How has one 50-year-old tooling manufacturer based in Windsor flourished in the current tough economic environment? By diversifying, of course.
Valiant Machine and Tool started as a one-person business when Mike Solcz Sr., now Chairman Emeritus, opened a small machine shop in 1959. The company makes automation systems for car manufacturers; essentially they build the equipment and tools needed for an auto production line, from systems that manufacture car doors or hang car doors on vehicle frames, to equipment that assembles and tests powertrains.
From the very start, the company understood that innovation, diversification and expanding its products and services were going to be key to its sustained success. Today, the company has almost 1,600 employees, throughout 23 facilities in 11 countries, including Canada, the United States, Austria, Germany, Belgium, the Czech Republic, Romania, India and Mexico.
Don’t put all your eggs in one toolbox
The automotive industry has always been Valiant’s backbone; its first major business came from Ford, soon followed by Detroit’s other “Big Three” auto makers, General Motors (GM) and Chrysler/FIAT. And for decades, while the auto sector boomed, Valiant expanded. But by 2004, the need for change was becoming increasingly evident as the automotive market began to show signs of slowing down.
“Six or seven years ago, we became ‘enlightened’ to the fact that 90 per cent of our business was in the auto sector,” says CEO Marty Solcz. “And the overwhelming majority of our business was in North America. We knew this was risky.” So, in a strategic move, the company began to aggressively apply its technology and pursue clients in new areas.
The aerospace industry was one of them. Other new clients were added and Valiant continued to pour significant resources into research and development to ensure that they were always developing new high-performance niche products. “We didn’t try to reinvent the wheel every time,” says Solcz. “We often went with proven technologies and designs, and reapplied them to other sectors. Our ability to deliver integrated solutions to our global customers, along with our advanced technology products, was a key ingredient to our success.”
By 2008, when Chrysler and GM were facing major financial challenges, Valiant’s diversification strategy helped insulate the company from the negative effects of the economy. Today, Valiant still provides automated production systems to the automotive industry – its bread and butter – but has also since expanded to the aerospace, construction, forestry, mining, alternative energy, plastics and composite tooling sectors.
“Diversifying is what saw us through the downturn,” says Solcz. “When the financial crisis began, we lost a great deal of our North American revenues overnight, but Europe was still strong. Overall, diversifying helps insulate you from most of the ups and downs, not the least of which is currency fluctuations.”
Follow your customers
Diversifying your market base is just as critical, and this strategy brought Valiant to India in 2009, when it established Valiant-TMS Systems in Pune to build the required equipment and install it in the assembly plants of its original equipment manufacturer (OEM) customers in the region.
“Our strategy is to follow our customers,” says Solcz. “And our customers – like GM, Honda, Volvo and Ford – were investing in India. So we knew we needed a presence there to support them.” Valiant first established a small engineering and sales office in Pune and now has a full-fledged design and build house there to support all its customers in the region.
Why India? It’s one of the world’s fastest growing economies but has only some 14 vehicles per 1,000 people, where the world average is 120. And with a population of 1.3 billion – and a fast-growing middle class that can afford vehicles – demand is only going to increase. It’s forecast to grow up to 15 per cent a year over the next decade. This means massive production by India’s auto makers, and concurrent demand for auto parts.
“The Indian supply base will have to grow considerably to keep pace with expected demand,” says EDC Transportation Group’s John Earl. “So there are huge opportunities for Canadian auto parts suppliers to diversify in India – and outside North America in general.”
India has only some 14 vehicles per 1,000 people, where the world average is 120. And with a population of 1.3 billion – and a fast-growing middle class that can afford vehicles – demand is only going to increase.
To meet this demand, EDC has been building relationships and providing loans to key Indian OEMs such as Tata Motors and global Tier One parts suppliers. These loans are then leveraged to influence, or pull in, trade opportunities for Canadian auto parts and tooling makers. Then EDC helps make the right connections – putting Canadian suppliers in the same room with major Indian auto sector buyers.
“EDC has been a consistent and supportive business partner throughout our global expansion,” says Solcz. “They have back-stopped a significant part of our international growth and co-financed our working capital needs.”
EDC also provides accounts receivable insurance coverage on some of Valiant’s large buyers, protecting both the company’s revenues and its access to working capital for investments, which is critical during a downturn, adds Solcz. “But where they’ve added even more value is in the introductions they are able to make.”
Last year, EDC coordinated an event in partnership with the Department of Foreign Affairs and International Trade (DFAIT) and the Automotive Parts Manufacturers Association (APMA), following the Auto Expo 2012 Show in New Delhi. At the event, several Canadian companies – Valiant among them – held face-to-face meetings with senior decision makers from Indian OEMs’ Mahindra & Mahindra, Ford India, Ashok Leyland and Tata Motors. As a result of these introductions, Valiant continues to build on its relationships and business in the Asia-Pacific region.