An Irish company believes it has the formula for global success, writes Cliffod Coonan in Dongguan, southern China
CF TOOLING'S China engagement started with a wager. One of their best customers, IBM, needed a factory in China to make server racks for the burgeoning market there, and needed it fast. CF managing director John Flaherty bet a fancy meal he'd have it up and running by July. IBM owes the man from Galway a dinner.
Athenry-based CF Tooling's Chinese name is "Xifu" meaning "hope and wealth", a fitting symbol of how the state-of-the-art production went from being a greenfield site to a fully functioning €7 million plant in just seven months in the booming production zone of Dongguan in southern China.
"We will be successful here like we are anywhere else, we bring the knowledge of the Irish manufacturing process to the world, and the efficiencies that we've built in over the years," says Flaherty as we walk through the plant. It's very impressive, clean and spacious and the toolmaking equipment is sophisticated. The dormitories are some of the best I've seen in China - they need to be. There is a growing labour shortage in southern China and workers vote with their feet if they feel conditions are not good enough.
Flaherty is not a man who likes to bandy words like "philosophy" or "vision" around. He rarely, in fact never, does press and insists this interview is the first he's ever given. Flaherty dislikes having the focus on him personally, and likes to stress that the company's success is down to his team.
He certainly has a strong and loyal team, but there is no doubting that Flaherty's energy and vision has driven CF Tooling from small beginnings in Galway to becoming a major globalised company, with factories in Athenry, the UK, Czech Republic and the Philippines and a workforce worldwide of more than 1,000 people.
Turnover in 2007 was $100 million (€63 million) and this year is forecast to rise to $120 million and $160 million next year once revenues from the China plant come into play. You get the sense that Flaherty has other tricks up his sleeve, he's happy to diversify if he feels the investment is right.
CF's customer roll call reads like a who's who of domestic and international blue chips - IBM, EMC, APC, Ingersoll Rand, Linde Carrier, Toshiba, Hitachi and Glen Dimplex. Flaherty is a finalist in the international category of the Ernst Young Entrepreneur of the Year awards.
CF Tooling began life in 1989 making service parts for clothing manufacturing equipment for Connolly Brothers in Galway, as well as Thermo King. At the time Flaherty was a toolmaker and part-time farmer. He set up the company with a partner, Michael Carr, the "C" in CF, who subsequently left the company but has since rejoined in a management role.
CF is a highly unusual company in many ways, mostly because it has a traditional approach to doing business. There are very few examples of corporates getting to where CF is today without bringing in the MBAs, the lawyers and the corporate finance specialists. Everyone in Flaherty's management team has come up through ranks and started on the shopfloor, an old-fashioned approach that has reaped dividends for him.
"We survived in Ireland because we were lean and efficient. We are lean and efficient because all our managers are engineers and toolmakers who started from the ground up," says Flaherty.
The company is a private company and has no interest in turning to the stock market for money. And his approach is bullish in the extreme - in three days spent in Dongguan watching CF Tooling in action, the words "downturn" or "recession" did not pass his lips.
Where Flaherty's philosophy really stands out is his belief in the future of manufacturing in Ireland. He has little time for the obsession with services and with gloomy prognoses about making things in Ireland.
"If you have proper processes and efficiencies you can manufacture in Ireland. In Galway we cut costs 10 years ago. And when we set up in the Czech Republic we brought Irish efficiencies and processes there and we'll do it again here," he said.
To keep manufacturing in Ireland you have to be flexible, he believes. CF designs tools in Ireland and builds them in its international plants, because toolmaking has become too expensive in Ireland, unlike other parts of the production chain. He takes the most expensive parts of the production process, such as tool-making, and gets them made where it's cheap, and then focuses on making the remaining parts of the value chain cost efficient.
"Galway is extremely profitable in a high-cost zone because of efficiencies. The people in my company did it. My people are not motivated by money but by the growth of the company.
"A lot of the senior management have grown with the company," said Flaherty.
"The reason we set up in Prague is because our customers in Galway started drifting to Central Europe. The late Tom Kennedy of Enterprise Ireland gave us some excellent advice. He said: 'If you want to stay in business, you've got to go global. Fold or follow'; either you fold your company in Ireland or you follow your customer. If you don't spread your wings, you won't be there.
"The pressure of the dollar drove us to the Philippines because we risked losing a job to a company there. We were losing a lot of work out of Galway to other suppliers. By moving globally I brought in new customers and strengthened Galway," said Flaherty.
CF Tooling vice president Des Kenny manages the Philippines plant, which started operations in 2004. "We'd have lost £12 million if we didn't open the plant in the Philippines. We had to find a way to keep jobs and revenue within the group. And within six to eight months we were up and running there," says Kenny. CF is planning to continue its policy of globalisation while retaining its Irish operations, and next year CF will open a plant in Minnesota.
"We need to be able to manufacture there to complete the global chain. At the moment we are shipping from the Philippines to America but with shipping costs and the price of oil, it makes more sense to manufacture there," said Flaherty.
