The picture on the wall in Axiom
Group's Aurora facility shows Rocco Di Serio, one of the owners of
the small auto parts maker, smiling ear-to-ear as he accepts a
plaque from a representative of Magna International.
The caption reads, "Preferred
Supplier Award".
But since that picture was taken
more than five years ago, the relationship between Axiom and Magna
subsidiary Intier Automotive Inc. has eroded.
Last year, Intier demanded Axiom
slash prices by 31.8 per cent, due to pressure for more competitive
pricing from automakers.
Many of Canada's small auto part
makers, including Axiom, face financial ruin as a trend of
cost-cutting from upper tier suppliers continues, an industry
conference heard last week.
Intier's proposed deep cuts would
essentially sink the business and lead to cutting more than 60 per
cent of Axiom's 145 employees, according to Mr. Di Serio and partner
Herbert Jahn.
The nearly 32-per-cent price cut
would be impossible for Axiom to absorb, Mr. Jahn said during a tour
of the 70,000-square-foot Mary Street facility.
"There's isn't 32 per cent
left," Mr. Di Serio added.
"Whatever we could offer (to
Intier in savings), we did it," he said, adding Axiom's
managing partners sought price cuts from their own suppliers in an
effort to satisfy Intier.
The company also asked the Town of
Aurora for a break on its commercial taxes and approached the local
hydro company to find savings.
But nothing it could do would have
produced a 32-per-cent savings, Mr. Di Serio said.
Last month, a Toronto judge granted
Axiom an injunction after Intier threatened to cancel all 40 of its
contracts with Axiom, some of which run through 2009.
In January, Axiom filed a
$30-million lawsuit against Intier, claiming it breached contracts.
Louis Tonelli, vice-president of
investor relations, said Magna would not comment on Axiom's lawsuit
since it is now before the courts.
"The parts-supply base has
become very unstable," Intier chief executive officer Don
Walker told The Toronto Star last week.
A shareholders meeting is set for
March 30, when Intier is expected to rejoin the parent company.
Magna spun off several of its subsidiaries over the past 10 years.
Meanwhile, lawyers for Axiom and
Intier are awaiting a trial date.
Axiom is using the time to court
new business, anticipating its dealings with Intier and Magna will
be over in four years, regardless of the trial outcome.
"It had to come to this,"
Mr. Jahn said.
Mr. Jahn, Mr. Di Serio and partner
Perry Rizzo began their business relationship with Magna in 1989,
when Axiom began making tooling and parts for automobile windows for
the auto parts giant.
After moving from Scarborough to a
larger facility in Aurora about three years ago, Axiom invested
millions in technology, while hiring more than 40 employees.
One machine, costing $250,000, was
purchased strictly to meet the requirements of Intier contracts, Mr.
Jahn said.
News of the fallout with Intier has
occupied much of the water cooler talk around among Axiom employees,
said shift supervisor Lalitha Thillainathan.
"We're still busy. We don't
want to lose Intier. People are worried," she said.
Intier has been Axiom's main
customer for 10 years, accounting for 60 per cent of its business.
Axiom has annual sales of about $14
million.
Intier generates annual sales of
more than $4.65 billion US.
In granting last month's
injunction, the judge said Intier would save about $1.7 million by
cancelling contracts with Axiom.
Statistics show about 2,000 of the
101,500 auto-parts sector jobs concentrated in southern Ontario were
eliminated last year.
Industry experts are forecasting a
6-per-cent downturn in North American vehicle production, or
approximately one million vehicles, next year.
