Cyclone Manufacturing: Lessons from the leading edge of global trade

Cyclone Manufacturing: Lessons from the leading edge of global trade

Sector Series: Aerospace

It was a classic case of “he liked it so much, he bought the company.” While working as a CNC (computer numerical control) machinist for Cyclone Manufacturing Inc., Andrew Sochaj was also busy studying the company inside and out for he knew one day, he’d buy it. And so he did.

Founded in 1964 by Ted Kosiorek, Cyclone fell into its mainstay — manufacturing aircraft parts — within the first five years and was the first company, along with a Detroit partner, to manufacture indexable cutters, now used across the industry. Cyclone’s first CNC machine, which ushered the use of computers to control machine tools, was purchased in the 1980s and Sochaj bought the company in 1990.

Today, Cyclone deals with all the industry’s biggest manufacturers — Bombardier, Boeing, Airbus, Lockheed Martin and Embraer.

From humble beginnings at a 24,000-square-foot facility in Mississauga with 40 staff, Cyclone currently operates with 575 employees working out of four facilities whose area totals 270,000 square feet, in Mississauga and Milton.

“We supply parts directly to Bombardier,” said controller Buz Forbes. “For Boeing and Airbus, we supply parts to other OEMs (original equipment manufacturers). Our other big customers are Lockheed Martin and Embraer and OEMs like Triumph and Spirit in the U.S.; FACC, out of Austria; GE Aviation in the U.K. and AIDC, from Taiwan. Most of our customers are either crown corporations or publicly traded companies.”

The company’s customer profile has changed dramatically in recent years. “A few years back we used to rely on Bombardier for more than 50 per cent of our sales, but now that reliance has dropped significantly to about 20 per cent,” Forbes said. “That’s a big change and it’s mostly on account of the development of new platforms and projects with existing and new customers such as Spirit, GE Aviation, FACC and AIDC. We do a lot of exports, including to customers in China.”

By combining all processing under one roof, Cyclone — the ultimate vertical integrator — helps clients eliminate needless shipping and minimizes production time and cost. Cyclone’s final processing facility is able to perform several important functions, including heat treatment, non-destructive testing of aluminum parts, chemical film and conversion coating and priming and topcoating.

Tier I and II Ontario-based manufacturers, such as Noranco, Centra and KOSS Aerospace, use Cyclone’s processing facility, rather than sending their parts to the U.S. or Europe for processing. This significantly reduces their lead time and cost.

Over the years, Cyclone has turned to EDC periodically for financing, including for accounts receivable insurance and export guarantees. Its most recent transaction was a guarantee for building a new plant — its first on foreign soil — in Krasnik, Poland, a country with a strong aerospace sector and extremely competitive labour pricing. Cyclone’s management decided to set up the plant in Poland to cater to the growing demand for processing and machining requirements in Europe.

“Setting up a new plant requires a massive amount of investment in the building, infrastructure equipment,” Forbes said. “That is something that a novel bank wouldn’t be willing to finance. In order to circumvent that, EDC stepped in and gave a guarantee.”

That guarantee also reduced the interest rate the bank was willing to offer, Forbes said.

“It’s a win-win situation for everyone,” he said.

Five export questions with Buz Forbes, controller of Cyclone Manufacturing Inc.

1. What was your first export sale?

Our first export sale was in 1994 to Shorts PLC in Belfast, a subsidiary of Bombardier Aerospace.

 

2. How did that first export opportunity arise?

The assembly plant was relocated to Belfast and Cyclone had been recommended as a supplier.

 

3. When it comes to exports, what do you know now that you wish you knew then?

If I’d known at the time that the Canada-U.S. exchange rate would change so drastically, I would have done a lot more exchange hedging.

 

4. How has the trading world changed since you started in business?

The past decade has been a truly amazing time for international trade. Due to advances in transportation, technological and geo-political relations, as well as other advances, companies are now able to maximize and expand their potential in ways that wouldn’t have been possible in the past.

The new trend for international companies is to have their headquarters in one country, manufacturing plants in another, and market for their products in many other countries across the world, which allows companies to take full advantage of what countries have to offer and in turn, it increases their productivity, efficiency and profitability.

 

5. What is the #1 thing new SMEs need to know about export and trade?

The capital investment into aerospace is humungous and there is a long gestation between the time you have the first investment to the time the first product goes out the door. There are a lot of certifications and approvals required. That’s the biggest challenge.

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