WHITBY FREE PRESS,, Buiiness ShowcasegWEDNESDAY, FEBRUARY 24,1988, PAGE A7 / F ~ ~ 4~ 9 - ~ 4; LAKE ONTARTO STEEL CO. Free trade will assure access toU.S. A free trade agreement will not necessarily mean large growth for Lake Ontario Steel Co. Inc. (LASCO) as much as it will assure access to the U.S. market, say company executives. "We don't anticipate dramatic growth but it does provide us with a base of business...and stability at our operating levels," says Rimas J. Gudelis, marketing manager for LASCO, Whitby's largestindustry. President Lew Hutchinson says access to the U.S. market is impor- tant since LASCO now ships about one-third of its steel to theU.S "We see that as being a key in or- der to plan our operations and run on a consistent basis," he stated in a previous interview with Gary Ralph of Rogers Cable-TV Pine Ridge. Hutchinson says lobbying in the U.S. by the "steel caucus," a group of about 90 members of Congress who want Canadian steel legislated out of the U.S., means Canadian steel has never been as "threatened" asitis now. "They're saying very strongly that we shouldn't be exporting stel to the country." "We're at the whim and fancy of the U.S. Congress, "says Jerry Hef- fernan, chairman of Co-Steel Inc. which began in Whitby in 1964 arid of which LASCO is a division. Gudelis says LASCO, with its current. access to the U.S., "already operates in a free trade environment. "We want tokeepit. We're saying, "Let's just keep going what we got goingnow," says Gudelis. "I think it's essential we have an arrangement whereby we do have a stable and more favorable trading environment between ourselves and the U.S.," says Hutchinson. "That gives us the opportunity to then plan our facilities and put in world class facilities..so that we can compete worldwide which is really what we're coming to in the world." Heffernan says the free trade deal, in which LASCO had some in- put during formation by the federal government will improve Canada- U.S. traderelationships. He said it could also set "an example" for the General Agreement on Tariffs and Trades (GATT) since GATT doesn't now have a good dispute settlement mechanism. "In the meantime, people get frustrated and then they take unilateral action, as the U.S. has been doing in a number oficases." He says the U.S. may have a num- ber of legitimate concerns, but Canada "gets the backlash." While there is still access to the U.S. for steel products despite a move toward U.S. protectionism, Heffernan warned that what hap- pened with shingles and shakes couldalsohappen tosteel. Heffernan says Co-Steel built Chaparral Steel in Texas to be a world class competitor, and there has since been penetration into Germany and a "breaking-down"of the non-tariff barriers into Japan. (In 1986, Co-Steel sold Chaparral to TXI in exchange for cash and share of TXI, says Gudelis. Other Co-Steel plants are in New Jersey and Kent, England). Hutchinson says the assurance of a large market or growing market because of free trade will mean job security for LASCO employees. "Our first position on this is that it will at least maintain jobs but there's every possibility that it could increase jobs." Since there is also profit-sharing at LASCO, in- creased prosperity could also benefit employees, he adds. Heffernan says-the consumer, because of resulting lower costs for goods, will be "the big winner in the long run," with agreement. And he sees no threat to Canadian culture or sovereignty. "The ability to support our culture depends on the wealth that we generate, the excess over our basic needs. And that's been true throughout the history of the world." He points to Sweden as an example of a country which has free trade yet feels no threat to its culture or social system. "I don't see it (free trade) as a threat, I see it as an opportunity for us," says Hutchinson. LASCO is now producing steel at record levels, forecasting 775,000 tons for 1988 after 720,000 tons were produced in 1987. And last year's production was a significant leap over 1986 when 603,000 tons were produced. "We're basically operating at full capability," says Gudelis, adding that the "fine tuning" is being carried out to go to 800,000 tons a year. The workforce at LASCO has also climbed to a record high of 1,100. LASCO plans to spend $20 million in 1988 on the plant, including $10 million on a revamp of the reheat furnace which will reduce fuel use and cost while improving the product, says Gudelis. Another project is the installation of additional pollution controls. Already installed are fume hoods (smoke collected in the hoods and purified in a bag house) but with high production levels capacity will add to the bag house for fume collec- tion. The major capital project last year was the $6 million shredder, a new and larger recycling device for old cars which LASCO obtains from auto body dealers from all over On- tario. Also added to the plant in 1987 were $1 million worth of new "high- tech" lathes while $3 million was spent on equipment improvement to boost the quality of such products as steel bars used for construction (bridges, office buildings and con- By DOUG ROBBINS Raising capital for a new busi- ness is never easy - but it can be done. Basically, there are three ways to do it - by yourself, in partnership with someone else or through a syn- dicate. The best is probably through a syndicate but if you want to do it yourself, you either have to come *up with your own cash or a com- bination of your own money and a loan. The first thing I would do is look at the lending ratios that are nor- mally available to that particular typé of business from a financial in- stitution. This is important. A bank, for example, cannot by law lend more than 75 per cent against real estate" In the case of receivables, the prospects are better. If you are a manufacturer selling to 25 major customers, a bank will probably lend you 70 to 80 per cent of the value of those receivables. If you're a small retailer, however, and most of your receivables are in the $20 to $25 range, you probably won't be able to raise anything. Money can also be raised on in- ventory and equipment. There are different ratios for each type of business. Your bank can quickly tell you what those are. Understand what reasonable borrowing is ... whether a com- pany has the financial capability or earning power to pay the interest on the money you will need to borrow to acquire that business. Once you've identified the busi- ness you want to go into, look first at your own resources - your house, pension plan, RRSP, bank account, investments, etc. If that isn't enough to either start or ac- quire the business, you'll cither have to borrow, take on a partner, or taise the capital through a syndica- tion or a venture capital company. dominiums). Gudelis says LASCO was steadily climbed since the "rock bottorm" 1980-81 recession period that took place after a major expansion of the company in 1980. Plans are already being made for the 25th anniversary celebration in 1989, that Gudelis says will include some "major contribution" to the Town of Whitby. Jerry Heffernan, chairman of Co- Steel -Inc: of which LASCO is a division, began the company in Whitby in 1964 as he introduced the electric are furnace and continuous casting process that inckeased yield wbile decreasing waste in steel oroduction;The same technology was used to build plants in the U.S. andtheoneinEngland. In the case of a partrier, you may need him or her for a skill you don't possess, perhaps in marketing or manufacturing. It should be a good blend. No matter how advantageous they may appear, partnerships don't usually work out The life expec- tancy for most is seven years and anyone going into a partnership needs a way out - a written buy/sell agreement that spells out how you terminate thatpartnership. Partnerships are not~the same as a syndication, which consists of a group of people who get together to invest in a particular business and in a particular individual. Thev have confidence in that individual's ability to make aparticular business perforin. If you're going to syndicate, you'll need the help of a good lawyer and an entrepreneurial ac- countant to lay out a program that will interest someone in investing in your enterprise. Your friends may invest. So may your business associates, your ac- countant and their clients. The same thing applies to your lawyer and his or her clients. It's a matter of get- ting a package together and selling it. I've done 25-syndications in the past 12 years and as far as I'm con- cerned, it's the way to go. With most syndications, the working partners usually have a management contract under which they are paid a salary up to a certain level. The investing partners usual- ly have a minimum guarantecd an- nual return. The syndication is ideal for people who want to make money but who don't want to participate in the business. Doug Robbins is a Hamilton- based business broker and a well- known lecturer on small business. How to raise capital FIRST WAGNER DEVELOPMENT GROUP INC. now presenting The Whitby Court Green and Ontario Streets Now leasing at the best rates in town. (Al agents are protected.) "For fifteen years we have given youyour rnoney's worth." il