Mon January 26, 2004 01:50 PM ET
By Yohannes Edemariam
TORONTO (Reuters) - Canadian boat manufacturer Barry Galperin sees storms on his horizon because of the steady rise of the Canadian dollar against its U.S. counterpart.
"If it continues like this," Galperin said, "I can survive for only one more year."
Since the beginning of 2003, the Canadian dollar has climbed 20 percent to reach a 10-year high of about around 77 U.S. cents.
This caused Canadian manufacturers, from Galperin's small Brig Inflatable Boats to Roots, whose sportswear has clothed both U.S. and Canadian Olympic athletes, to cut jobs and, in some cases, move production out of the country despite a robust local economy.
Brig, which is based in Concord, Ontario, saw earnings drop almost 30 percent this boat-selling season.
The company derives most of its sales in U.S. dollars, but pays expenses -- salaries and the money for raw materials -- in Canadian currency.
The shifting exchange rate means Galperin makes less money in Canadian dollar terms even if the number of boats he sells remains stable.
"When the new season started, the money I had in U.S. dollars just melted," he said.
He said that he has been forced to raise his prices in the United States by 6 percent, making his company less competitive in an already tough market. If conditions do not improve, he will move his operation south of the border, to Buffalo, New York.
SMALL COMPANIES HURTING
Since some 40 percent of Canada's gross domestic product comes from exports, more than 80 percent of which are to the United States, the importance of the dollar's appreciation can not be underestimated, said Jay Myers, chief economist of Canadian Manufacturers and Exporters.
"I think the full impact of the dollar's appreciation will not be felt well into the second quarter of the year," he said.
To survive, Myers said, many companies have had to shut down their own plants and shift production overseas.
Both he and Stephen Poloz, chief economist at Export Development Canada, which provides trade finance services to Canadian exporters, said small companies are the most likely to suffer because of the strong dollar.
"Small manufacturers have very little scope for adjustment," he said. "Say you are a small company with 10 or 20 people, it's not like you can just cut 50 percent of your head count or buy a brand new machine."
But even big corporations are finding things tougher. Alcan, the large Canadian aluminum company, recently announced the closure of a Quebec smelter that employs 515 people, citing the rising dollar as one of the reasons.
"Every time the Canadian dollar rises by one cent, we lose $11 million," said Alcan spokesman Joseph Singerman.
Clothing chain Roots, which has 200 stores worldwide, recently said it would close its Toronto plant, cutting 200 jobs, and outsource the production. It has already shifted some manufacturing overseas, where labor costs are lower and it does not have to pay for materials in Canadian dollars.
http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=4210229&pageNumber=1
By Yohannes Edemariam
TORONTO (Reuters) - Canadian boat manufacturer Barry Galperin sees storms on his horizon because of the steady rise of the Canadian dollar against its U.S. counterpart.
"If it continues like this," Galperin said, "I can survive for only one more year."
Since the beginning of 2003, the Canadian dollar has climbed 20 percent to reach a 10-year high of about around 77 U.S. cents.
This caused Canadian manufacturers, from Galperin's small Brig Inflatable Boats to Roots, whose sportswear has clothed both U.S. and Canadian Olympic athletes, to cut jobs and, in some cases, move production out of the country despite a robust local economy.
Brig, which is based in Concord, Ontario, saw earnings drop almost 30 percent this boat-selling season.
The company derives most of its sales in U.S. dollars, but pays expenses -- salaries and the money for raw materials -- in Canadian currency.
The shifting exchange rate means Galperin makes less money in Canadian dollar terms even if the number of boats he sells remains stable.
"When the new season started, the money I had in U.S. dollars just melted," he said.
He said that he has been forced to raise his prices in the United States by 6 percent, making his company less competitive in an already tough market. If conditions do not improve, he will move his operation south of the border, to Buffalo, New York.
SMALL COMPANIES HURTING
Since some 40 percent of Canada's gross domestic product comes from exports, more than 80 percent of which are to the United States, the importance of the dollar's appreciation can not be underestimated, said Jay Myers, chief economist of Canadian Manufacturers and Exporters.
"I think the full impact of the dollar's appreciation will not be felt well into the second quarter of the year," he said.
To survive, Myers said, many companies have had to shut down their own plants and shift production overseas.
Both he and Stephen Poloz, chief economist at Export Development Canada, which provides trade finance services to Canadian exporters, said small companies are the most likely to suffer because of the strong dollar.
"Small manufacturers have very little scope for adjustment," he said. "Say you are a small company with 10 or 20 people, it's not like you can just cut 50 percent of your head count or buy a brand new machine."
But even big corporations are finding things tougher. Alcan, the large Canadian aluminum company, recently announced the closure of a Quebec smelter that employs 515 people, citing the rising dollar as one of the reasons.
"Every time the Canadian dollar rises by one cent, we lose $11 million," said Alcan spokesman Joseph Singerman.
Clothing chain Roots, which has 200 stores worldwide, recently said it would close its Toronto plant, cutting 200 jobs, and outsource the production. It has already shifted some manufacturing overseas, where labor costs are lower and it does not have to pay for materials in Canadian dollars.
http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=4210229&pageNumber=1
