The Last Days of the Canadian Porcelain Company

Incorporated on October 29, 1912, Canadian Porcelain's demise in the 1980s exemplified the changing insulator business that was for so many years a stable industry. The story includes lessons about the dangers of complacency, the cutthroat nature of international competition, and the politics of plant closings.

Perhaps the first step in the company's demise can be traced back to June 17, 1958 when the company was sold to I.T.E. Before this time, Canadian Porcelain (CP) benefited from the huge demand for porcelain insulators needed to rebuild Europe after the second World War. After I.T.E.'s purchase, the company was not allowed to sell insulators to the foreign market. This certainly limited the size of CP's market and, given the small number of buyers in Canada, made the company at risk if one of them purchased insulators elsewhere. The top four customers of CP consisted of Hydro Quebec, NEDCO, PTS and Ontario Hydro and accounted for over half of CP's sales.

Gould, Inc. acquired I.T.E. on April 30, 1976, making CP a subsidiary of that company until 1981. In 1981, Gould divested CP by selling it to Cinvest. Poor management, a recession in 1982, and increased competition from the United States and Japan soon resulted in sizeable losses by the company. In 1983, the company lost $1 million on $3 million in sales.

Part of the losses experienced by CP can be attributed to dumping by several companies including Lapp and NGK in 1982. Dumping involves selling a product in a country for less than it is sold domestically. This behavior increased foreign competitors' share of the market from 13% in 1980 to 74% in 1984. CP successfully sued over this behavior and won some protection from the government (as high as a 32% tariff) but the suit was undoubtedly expensive (current antidumping lawsuits costs run from six to low-seven figures ), eroded the company's market share, and drove down the profit on insulators that were sold.

Another factor in draining the company was its high scrap rates. In 1983, the company's scrap rate had risen to an average of over 30% although they had only been 7% in the past. One source listed the scrap rate at 50%, caused by problems with the clay.

Not everything seemed to work against CP. Until 1982, there were only two main suppliers of insulators in Canada: Canadian Porcelain and Canadian Ohio Brass. In 1982, Canadian Ohio Brass experienced a long and bitter labor dispute that eventually led to its closing in mid-1983. As the only remaining domestic supplier, CP's prospects should have been bright. They were even able to purchase Canadian Ohio Brass' equipment and move it to their plant in Hamilton and partially pay for the $1.2 million buyout with $326,750 received from the federal Industrial and Regional Development Program. However, this purchase instead created a drain on the finances of the company making it difficult to further upgrade the facility to stay competitive.

With several factors working against it, CP went into receivership on December 11, 1984 owing $3 million to its bank and about $200,000 in city taxes. At this point the workers attempted to buy the plant and run it as a cooperative. Each of the approximately 100 workers was budgeted for a personal load of $5,000 to provide some of the funding. One interesting source of about $300,000 in funds to help the workers came from an inter-denominational church group called Christians for a Co-operative Society. This group was formed to provide concrete assistance to threatened unemployment and chose the CP workers' situation as its first social experiment. The workers offered $1.1 million for the plant while the receivers asked $1.5 million. In the midst of this offer, Lapp suddenly stepped forward and bought the plant. 

Lapp purchased the plant for $1.25 million over a revised $1.3 million bid by the workers. The receivers felt that Lapp had more financial backing than the workers and greater ability to market insulators outside of Canada. This seems like a pretty good deal for Lapp. They gained greater access to the Canadian market, took possession of CP's equipment which also included the $1.2 million in equipment from Canadian Ohio Brass, and took title to land bordering a golf course valued at $800,000 on which the factory stood. Lapp ran the plant for about 3 years, marking insulators with the name Lapp Insulators Canada and investing several million dollars into the plant but eventually decided they had had enough. 

The straw that seemed to break the camel's back was a strike for higher wages on November 30, 1987 by members of Local 249 of the Aluminum, Brick and Glass Workers union. Five days later, Lapp announced it was closing the plant. The number of employees was down from more than 100 in 1981 to about 42 at the time of the strike. Because the number of employees had dwindled down to less than 50, Lapp did not have to justify the plant closing as it would have under June 1987 amendments to plant-closure legislation. Lapp also did not even have to sell the Hamilton plant's assets and its $11.4 million asking price certainly discouraged any buyers. This was a point used to call for stronger laws in this area. 

Politically, several broad issues were raised in the final years of the company's life. These issues included how to deal with dumping, how much investment should be allowed by foreign companies, whether worker buyouts of a company are a good idea, and what control should the government exert over plant closures. 

Economically, the effects of unions and trade policies are shown. On a micro-economic level, the problems of cash flow and collateral got the company in trouble and made it difficult for the workers to come to the rescue. On a macro-economic level, the effects of recession and the tendency toward consolidation in the industry is illustrated. Socially, workers ended up out of a job and Canada lost its last high voltage porcelain insulator manufacturer. On the positive side, the role of churches in helping a community took a different form. Rather than just providing moral support, they also provided financial backing in this case.

Technologically, the company faced the age-old problem of maintaining quality plus handling the emerging threat of an entirely new product line in polymers. In both cases, the company seemed to lose the battle. 

Today, the land that once was home to the Canadian Porcelain factory is now home to hundreds of people living in condominiums. 

Bibliography

This article is primarily based on an April 1985 Canadian Porcelain Co-Operative Ltd. Business Plan written by Co-operative Work (Toronto) Ltd. This document as well as much other material came from the files of 

Richard Allen, a Hamilton (Ontario) New Democrats Party Member of the Provincial Parliament found in The William Ready Division of Archives and Research Collections, McMaster University Library, Hamilton, Ontario, Canada. 

Ronald A. Wirtz, "Anti-Dumping: The Free-Trade Antacid." The Region: Federal Reserve Bank of Minneapolis 15.4 (December 2001): 23. Carol Corley, "Union, MPP to Pitch Lapp to Keep Plant from Closing," 

The (Hamilton, Ontario) Spectator. "Workers Takeover Bid Praised by Churches," The (Hamilton, Ontario) 

Spectator February 16, 1985. "Church Group Aids 75 in Bid to Save Factory." The Globe and Mail February 1985. 

Brian Christmas and Jill Morison, "Lapp Workers Shocked, Dismayed at Surprise Closure Announcement," The (Hamilton, Ontario) Spectator December 5, 1987: B 1. 

John Flanders, "Ottawa Probe Clears Lapp of NDP Accusations about Plant Closing." The (Hamilton, Ontario) Spectator June 1, 1988: B1. Other sources have put the number of employers at 43 and 47. 

Jack Quarter, "One Factory Down and How Many More to Go?" The Globe and Mail February 5, 1988.