Cash crunch latest blow for Canadian manufacturers

Thu Oct 30, 2008 2:13pm EDT
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By John McCrank

TORONTO (Reuters) - A few weeks ago, Peter Jeffrey was looking to hire four or five more employees to keep up with the busy workload at FormaShape, a composite fiberglass company in Kelowna, British Columbia.

That was before a major customer in the United States called to cancel a big order that would have kept the molding company busy for a year. Jeffrey, who's president of the company, has put any expansion plans on the shelf for now.

Canada has so far has felt little direct impact from the cash crunch that has frozen credit in many parts of the world and fueled fears of a deep global slowdown. Even so, as the experience of FormaShape illustrates, Canadian manufacturers are starting to feel the pinch as their customers struggle to make payments on time, or cancel orders altogether.

"What we're hearing is that American customers in particular are delaying payments because of problems obtaining credit, and what we're also hearing right now that a number of orders are being canceled," said Jayson Myers, president of the Canadian Manufacturers and Exporters trade group.

Manufacturing is a C$600 billion ($494 billion) business in Canada, employing nearly 2 million people and accounting for 15 percent of the country's economic output.

But the sector has seen difficult times since the value of the Canadian dollar started rising from its low point of 62 U.S. cents in 2002, with about 400,000 jobs lost.

The currency has recently dropped sharply against the U.S. dollar, but that has not translated in gains for Canada's long-suffering manufacturers. The cash crunch is the latest blow to the sector.

To make it through the tough times, FormaShape is focusing more of its efforts on winning contracts from companies in sectors such as oil and gas, where cash is more readily available.   Continued...