Member Profile

by Karen Wesseling

Axalta shares their thoughts on the Canadian shortline market in view of the recent turmoil created by tariffs

Just like their coatings, Axalta is built to endure difficult conditions, conditions they have faced during the recent changes in trade.

Axalta is a manufacturer of industrial and automotive coatings, with a robust business in the agricultural industry. Axalta has more than 150 years of expertise in the coatings industry. In 2013, Axalta purchased the coatings business from DuPont and has consistently gained recognition in the coatings industry; now ranking as one of the top five globally.

“Axalta recognizes that the shortline agricultural implement business provides vast opportunities for us, but is a cyclical business,” noted Robert Ablamowicz, Canada Group Leader – Industrial for

Axalta Coating Systems Canada. The Canadian shortline industry was on an upward trajectory for seven-plus years and then begun to slow down in 2015. Sales remained soft thru the fall of 2016 but rebounded in Q3 2017. When the discussion of tariffs began, specifically those around steel, Axalta started to see a softening of demand from the market. With the implementation of tariffs, many manufacturers needed to adjust and assess the impact on costs. In some cases, this has led to some reductions in output. “Our customers are feeling the effect but are rapidly adjusting to the new reality. There may be further uncertainty in 2019 as tariffs take full effect thru US-based supply chains. Having said that, Canadian shortline manufacturers are creative and innovative. They will adjust, realign and survive.”

“Tariffs on steel and other commodities are having a notable effect on our industry. Raw materials used in coatings are sourced globally. The imposition of tariffs and burgeoning trade wars drive up costs,” said Ablamowicz. The inflationary pressure that this produces then forces companies to think carefully how best to proceed. “We must maximize efficiencies as much as possible to offset increasing costs! We are always reassessing cost inputs and looking at ways to increase productivity.”

Many manufacturers who either build shortline equipment and or supply the industry, such as Axalta, are having to adjust selling prices. “We don’t want to have to pass these costs onto our customer, but we have to be smart about it.” Tariffs are having an effect on both the manufacturing and supply side of the business. “The reality is everyone is feeling the pinch and we just need to take the emotion out of it and adjust. The playing field has changed.”

“AMC is in an excellent position to support Axalta and other members through advocacy at the federal and provincial levels.”

— Robert Ablamowicz, Canada Group Leader, Axalta

Easier said than done. Axalta’s customer base builds quality manufactured implements for the agricultural community. It is next to impossible to take emotion out of it when farmers are being squeezed from both sides. Ablamowicz acknowledges, “Farmers have faced lower commodity prices and an increase in implement costs, remaining profitable becomes ever more challenging.”

He predicts that the price inflation caused by tariffs is going to force farmers to be more conservative in their buying patterns. “Typically, farmers are buying equipment such as air seeders or swathers and trading them in every three to five years. With the rise in costs of equipment, they’re going to consider hanging on to equipment longer. This may, in turn, lead to a decrease in equipment sales, but potentially will see increases on the maintenance and parts side of the business.”

The strategy for Canadian shortliners and other manufacturing businesses is to shift their focus to sales outside of the United States. More emphasis on the global market is needed. Many shortliners have had great success exporting equipment to Asia, Australia, Eastern Europe and Russia. “Canadian companies have relied too much on the US market, so there is a need to double down on export development. We know from a strategic standpoint, that we have to work with the government and work together to expand our global reach.” Axalta has seen many customers have great success exporting to other countries outside of the United States and feel that this strategy must continue and expand.

As for AMC’s involvement in this strategic direction, Ablamowicz noted that, “We are very optimistic about the direction that AMC has taken in the past few years. With a focus on reinvigorating the organization, AMC is in an excellent position to support our members through advocacy at both the federal and provincial levels - export development being a critical item on the agenda.”

Agricultural manufacturers produce over a billion dollars in equipment across Canada every year, yet the industry is not well known to most Canadians. AMC has made great strides in getting in front of government policymakers and providing advocacy on matters such as economic development and trade.

The agricultural industry is strong and although this current climate is a challenge, Ablamowicz believes that if strategies evolve, the Canadian shortline industry will continue to thrive.