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Canadian equipment manufacturers feeling the COVID-19 crunch

Grant Cameron
Canadian equipment manufacturers feeling the COVID-19 crunch

COVID-19 has taken its toll on contractors, construction companies and workers. It’s also having a devastating effect on Canadian equipment manufacturers, with no end in sight for the foreseeable future.

Nearly half of Canadian companies that responded to a survey by the Association of Equipment Managers (AEM) indicated it will take one year or longer to get back to pre-pandemic business levels and 50 per cent say they have used or intend to use the federal COVID-19 assistance program to help their business.

“The COVID-19 pandemic has clearly impacted equipment manufacturers and the communities we proudly serve across Canada,” said Alexander Russ, director of government affairs for AEM. “From new orders drying up to supply chain disruptions, this unprecedented crisis has caused many companies to reduce their immediate financial outlook.

“AEM continues to help our industry navigate these challenging times to come back stronger and fuel Canada’s economic recovery.”

The survey was conducted between June and August to get the lay of the land and a rundown on what the future looks like for the industry. Twenty-four respondents weighed in on the effect of the COVID-19 pandemic on the economy, the industry, their companies, supply chain and manufacturing operations.

The survey also explored their financial expectations, as well as the challenges they continue to face. Respondents detailed the challenges that they face as a result of the pandemic and specific ways the Canadian government can keep equipment manufacturing strong and help ensure the country’s economic comeback.

Companies participating in the survey were AEM members based in Canada. The companies included those that build or manufacture equipment and parts used in construction, utility, mining, agriculture and forestry.

The results painted a bleak picture for the industry going forward, with 24 per cent indicating it will likely be the second quarter of 2021 before their company recovers to pre-COVID business levels. Fourteen per cent said it would take until the first quarter of 2021, 10 per cent said the third quarter of 2020, and five per cent said it would take until the fourth quarter of 2020.

More than three out of four Canadian equipment manufacturers identified a decrease in new orders as the primary impact of COVID-19 on their business and manufacturing operations while four out of 10 identified supply chain issues as a major impact.

The next largest impacts were employee absenteeism at 43 per cent, a decline in company financial situation at 43 per cent, cancellation of orders at 38 per cent, reduction in employment levels at 29 per cent, and layoffs at 29 per cent.

In light of the situation, the AEM is calling on the Canadian government to help the equipment manufacturing industry and provide economic assistance to businesses as well as invest more federal money in infrastructure projects.

“AEM continues to lead the industry’s response to the COVID-19 pandemic and is working closely with Canadian officials to keep the equipment manufacturing industry in Canada strong and ensure the nation’s economic resilience,” the organization said in a statement.

“AEM is calling for bold action by the Canadian government to incentivize the further development of the equipment manufacturing industry in Canada, and to provide additional economic assistance to businesses of all sizes.”

To help equipment manufacturers during the COVID-19 crisis, the AEM has laid out a laundry list of requests.

Sixty-five per cent of the manufacturers who responded indicated they want the federal government to recognize the critical importance of Canadian manufacturing capacity and implement measures to increase the competitiveness of the sector and to reward innovative Canadian manufacturers.

Sixty per cent suggested investing more federal money in infrastructure projects, including increasing the federal portion of funding for provincial and municipal projects.

Meanwhile, 60 per cent also suggested creating a program to replace older equipment with new, lower-emission equipment through tax credits or government grants and loans.

Additional actions that the Canadian government should be taking, according to the equipment manufacturers, include expediting the permitting process for new infrastructure and resource development projects and working with the provinces and municipalities to remove duplication in their processes.

Thirty-five per cent of respondents suggested setting up a Canadian Secured Credit Facility to help businesses invest in capital equipment and 30 per cent felt government should provide greater support in exporting to foreign markets. Fifteen per cent recommended reducing interprovincial trade barriers and regulations.

Of those who indicated they used or intend to use the federal COVID-19 assistance programs, all said they would use Canada’s Emergency Wage Subsidy (CEWS), while 10 per cent indicated they would use the temporary 10 per cent Wage Subsidy, and 10 per cent stated they would use Canada’s Work-Sharing program.

Ten per cent said they would use Canada’s Summer Jobs Program, another 10 per cent indicated they would use Canada’s Deferral of Customs Duty and Sales Tax for importers, and 10 per cent said they would use Canada’s Deferral of Taxes and GST/HST Remittances.

Of the equipment manufacturers in Canada accessing CEWS, 55 per cent said it was “easy” while 22 per cent said it was “relatively easy,” and another 22 per cent indicated it was “moderately difficult.”

 

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