of our people [who are] critical to our successful, continued growth,” Hasenfratz maintains.

Although still in the planning phases, the building will be reconfigured to include ample training space, an amphitheater, additional testing and product development space, as well as augmented engineering offices.

“What is innovative today is a commodity,” Fedchun says. “In five years, once you innovate something, it will be duplicated. If you want to stay competitive, you have to keep innovating.
“Linamar is a sterling example of wanting to constantly work on new products and processes so [they] can stay competitive,” he adds.

As Hasenfratz explains, the company’s product and process innovation has evolved in the past 10 years. The company used to quote a component for a customer’s design, but now is capable of designing an entire system for the client.

“Today, we endeavor to either provide a fully designed system, such as with our power transfer unit [PTU] business, or at least provide input to the design team on the design for their components and modules based on our manufacturing experience and knowledge about what is the most cost-effective design from a production basis,” Hasenfratz explains. “Our industrial business, on the other hand, has always been fully design-responsible for our scissor and boom lifts; R&D is an important aspect of our business growth.”

Product development efforts became a strategic focus of the company in 1997 and were further emphasized in 2003 with the acquisition of McLaren Performance Technologies. Under the McLaren umbrella, Linamar’s product development encompasses prototyping, system and component testing, program management, evaluation of new technologies and warranty analysis.

What’s In the Pipeline?
As other countries become more efficient in manufacturing, Canada’s auto manufacturers must compete by locating or acquiring the labor and facilities in these countries. Linamar has built capacity through acquisitions – most recently on Aug. 31 with the purchase of Ford Motor Co.’s Automotive Component Holdings’ PTU business.

The purchase included a 304,000-square-foot manufacturing plant in Mexico and a design engineering team in Detroit. The business employs 500 staff and 20 engineers. The acquisition broadens the company’s portfolio to include PTU, a critical driveline system that provides all-wheel-drive control to vehicles.

Although there are many players in the industry, Fedchun says he can’t point to one in particular that has played a more significant role in keeping Canada an automotive innovator. “It’s going to be a tough road to hold, but most people will make it through,” Fedchun predicts. “Most companies will make it and the ones that do emerge will emerge stronger than ever.”

Linamar intends to grow the business significantly in the future through new product and process development, Hasenfratz says. “We are passionate about growing our company, but always conscious of doing so in such a manner as to ensure our employees, our customers and our shareholders are all satisfied,” she says.

“We have a long term-vision of reaching $10 billion in sales by the year 2020. In order to achieve that, we should be a $3.5 to $4 billion company by the year 2010. We envision continued growth in both our powertrain/driveline business and our industrial business though that time period as we take advantage of massive opportunities in each market on a global basis.”