The long game behind Linamar’s durability

Canadian manufacturers looking to learn about weathering market ups and downs could take notes from Linamar Corp., the Guelph, Ont.-based auto parts company.

Linamar has spent the last 60 years reinventing itself to stay relevant, and along the way has navigated technological disruption, shifting trade policies, a global financial crisis and the auto industry’s biggest transitions in decades. Linda Hasenfratz, the executive chair of the board, and the company’s former chief executive officer, points to a combination of innovation, flexibility and an unusually long-term plan as keys to Linamar’s longevity.

Linamar has always kept a close eye on industry transition. About a decade ago, reading the direction the automobile market was going, the company invested in electric vehicle (EV) technology. However, they also ensured the components it was producing for EVs could also be used for hybrid and internal combustion engine vehicles as well.

“When the battery electric [demand] didn’t materialize, we took all that equipment and shifted it into programs that were selling,” says Ms. Hasenfratz. “When you can’t predict the future, you don’t want to make a big bet on something that might not pay off.”

Companies like Linamar are “bridges of the competing automotive futures”, says Romel Mostafa, an assistant professor of strategy at Western University’s Ivey Business School. “They’ve been able to play both [markets] and that requires managerial astuteness. Fortune favours the bold, but also the astute.”

After immigrating from Hungary, Frank Hasenfratz started a one-man machine shop that became Linamar in 1966 (named for daughters Linda and Nancy and his wife Margaret). The company now has more than 37,000 employees and 87 manufacturing locations globally. It recently reported second-quarter net earnings of $183-million, up from almost $127-million in the same period last year, as sales increased by $500-million to a record $3.14-billion in Q2.

Linamar is now a diversified advanced manufacturing company. Beyond the automotive sector, it creates solutions for industries including agricultural, medtech, water, power, defence and robotics.

The company’s culture of flexibility also shapes how it responds to uncertainty. Instead of fearing periods of economic or technological change, Linamar sees them as opportunities, says Ms. Hasenfratz.

“We’ve always been quite conservative in how we run our balance sheets, so we don’t carry a lot of debt,” she explains. “So in those challenging economic times, there’s going to be companies that are struggling and that might create an opportunity from an acquisition perspective, for instance, to bring more technology in at a more reasonable price.”

Rather than developing every new technology or product internally, Linamar has used its acquisitions to expand into technologies it believes will be important for the next generation of vehicles.

In the last couple of years, Linamar has acquired a substantial part of Mobex Global’s U.S. operations and Dura Shiloh’s battery enclosures business. That expanded its capabilities in the EV market, and added propulsion-agnostic technologies that can be used in EV, hybrid and internal combustion engines.

Adapting to what’s happening in the moment has been part of the company’s fabric from the beginning. Underpinning all of the company’s business decisions is its “100-year plan” – a mindset designed to remind Linamar’s leaders that every decision should grow the business not just the next quarter, but well into the next decade.

“We’re 20 years into this 100-year plan, and we’re thinking generationally,” says Ms. Hasenfratz.

She says Linamar’s main objective is to build a business that can succeed regardless of how markets evolve.

Marvin Ryder, an associate professor at McMaster University’s DeGroote School of Business, says manufacturing leaders must manage countless day-to-day challenges while continually adapting to new ones, as failing to keep pace can threaten the business’s survival.

“The people who run these businesses I describe as ‘jugglers’. The average Canadian hears a story like Linamar and takes it for granted that a business can be around for 60 years or 100 years or 150 years. In fact, it’s the opposite. These are rare and beautiful things.”

Long-term success depends not only on consistently delivering quality products, but also on anticipating changing customer demand through research and development or strategic acquisitions that bring new capabilities, says Mr. Ryder.

While manufacturers may start out as the makers of an item or two, top ones branch out based on the market. For Linamar, he says their core product is also their reliability and quality.

“I think Linamar’s success isn’t traced to a single product or piece of innovation, but to a consistent manufacturing standard,” Mr. Ryder says.

“It’s too hard to predict the future, especially these days with technology evolving so quickly,” adds Ms. Hasenfratz. “Just stay super flexible and try to develop a strategy that will be successful in as many different future scenarios as you can envision.”