Oshawa industry case

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Oshawa Industries Case1

Although Mark Talbot knew that he was developing a reputation as a quick technical and managerial understudy, he never thought he'd be promoted to Plant Manager at Oshawa Industries (OI) after just six months as Assistant Plant Manager at electroplating plant. He wondered how a relative "greenhorn" like himself could effectively manage the complicated situation at the plant. In the six months since he joined the plant, Talbot had found a product pricing system that didn't readily appear logical, inconsistent senior management behavior, labor-management relations and employee morale that were close to rock bottom, outdated equipment, declining sales and deteriorating customer service. Convinced by the Vice-President, Roger Sutherland, that he was the person for the job and that this was the "opportunity of a lifetime for a young manager" Talbot wondered how he should tackle the situation – given he had accepted the job. Oshawa Industries and Oshawa Holdings Limited Oshawa Industries was a subsidiary of Oshawa Holdings, a company of over 25 automobile parts manufacturing, metal finishing and plating plants. For many years, Oshawa Holdings grew under the leadership of Dean Carter (CEO), his brother Jack (Executive VP Manufacturing Operations) and Chet Wainwright, the Executive VP who provided technical leadership. Roger Sutherland was in his forties and had joined the firm approximately a year ago as Vice-President, Administration. As an MBA and a seasoned manufacturing executive, he provided managerial skills and was responsible for administrative systems, human resource systems, industrial relations, and senior management development, as Dean and Jack Carter and Chet Wainwright began to consider retiring. There were other senior executives at the OHL headquarters (e.g., the Chief Financial Officer, the VP Computing and Information Systems, the VP Marketing and Sales), but Dean, Jack, Chet and Roger were the senior decision makers. Much of the past growth was attributable to Dean’s entrepreneurial and administrative skills and Chet’s technical capacities, augmented by Jack’s people-oriented focus and much more recently by Roger’s managerial skills and strategic outlook. While Oshawa Industries was a subsidiary of Oshawa Holdings, the cultures were very different. The OHL Corporate Profile identified three guiding principles: entrepreneurial focused factories, the pursuit of joint ventures and an emphasis on quality in both employee relations and products and services (see Exhibit 1). OHL was a Tier 1 manufacturer to the automotive industry. All but two of the twenty-one Oshawa Holdings operations (averaging approximately 100 employees per plant) were nonunion, had gainsharing plans, profit sharing and operated under participative management 1 All proper names have been disguised. This case is based on the original Oshawa Industries by T. Cawsey and R. McGowan, copywrite the Laurier Institute.

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principles to encourage employee productivity and loyalty. Plant managers were given a fair degree of autonomy in how they operated their plants but were held accountable for key performance indicators (measures related to cost, profitability, customer satisfaction and employee satisfaction). The commitment of OHL’s plant management commitment to the above principles was evident in the high esteem they were held by both customers and employees. Consistent superior profitability and growing volumes flowed directly from plant actions. Dean Carter commented that the role of head office was to act as the bank and auditor for OHL plants, be the deal maker involving new plants or joint ventures, hire well, and to then get out of the way and let the plant managers run their operations. Oshawa Industries’ (OI) culture and organization, however, were a very different matter. Oshawa Industries was comprised of a single plant, with OHL’s head office located in adjacent single story buildings in a heavily industrialized section of Oshawa. The OI plant, built 25 years ago, specializes in electroplating and metal finishing for steel manufacturers and automotive plants where OI is a Tier 2 supplier. This plant electroplates many different types of products, ranging from fasteners to auto parts to ten ton steel rolls for steel producers. Plant equipment in the electroplating division was a mixture of equipment installed in the 1980's and updated electronic quality testing equipment. The plant housed vats of caustic chemicals, automated racks (which suspend metal parts for coating and heat treatment ovens), and equipment capable of chrome plating up to 10 tons of material at a time. During the past decade, processing lines were added or existing ones expanded within the original facilities, which themselves were not expanded (see Exhibit 2 for the plant floor layout). The plant’s dedicated, continuous process lines operate with cycle times of up to one hour. Automated overhead racks raise and lower the parts in the solutions as well as transporting them along the processing line. Most processing lines consist of a series of tanks containing solutions formulated to degrease, clean and electroplate the parts. At the electroplating tank an electrical current was introduced to the solution causing ions in the solution to deposit on the parts. After plating, some parts were heat treated to increase the life span of the finish. OI had recently installed a "state of the art, high tech" electroless nickel metal plating process that added 17% to its productive capacity, at a cost of $750,000. Because it offered a superior finish at a lower cost, OI was looking to this process for competitive advantage but Sutherland did not believe this had yet to materialize. Most plating jobs involved a standard set of procedures and OI was QS register, to meet the demands of the auto industry. This registration was the product of the efforts of OHL staff who understood how to obtain and retain standards and who had been instrumental in ensuring OI met minimum conditions. However, when employees were faced with orders for unique finishes or those involving nonstandard metals they relied on Wainwright's expertise or in his absence, one of two senior plating technicians. To those who knew Wainwright, it seemed that he believed that plating was an "art" directed by the plater and implemented by semi-skilled workers. Wainwright's hands-on

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approach meant that most employees had received little formal training in plating or advanced technology. Such process specifications were not documented for the nonstandard jobs that made up approximately 25% of the production, and process problems were often solved by Wainwright or one of the two senior plating technicians, through trial-and-error. However, Talbot discovered that special written instructions from Wainwright were increasingly being overridden by workers who were experiencing confusion as to how to put them into practice and still meet production targets. Talbot also noted that trends which started in 2002 were continuing: late deliveries were increasing, productivity decreasing, and margins were becoming thinner. The hazards of an electroplating plant were well known to the employees and to Dean Carter. Acid bums, cyanide poisoning, electrical shocks, crushed fingers and scalds were common injuries. An improved ventilation system was recently installed at OI to enhance the quality of the air which previously had been tainted by propane and combustion products from forklifts, vats and furnaces. Aging pipes, tanks and spill pails containing chromic, sulphuric and nitric acid and caustic oils were sources of employee concern. In many areas of the plant, natural and artificial light were blocked by equipment both stored and operational and the noise level was sometimes considerable. Employees often joked that OI had a climatically controlled plant - the outside climate controlled the plant's environment! Cost, finish quality, and delivery have traditionally been key success factors in the electroplating industry and OI has had a solid reputation in these areas. Meeting or exceeding customer plating specifications for corrosion resistance, appearance, uniformity of deposit, hardness, wear resistance and finish have been critical to acquiring and maintaining customer contracts. Increasingly however, product quality differences between plating firms have disappeared and OI has found that it is increasingly necessary to focus on cost, order fulfillment (just-in-time delivery was particularly important to firms supplying the automotive sector) and service/responsiveness as differentiators. One competitor, in particular, had become a serious threat to OI. The local plant was part of a large, multinational firm that specialized in the automotive sector, and was one of four electroplating operations that it owned. In addition to services similar to OI, they offered two substitute processes (electro deposit point and nitride finishes) that OI did not offer. Certain key customers were reporting that this firm was steadily becoming more cost competitive and were providing equivalent or superior coating finishes and better on-time performance. OI had experienced the loss of two existing plating contracts to them in the past year that had represented 15% of their total business volume. They were further eroding OI’s position as a local market leader through their recent successes involving contracts for the electroplating of components for two new automotive programs. With the exception of the recently installed metal plating process and quality instrumentation mentioned earlier, new technologies and applications for metal finishing had not been aggressively pursued by Wainwright or OI. OI’s customer base was located within a 200 mile radius, because of their customers’ desire to control the transportation and handling costs related to heavier products that needed electroplating. There were 11 firms competing for business in OI’s market area,

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but the top three accounted for 80% of the business (based on billings), with OI at 45%, down from 50% a year ago. OI primary focus was automotive and steel industry applications and they did not compete in such sectors as semiconductors, jewelry and medical applications. The industrial electroplating industry in North America was undergoing consolidation, was in the mature stage, and was showing signs of decline as firms switched to the use of plastics and composite materials that did not require electroplating, reduced weight and in some cases costs, and reduced environmental concerns related to the electroplating process. Technical innovations in electroplating were focused on improving quality and cost effectiveness and at addressing environmental hazards associated with the process but traditional approaches still dominated the sectors OI served. Up until now, OI’s customers had demonstrated little appetite for integrating most electroplating applications into their manufacturing facilities, because of environmental and health and safety risks, plus their belief that their needs in this area were best addressed by outsourcing to experts in the field. One exception involved the location of electro deposit paint lines in certain larger plants. Management of OHL and OI For the first eighteen years of his employment with OI and OHL, Chet Wainwright was the GM and then the Executive VP, reporting directly to Dean Carter. The two men formed the nucleus of OI/ OHL. Wainwright's "technical genius" in electroplating and automotive manufacturing processes led to his central role in OI' s operations and his subsequent position as a consultant to OHL's joint ventures and EVP of OHL. OI was their first operation but now represented less than 2% of their total billings. Early in OI’s history, Dean Carter was constantly involved in the commercial and technical aspects of the electroplating plant - it was "his" plant. This constant involvement in the plant became a burden for the technical GM (Wainwright) and other managers. Eventually, employees avoided Carter and the information trickled, rather than flowed upwards. This didn't bother Carter who saw it as “his” plant and he could do as he wished. Carter loathed unions but one was certified at OI twelve years ago, following an organizing campaign by the IAW (International Auto Workers). Carter was known to act decisively, seldom changed his decisions, and developed a reputation as a tough negotiator. He continued to support charities many years after initial contributions, and he was loyal to his staff, most of whom never left the company. Wainwright knew a lot of people in the industry and a lot of people knew him. As one manager said, "Wherever you went they seemed to know Wainwright - even in the States and abroad." Wainwright's technical prowess, savvy, extensive travel experience and a knack for storytelling made him a "legend" of sorts in the industry. It was often Wainwright's reputation that gained OI and OHL access to new customers or market opportunities. Wainwright knew how to read Carter. He knew when to challenge one of Carter’s bids and when not to. In the latter case, Wainwright would move “heaven and earth” to make

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sure the job was done. For the last several years, Wainwright’s energies were consumed with bringing on new plants for OHL and this meant that Wainwright was away from headquarters for extended time periods and did not maintain close contact with OI. When he went to OI meetings with major customers (which was now occurred infrequently, involving relationship management and damage control), he often had to rely on his background knowledge, internal reports and long-term relationships. In the mid 1990’s Wainwright became EVP, moved to the role of a consultant to OI and spent even less time at the plant. The first post Wainwright plant manager (James Horkey, the former assistant OI plant manager) was replaced two years later (for health reasons) by Gerry Pawlawsky who assumed responsibility for the plant's daily operations. In addition to Wainwright and Pawlawsky, there were Quality (Jim Lavin), Production (Brian Miller) and Maintenance Managers (Robert Harcourt) overseeing the plant's approximately forty production employees (See Exhibits 3 & 7 for the production employee breakdown and organizational chart). The OI Office Administrative Manager (Arlene Matthews) also managed the Fabrication operations. Matthews was originally hired by Dean Carter's father immediately after she completed her high school diploma and had remained with the firm ever since. OI, in fact, had been the only place she'd ever worked. Excluding already mentioned managers, there were approximately ten non-union office staff employees at OI. Employees and Management/Union Relations All plant employees at OI were members of the IAW. There were also two unionized plants within the OHL group of companies. The unionized workers at OI were hourly-paid employees while all management positions were salaried. Gainsharing and profit sharing were not part of the compensation scheme at OI. Carter knew most of the employees by name, either from involvement in their hiring or from his physical presence over the years. Most employees had been with OI for 15 to 20 years and everyone earned similar wages. Union/management relations were brittle at best. Union members felt that the recent plant managers were relatively powerless and that their decision-making was dictated by Dean Carter. Following Wainwright’s promotion to EVP, the plant manager role had changed hands a couple of times and Talbot had heard rumors of a shop floor pool betting on his expected departure date. The Union contract was ambiguous as illustrated by the following excerpt from the contract regarding seniority:

It is agreed that each employee shall have a measure of job security and job opportunity based on his length of service and his ability to perform the work available. This, in effect, means that the employee with the greatest length of service shall have the greatest seniority rights to such work as is available, provided the employee is qualified to properly perform the work available.

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Office/supervisory staff and plant workers rarely mingled. During lunch, office staff and supervisory personnel usually ate lunch at their desks while the plant floor workers ate in the small lunchroom at the front of the plant. Although anyone could eat in the lunchroom, it was usually only used by the shop room workers. With its Spartan furnishings - a rectangular table and soft drink, coffee and snack dispensing machines - its appeal was that it was "close to work." OI's seven designated parking spaces were reserved for the Plant Manager, Assistant Plant Manager, Quality Control Manager, Office Manager and three visitors. Other OI employees parked their cars precariously on a first come, first serve basis along the side and back areas of the property, leaving only narrow access corridors for delivery trucks. Finance OI's financial affairs were controlled through OHL by Dean Carter and OHL's staff accountant Al Simpson. Financial statements were developed on a consolidated basis for OHL. After six months at OI, Talbot had little feel for OI's financial position or cash flow. For example, net 30/2% were common terms for customers but Talbot did not yet know their compliance rate. Products or process lines were selected according to the degree to which management believed they affected the contribution to overhead. If there were no parts to finish, the lines would be shut down. Profitability of OI as a whole, rather than that of individual products or plating lines, was the concern. Equipment was seldom removed from the plant floor. Carter's perspective was that equipment that had been bought and paid for should be operated, regardless of its relative efficiency. It was not clear to Talbot how prices were developed. It seemed that Carter and Wainwright or the plant manager of the day would basically quote whatever price was necessary to get the customer. Product pricing seemed to be based on the following criteria used either individually or in some combination:

1. How many dollars per hour can the machine generate? 2. What price can the market bear? 3. Where do you want to hold direct and indirect labor and overhead costs?

This frequently depended on what management thought Dean Carter wanted to see.

4. What are the plant's average costs? Hold the average and force it down if possible!

5. How many sales do I want? 6. What do we think it's going to take to get the job?

This approach led to pressure on quality and service. Increases in the costs of labor and raw materials were passed on to established customers when it was felt they would accept such an increase. Otherwise OI would be forced to swallow the increase and senior managers would try to figure out how costs could be pared further.

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There were systems for tracking major variables on a daily basis: labor, raw materials (e.g., chemicals), sales, payables, etc., however, the inventory system for supplies/raw materials was not well developed and there was no specific tracking of utilities or raw materials directly to the processing lines and production runs that used them. Each line was charged an average rate for utilities, chemicals and other overhead costs. These were normally allocated on a percentage of sales' basis. Talbot knew that the lines' usage of water, electricity and chemicals varied considerably but all allocations of those costs to the customer were considered "flexible" and allocated as needed to make the statement "look right." The game was always to make money. Budget statements were finalized through an iterative process, often going through a number of revisions before they "were right." Financial statements and profitability information were compiled monthly for OI (see Exhibits 4 to 6 for financial information on OI). Sales Historically, OI had boasted a 65% market share in the Oshawa region but this had slumped to 45% and recent sales growth had been flat. Carter was aware that recent sales were primarily to customers with long-standing loyalties both to OI and to himself or to Chet Wainwright personally and realized that OI was starting to lose "old" customers (internal advocates were retiring or exiting their purchasing roles), without attracting new ones. Purchasing relationships built on personal friendships and loyalties were becoming passé and new purchasing managers were being held accountable for increasingly stringent measures. Cost competitiveness was an important challenge for OI, but so too were product quality and on-time delivery. Recent investigations at OI revealed that oil and grease had occasionally dripped onto newly-plated parts and some defective parts were being buried in the middle of bins, ready for shipment to the customer. It seemed to Talbot that the firm talked about customer service but operated with a production orientation, with no clear understanding of what customer service meant. Lines were run "when it was convenient" for the shop rather than for the customer. Often orders lingered at the production manager's desk for a week or more. Talbot could see that in an environment driven by JIT production, OI was not meeting customer needs. Talbot knew that customer service meant meeting clients needs when they needed it and doing it better than the competition. Environmental Issues With public concern for environmental issues on the rise, government pressure on electroplating firms was increasing. Under the Ontario Environmental Protection Act, almost everything to do with the electroplating industry was classified as hazardous because the processes are laden with acids and heavy metals. The old "solution to pollution by dilution" had become increasingly unacceptable and pollution control equipment was very expensive. One consultant estimated that purchasing and installing

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adequate pollution control equipment at OI would cost almost $450,000. OI had allocated $200,000 for the direct purchase of 90% of the required tanks, pumps and meters and decided to install the equipment themselves, but had yet undertaken the work. Decision to Hire Mark Talbot In the mid 1990’s, it became apparent to Carter that Wainwright needed a plant manager to oversee the OI plant's daily operations, since much of Wainwright's time was spent on the road, managing new plants and visiting customers. He also noticed that emerging metal finishing technologies were beyond the scope of Wainwright's interest. Wainwright also recognized the need for a plant manager as well as a successor and was more than willing to assist any new recruit in learning the processes involved in the electroplating industry. Pawlawsky was the second plant manager promoted by Carter and Wainwright. Pawlawsky found that although he was "responsible" for management of the plant, he still had to get approval from either Wainwright or Carter for any operational changes or expenditures. During his first few two years Pawlawsky identified several problems within the plant and questioned a number of business practices but he never developed a strong relationship with Carter or Wainwright. He was unable to persuade them to accept and implement most of his proposed changes. Relationships, especially between Pawlawsky and Carter faltered. Carter was very concerned about Pawlawsky's inconsistent management style with employees. One moment he pushed quality and the next he pushed output. Carter eventually deemed Pawlawsky unsuitable for the position of Plant Manager and he was demoted to Assistant Plant Manager. Shortly thereafter the Quality Manager quit over a salary dispute and one month later Roger Sutherland joined as Vice-President. One of Sutherland's first jobs was to fill the vacant Plant Manager and Quality Manager positions. When no acceptable replacements were found from among staff at OI and OHL, it was decided that an 'outsider' would be hired and trained. Over a period of four months, Wainwright and Sutherland interviewed eight candidates for the plant manager job and seven candidates for the position of quality manager. Talbot, a 28 year old engineering graduate with three years of manufacturing experience was the sixth candidate for the latter position. Sutherland was very impressed and began to wonder if he might not be a good candidate for the plant manager position. Sutherland quickly arranged a series of OHL interviews for Talbot. When Wainwright first interviewed Talbot, he asked him about his career goals and Talbot indicated that his goal was to have Wainwright’s job. After receiving positive reports on Talbot from Wainwright and Sutherland, Carter was curious to meet this bold candidate. When Carter interviewed Talbot, he was impressed by Talbot's drive and nerve. He thought that Talbot might be the candidate with the needed technical and entrepreneurial skills and who would not be afraid to "take the bull by the horns and get the job done" in order to bring OI's operations in line with the guiding principles of OHL.

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Talbot was equally impressed with what he heard during the interviews with Sutherland, Wainwright and Carter and admired Sutherland for his apparent management abilities. Carter stressed the company's focus on quality, his desire for OHL to be an industry leader in the coming decade and his concern for the employees. Carter stressed that OHL was just an advisory board and would not interfere with OI's operations, and that he believed in autonomy for competent General Managers. Carter also alluded to the possibility that "for the right man" the Plant Manager position could lead to that of General Manager or even to becoming a VP/Technical Consultant of OHL. There were no salary negotiations but Carter presented Talbot with a job offer for employment at OHL. Talbot accepted and started in January 2002 at Brockville Enterprises a new offshoot company of OHL. He was hired to install new plating equipment and for the next six months learned plating from the ground up. Sutherland developed a close relationship with Talbot during this period. By June, 2002, Wainwright and Sutherland felt that Talbot was ready to move to OI to assume the position of Assistant Plant Manager. The position of Assistant Plant Manager was curiously named because OI did not have a Plant Manager at the time. So in effect Talbot had no direct reporting relationship to anyone other than Wainwright. Six months earlier, Pawlawsky had expressed the desire to transferred out of his role as Assistant Plant Manager and become the Quality Manager at OI. His request for the transfer was honored with the arrival of Talbot. Talbot's First Six Months as Assistant Plant Manager Sutherland wanted to expose Talbot to both new and existing customers, the full range of OI's products and services and the opportunity to prove himself in a position where any mistakes made would be small. Sutherland felt Talbot was bright but his lack of management and operating experience was a shortcoming. He felt it particularly important that Talbot learn as much as possible from Wainwright. Talbot's first task after joining OI was to identify new sales opportunities for the company since sales growth had fallen during the previous year. His initial goal was to attract new sales equivalent to 300 percent of his annual salary. In addition to his sales function, Talbot was Wainwright's technical apprentice because OI needed to decrease its dependency on Wainwright's technical expertise. During Talbot's first six months, the relationship between he and Wainwright, though intermittent, prospered. Carter also felt a growing confidence in Talbot's ability to assume the role of Plant Manager. Talbot was a quick study and able to draw on his chemical engineering degree and technical background to learn the intricacies of electroplating. Talbot asked a lot of questions but he was never perceived as a threat by Wainwright. By January the situation had started to change. Operating procedures and business practices which had previously been taken for granted by Wainwright and the plant staff were under scrutiny by Talbot. Talbot was beginning to take a more active role in managing the plant, often bypassing Wainwright's approval and initiating and

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implementing small changes to the manufacturing process on his own. Talbot also found that the Quality, Production and Maintenance Managers continued to talk directly to Wainwright, rather than to him. Although Talbot seemed to be slowly winning the support and co-operation of some plant personnel, Talbot felt that some of his approaches were earning him a reputation as a "stubborn purist" on issues such as quality. Talbot's unwillingness to ignore problems or to accept shortcomings in either the operations or in people's performance and his "take charge" attitude and questioning style resulted in some tensions between himself, Wainwright and other managers in the plant. That was why he was surprised when he heard through Carter that Wainwright recommended his promotion to the position of Plant Manager under Wainwright twelve months ahead of the original plan. If a firm offer of promotion materialized, he thought that he would take it but wondered what he should do. How would he manage the people, production and marketing, and corporate issues at OI?

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Exhibit 1 Guiding Principles of Oshawa Holdings Limited*

Joint Venture Oshawa Holdings policy is to form joint ventures with its major customer. Such a policy allows each party to contribute, in an organized way, to improve die operations of the company, such as sharing technology and production methods. Oshawa Holdings tried to reduce or at least maintain the cost of the product to die customer by cost improvement programs or increases in volume. In this way long-term stability and market penetration can be obtained. Oshawa Holdings joint venture companies operate completely independently. Each has a chief executive officer and is an autonomous entrepreneurial company. Oshawa Holdings only monitors their operations and makes sure that the shareholders' interests are being developed and protected. Our experience is that, if monitored properly, an independent entrepreneurial company, with the proper chief executive officer, will prosper. Because Oshawa Holdings does not get involved in the day-to-day operations of its joint ventures, it is able to be involved in a number of them. Employee Relations To create a quality culture, the most important thing is to have a happy family relationship amongst all employees and to have the employees enjoy their jobs. To do this it is critical to have employee involvement in the management of the company. All employees must be involved in the objectives of the company such as quality, production levels, methods of production and capital spending. This emphasizes that all employees are of equal importance and contribute equally to the company's success. When employees are involved in the management of the company, their jobs are more secure, interesting and varied and they care more about the company and are happier. Every effort is made to avoid laying off permanent employees and to increase job security. In Oshawa Holdings' companies the employees also share in the profits of the company through gainsharing, or other forms of profitsharing. These policies ensure that the employees of Oshawa Holdings will remain company-oriented and work as a team without outside interference. Statistical Process Control To have a quality culture, it is also necessary that each plant must be under complete statistical process control. Machine and process capability studies must be constantly performed and statistical inspection and charting of the production must be done. Many of Carter's companies have reduced acceptable production tolerances to 5 0% of print specifications. At Oshawa Holdings' companies, the machine operators are the inspectors and machines are repaired and rebuilt based on machine capability studies. Records must be kept so that complete traceability of production can be done. All employees must attend SPC seminars every two months to update their knowledge and new employees must attend a two-week course on SPC. Oshawa Holdings' objective is to eliminate final inspection audits by statistical machine and process control and operator inspection and charting.

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Small Entrepreneurial Focus Factories Oshawa Holdings believes that small, entrepreneurial focus factories are the best type of organization for North America to produce quality products efficiently. Its policy is to create small companies with a limited number of technologies, which are managed by technically qualified people. This enables each technology to be fully developed and controlled and to be operated at its optimum. Each of these companies searches for new materials, conducts research and development and develops new production and process equipment. They also, along with Oshawa Holdings, are committed to diversification. This type of organization is very efficient and keeps production and overhead costs low. *Source: Oshawa Holdings Limited Corporate Profile, 1988.

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Exhibit 2 Plant Floor Layout

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Exhibit 3 Employee Distribution

Classification

# of Employees

Plant Seniority # / years

Wage Rate $ / hour

Steel Shop

Welding & Layout 3 1 @ 28; 2 @ 13 22.98

Welding & Fitup 2 1 @ 7; 1 @ 6 22.84

Plating Department

Plater Special 5 1 @ 36; 1 @ 34 23.12

2 @ 20; 1 @ 12

Plater 1 15 1 @ 3 1; 5 @ 13 22.60

7 @ 12; 1 @ 8

1 @ 2

Plater 2 7 3 @ 12; 1 @ 9 22.12

2 @ 7; 1 @ 2

Maintenance Department

Maintenance (ticketed) 2 1 @ 19; 1 @ 1 25.00

Maintenance (nonticketed) 2 1 @ 35; 1 @ 20 22.60

Chemistry Department

Chemist 1 1 @20 23.12

Shipping Department

Shipper 1 1 @20 23.12

Tractor Trailer Driver 2 1 @ 17; 1 @ 16 23.12

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Exhibit 4 Oshawa Industries

Balance Sheet, 31 December

Account 1998 1999 2000 2001 Current Assets Cash $52,908 ($77,190) $452,132 $243,340 Accounts Receivable 1,001,014 1,105,324 992,116 1,487,726 Inventory 406,162 351,684 325,466 398,928 Prepaid Expenses 48,700 72,590 38,634 29,554 Deferred Exchange 4,600 109,820 198,912 Total Current Assets $1,513,384 $1,452,408 $1,918,168 $2,358,460 Investments Inter-company $1,450,134 $252,788 $493,350 $560,880 Investment in Europe 1,381,710 718,000 718,000 Total Investment $1,450,134 $1,634,498 $1,211,350 $1,278,880 Total Fixed Assets $3,740,600 $4,081,824 $4,339,060 $4,799,874 Accumulated Depreciation 2,820,124 3,032,472 3,193,540 3,487,596 Net Fixed Assets $920,476 $1,049,352 $1,145,520 $1,312,278 Other Assets $820 $0 Total Assets $3,884,814 $4,136,258 $4,275,038 $4,949,618 Current Liabilities Accounts Payable $537,842 $548,934 $553,926 $639,316 Accrued Payroll 32,558 38,698 11,308 20,084 Pension Plan Payable 2,374 65,676 85,466 48,126 Accrued Staff Benefits 115,118 102,374 118,542 128,702 Taxes Payable Payroll Tax 96,104 95,668 126,714 132,894 Sales Tax 794 0 Income Tax 124,372 (162,546) 434,496 323,742 Operating Loan 890,000 11,056 Other Liabilities 95,946 113,238 605,206 349,538 Total Current Liabilities $1,005,108 $1,692,042 $1,935,658 $1,653,458 Long Term Liabilities Bank Loans Payable $40,000 $430,000 $24,000 $18,000 Sales Contract 130,558 320,220 251,744 179,844 Customer Deposits 51,752 30,538 22,656 9,624 Shareholder Loans 850,156 850,156 2,437,036 Deferred Income Taxes 296,842 248,200 248,200 244,200 Total Long Term Liabilities $519,152 $1,879,114 $1,396,756 $2,888,704 Shareholder Equity Common Shares $200 $200 $200 $200 Current Retained Earnings 1,542,086 1,944 313,230 (69,450) Accumulated Retained Earnings

790,722 556,800 623,038 472,336

Total Equity $2,333,008 $558,944 $936,468 $403,086 Auditor's Adjustment $27,544 $6,156 $6,156 $4,370 Total Liabilities and Equity $3,884,812 $4,136,256 $4,275,038 $4,949,618

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Exhibit 5 Oshawa Industries

Statement of Income and Expenses for Periods Ending 31 December

Description 1999 2000 2001 REVENUES Steel Division $950,500 $907,784 $1,259,586 Plating Division $8,406,524 $8,746,344 $8,693,478 TOTAL SALES $9,357,024 $9,654,128 $9,953,064 LESS Sales Discounts $31,884 $33,268 $39,018 Credit Notes $13,890 Adj. Work in Progress ($16,490) ($12,610) ($22,844) NET SALES REVENUES $9,294,760 $9,608,248 $9,891,202 EXPENSES Labour $3,162,470 $3,149,156 $3,254,016 Benefits 775,438 817,024 881,636 Materials 2,391,534 2,294,548 2,364,098 Shipping 605,494 649,836 905,198 Utilities 846,280 800,490 772,476 Fixed Asset Expenses 327,378 382,854 425,312 Marketing and Administration 397,116 355,300 442,086 TOTAL EXPENSES $8,505,710 $8,449,208 $9,044,822 OPERATING PROFIT (LOSS) $789,050 $1,159,042 $846,380 OTHER SALARY EXPENSE DEFERRED EXCHANGE OTHER INCOME 4,246 54,038 23,950 INTEREST INCOME (CHARGES) (99,842) (28,920) TOTAL PROFIT (LOSS) $793,296 $1,113,238 $841,410 TOTAL INCOME TAXES $349,200 $490,200 $369,200 AFTER TAX PROFIT (LOSS) $444,096 $623,038 $472,210 REVENUES, STEEL $934,010 $895,142 $1,236,742 REVENUES, PLATING $8,360,768 $8,713,106 $8,654,460 EXPENSES, STEEL $952,154 $967,376 $1,160,678 EXPENSES, PLATING $7,553,554 $7,481,832 $7,884,144 PROFITS, STEEL ($9,920) ($37,230) $44,058 PROFITS, PLATING $454,018 $660,268 $428,152

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Exhibit 6 Oshawa Industries Financial Analysis

Ratio 1999 2000 2001 Current Ratio 0.86 0.99 1.43 Quick Ratio 0.65 0.82 1.19 Return on Total Assets 10.74% 14.57% 9.54 Return on Stockholder Equity 79.45% 66.53% 117.1

5 Net Profit Margin 4.78% 6.48% 4.77 Current Liabilities to Inventory 481.13

% 594.73 %

414.4 8

Sales to Inventory Ratio 26.43 29.52 24.79 Average Collection Period (Days) 43.41 37.69 54.90 Cost to Sales Ratio 87.24% 84.24% 86.97

Industry Standards

Ratio 1999 2000 2001

Current Ratio Upper Quad. 2.3 2.5 1.3 Median 2.0 1.7 1.3 Lower Quad. 1.2 1.1 1.2 Quick Ratio Upper Quad. N/A 2.6 0.9 Median N/A 1.3 0.9 Lower Quad. N/A 1.0 0.5 Return on Total Assets Upper Quad. 28.6% 23.9% 13.1% Median 17.0% 21.8% 10.1% Lower Quad. 13.3 % 17.8% 5.0% Return on Stockholder Equity Upper Quad. 57.6% 48.9% 38.1% Median 49.5% 31.4% 26.3% Lower Quad. 25.7% 24.6% 18.6% Net Profit Margin Upper Quad. 10.7% 13.4% 8.6% Median 6.7% 9.0% 7.3% Lower Quad. 6.1% 7.2% 4.0% Current Liabilities to Inventory Ratio Upper Quad. N/A 99.2% 144.1% Median N/A 179.2% 265.8% Lower Quad. N/A 287.3% 644.4% Sales to Inventory Ratio Upper Quad. N/A 88.6 21.5 Median N/A 74.3 12.7 Lower Quad. N/A 17.8 8.5 Average Collection Period (Days) Upper Quad. N/A 40.1 27.7 Median N/A 62.8 42.6 Lower Quad. N/A 69.8 72.5

NOTE: Industry Standards were obtained from Dun and Bradstreet Canadian Norms and Key Business Ratios, SIC 3471. Costs to sales ratio averages about 77% for comparable industries.

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Dean Carter President (56)

Karen Decker CFO (52)

Chet Wainwright EVP Plant Development

& New Initiatives (57)

Roger Sutherland VP Administration (44)

Jack Carter EVP Manufacturing(54)

George Jones VP Computing & Info Systems (42)

Jerry Kaplan VP Marketing & Sales (48)

15 Plants & Plant Managers

7 Plant Mangers (Newer Plants),

Plant & Production Design

Corporate HR & IR Managers

Corporate Marketing & Sales Staff

Oshawa Holdings Limited 21 Plants

Oshawa Industries

1 Plant

Plant Manager (Unfilled)

Mark Talbot (28)

Assistant Plant Manager

Arlene Matthews

Office & Steel Shop Mgr (52)

Gerry Pawlawsky

Quality Manager (46)

Brian Miller

Production Manager (46)

Robert Harcourt

Maintenance Manager (52)

Exhibit 7 Organizational Structure of OHL and OI