Describe Linamar Corp. as ambitious and you'd be right on the mark. Frank Hasenfratz, a Hungarian immigrant who came to this country in the 1950s, turned a metalworking shop in his basement into a global automotive parts empire with annual domestic and international sales of nearly $2.3 billion.

Other words that apply equally to the Guelph, Ont.- based enterprise are innovation, flexibility, adaptability and certainly, diversity.

"Diversity has always been part of our strategy," af- firms CEO Linda Hasenfratz, daughter of the founder. She now heads a company that has earned its place on the list of Canada's most proficient and profitable industrial endeavours.

And now it can add "Manufacturer of the Year" to its many accomplishments. Linamar is the first recipient of the Canadian Manufacturers and Exporters(CME) Innovation Award, sponsored by PLANT, Canada's Industry Newspaper, a Rogers Media publication. The award recognizes a Canadian manufacturer that excels in its markets by being innovative, agile, involving its employees in the company's success and is an upstanding member of its community.

Linamar possesses all these characteristics and many others, instilled and refined by the founder, who now serves as Linamar's chairman of the board.

Today his creation has more than 11,000 employees and 37 manufacturing locations, with 25 plants in Ontario alone. Other production operations are in the US, Mexico, Germany, Hungary, South Korea and China. Each facility is directed by a division manager as an independent profit centre. Each plant has clustered facilities to gain maximum efficiencies and economies of scale. There are also nine international sales offices and five product development centres.

The company is organized into five groups, each representing an area of expertise, namely: engine, transmission/ driveline, industrial, Europe and Asia Pacific. This structure allows Linamar to focus on three key areas: performance, opportunity and innovation.

The engine group designs, develops, manufactures and assembles every key component of today's power plants. The transmission/driveline group does the same for its products. The industrial group designs, develops and manufactures elevating work platforms, focussing on scissor lifts and most recently the boom lift. The Europe group is centred on full-service engineering and manufacturing engine, transmission and driveline products for the continent's automotive and commercial market.

Although Linda Hasenfratz may have started out her corporate management journey in her father's footsteps, today she has established her own strong leadership position and plays a pivotal role in development of a company that constantly explores new manufacturing paths.

Her initiation in the company began in 1990 and involved literally learning managerial skills from the ground up. An extensive training program, including shop floor time as a machine operator, provided familiarity with all aspects of the business. During her climb up the corporate ladder, she also worked to complete an Executive MBA from the Ivey School of Business at the University of Western Ontario. Since she was named CEO in 2002, Linamar sales have grown from $779 million to the multi-billion-dollar range�an 81% increase.

Also in a leadership position in directing the company along new and profitable production paths is Jim Jarrell, president and chief operating officer. He says the customer- and product-focused group structure is a key element needed to fully implement Linamar's production system. "It's designed to make Linamar the lean, cost-effective organization we need it to be."

Strategic Investment
Linamar's employees drive continuous improvement. "We pride ourselves on the capability and ingenuity of our workforce and have commitments to significantly invest in training resources," says Hasenfratz.

In 2006, Linamar confirmed this commitment when it introduced a five-year, $1.1-billion investment strategy to further develop its people and product through training and R&D. The hub for this activity is an 80,000 square-foot technology and training centre in Guelph, which officially opens in 2008.

Part of the upgrade plan is to introduce new and improved technologies to all its Ontario plants by 2010 as a component of a skills development strategy for the employees of its precision machining plants.

In addition to its own funding, Linamar's focus on R&D, continuous improvement and innovation has received generous support through loans and other fi- nancial contributions from the provincial and federal governments.

Linamar has continued to grow when many in the automotive sector have scaled back operations. The $22-million investment and expansion of its Skyjack subsidiary is a good example. In 2002, the aerial platform producer sold 5,500 machines. In 2006, the figure had reached 22,540�a 302% increase.

In 1998, Linamar implemented its Stepping Stool Program as a reward for its employees. Each facility's performance is tracked by a visual system. Red means targets have not been met; yellow means targets are on track; and green means targets have been met or surpassed. The results are tabulated quarterly and directly affect the quarterly payout bonus.

"The Stepping Stool Program is a measuring tool that demonstrates the efforts of employees in all levels of the organization," Hasenfratz explains. "Since 2000, the program has paid out more than $35 million."

Diversity drives Linamar to the top tier

Last year, Linamar created an annual employee award program called the Power to Perform Challenge. Employees are encouraged to submit their best in-practice or factual story that supports Linamar's core values, ideas and leadership concepts. Up to five winners are selected to receive a cash prize.

On the employee health and safety front, job injuries are monitored and measured through a leg of the Stepping Stool Program and through various committees, supervision efforts. Other communication tools safeguard staff members on a worldwide basis. The result of this effort has earned the company an impressive record of accident-free operations.

Linamar operates with small, manageable and autonomous profit centres. "This enables our plants to take ownership of their operations and closely monitor processes and production," says Hasenfratz. "This formula creates strong relationships with our people and encourages collaborative efforts from all levels."

Product-focused factories are established that use flexible equipment whenever possible. This allows Linamar to create a series of specialty shops that easily identify and troubleshoot common issues with equipment prior to ordering.

"When possible, we purchase compatible machines and parts to give us more flexibility to tool up new lines and modify our existing lines to meet the changing needs of our customers," says Hazenfratz. "We strategically develop plant clusters geographically because this gives us the agility to link and leverage those resources and capabilities, drive down purchasing costs and help integrate the lean culture and community we have developed at Linamar."

To hedge its business from fluctuations in currency, Linamar manufactures within close proximity to its customers, therefore generating revenues in the country's currency.

Beyond Borders
In its strategy to develop markets in Asia, Linamar opened a plant in Wuxi, China near Shanghai in 2005 and it initially produced valve bodies. Now it has been awarded a camshaft program to turn out about 500,000 units a year with its staff of more than 100 people.

"The facility is now producing a combination of transmission, driveline and engine components and models and is lining up well with our overall company product strategy," says Hasenfratz.

Product and geographic location diversity has helped Linamar grow its business, despite dramatic realignment in the automotive industry.

Indeed, Linamar offers a quick response to marketplace conditions. "Our globally integrated group structure naturally promotes the sharing of knowledge, best practices and resources across the organization," Hasenfratz explains. "Wherever possible, we design our process in such a way that when volume on one production line ramps down, the equipment on that line can be easily retooled and used on another line. Our ability to transfer equipment and personnel throughout our groups as needed means we have the ability to capitalize on changing market conditions. This agility helps keep our operations scalable and allows us to cost-effectively increase and decrease capacity as market demands shift."

In its efforts to protect the environment, Linamar sets annual objectives as part of its compliance auditing and training. It has 34 facilities registered to the ISO 14001 Environmental Management System standard. These include 23 in Ontario, three in Mexico, three in the US, four in Europe and one in China.

As a member of the Automotive Parts Manufacturers' Association, Linamar is participating in the Environmental Performance Agreement involving industry and the federal government.

"Linamar believes strongly in job training," says Hasenfratz. "As such, all facilities offer training programs specifically designed to develop and enhance skills needed for the business. Currently, our focus is on providing job-specific training in the areas of machine operator, lean and new product development. That is not to say other training is not happening, because it is. However, in order to meet global business goals, training in these three streams is critical. In Ontario alone, for the period 2005 to 2006, over $4 million was attributed to machine operator skills development training."

Lean manufacturing has been a part of Linamar's culture since 2002. Since then, a group of managers around the world have been provided with specialized training to lead lean initiatives in each global facility. In Ontario, from 2005 to 2006, more than $170,000 was allocated to lean training.

Jarrell, who spends about 50% of his time travelling to Linamar's far flung plant locations�because it�s the best way to get a real read on how things are going�has been instrumental in imbuing the whole of the lean philosophy throughout the company.

Part of the lean initiation phase was a week-long study session organized by Jarrell involving all Linamar's general managers at California's Nummi operation, a joint venture of General Motors and Toyota.

"This set the stage for everybody to get the feel for lean and the impact it could have," says Jarrell. Linamar started by implementing production tools such as kanban and value-stream mapping to get the staff engaged. This was supplemented by workshops and study groups to exchange ideas.

and study groups to exchange ideas. "About 16 months ago we started to hone in on getting every person in Linamar accountable and responsible for implementing their own suggestions and creating a lean culture of improvement. That's the phase we're in now; but lean improvement never stops. It's just a matter of how you tweak the program once the concept has taken hold and is firmly in place. I think our results to date are quite good, but they can always be better�and that's the whole philosophical goal behind lean procedures."

How lean is Linamar? Reluctant to quote an exact�often- elusive�cost-saving percentage, Jarrell instead uses a signal light analogy. "I would say we are out of the red, into the yellow and starting to move into green."

Looking forward, Jarrell says of primary importance, bar none, is having enough technology and leadership resources to fuel the company's growth, "because we have outstanding opportunities as a strong company with a strong balance sheet." This is a major asset. He says the OEMs are asking Linamar to do more. "Of course, they don't want to pay more."

Another thing Linamar is watching on the auto side is not having all its eggs in one basket. "We have to diversify away from some traditional sources of our business, such as GM, Ford and Chrysler, and get more involved with OEMs such as Toyota, Honda and Nissan, which we're pursuing very aggressively," says Jarrell.

On changes in power sources in the auto industry, Jarrell sees the development of different fuel systems advancing in an evolutionary manner. "It won't be overnight; each method will be considered on its economic viability." And he predicts that there probably won't be a big change in the North American vehicle industry until the US government comes to terms with an energy policy that is firm and fixed. Otherwise the industry will be reluctant to make the necessary investments. In the meantime, he sees further advances in hybrids and a greater use of diesel engine power.

Looking ahead
On the economic front, Jarrell sees the dramatic rise in the Canadian dollar heightening concerns about Linamar's competitive position in world markets. "Asia is not an emerging potent economic force, as some people say, it's already here."

He sees China as the world's second biggest auto consumer in the next couple of years, while the market in India is heating up. Linamar is also studying opportunities in Thailand and other Far East nations. This interest would involve vehicle production sourcing, car and truck lines and other industrial equipment.

On the home front, Magna International's recent decision to allow unions to organize its auto plants has not yet raised serious concerns at Linamar. Its Canadian plants are non-unionized, with the exception of one plant that already had a union when Linamar purchased it.

"We have a very active pro-employee program and we think we can work together on our own," he says. "Of course, there is always outside pressure, but we just think if we stick to the fundamentals of a strong customer aspect, a strong employee aspect and a strong financial aspect, that�s the right mix."

Linamar sponsors the Yves Landry Foundation Awards, Skills Canada Competition, Multicultural Festival, Guelph Jazz Festival and Rotary Club Canada Day. It's also a strong supporter of the MS Society, United Way, the Lung Association, the Kidney Foundation, the Alzheimer's Society, the Cancer Society and other charities' local sports teams.

Winning the Manufacturer of the Year Award is an appropriate acknowledgement of Linamar's many accomplishments. But for Jarrell, it's also a way to honour the hard work and dedication of its employees.

"I truly believe we are a great manufacturer and we have excellent employees who are responsible for the output of very good quality products," says Jarrell. "Going after the award is a way to recognize their efforts. It is not an easy thing to be a manufacturer today in the present environment, to provide cost reductions and to grow quality and give customers what they need. The award is welcomed on behalf of our employees, and it certainly gives us recognition in the marketplace."

Linamar intends to hit sales of $20 billion by 2020. Based on past performance and future plans, that is an attainable objective.

Ron Richardson
ronrich@rogers.com