Thank you and good afternoon, Mr. Chairman, honoured members of the committee, those in support and fellow guests.
I'd like to relay on behalf of myself, the shareholders and all our employees a high level of gratitude for the opportunity to speak to this committee.
I'm here representing Court Holdings Limited. We are a family company that will be celebrating 100 years in business next year. We operate in 14 different countries around the world. Our main focus is in two areas: providing mechanical and technical services to international steel companies, and the manufacturing of automotive and railway parts for the North American market. Each one of our companies operates as a small business employing between 12 to 100 employees. In the Niagara region alone, we have approximately 500 employees in manufacturing jobs.
In our manufacturing business, we export 90% of our products into the United States. In the past, we have freely moved components and raw materials across the U.S. border to provide goods and services to our customers. Over the past 18 months, what had been normal is now abnormal. Today I'll speak about two examples. First is the impact of the U.S. section 232 steel tariffs, as well as the Canadian reciprocal tariffs, on our plant in Vineland, Ontario.
At Vineland Manufacturing Ltd., we manufacture steel air reservoirs for the braking systems on railway cars and locomotives, and that's for the North American rail industry. We source a very specific grade of steel from the U.S., one that was not available in Canada until recently, and that's now being ramped up at Algoma steel. Since the trade confrontations escalated, we have seen the price of our steel increase over 28% since January 1. This is absent of the tariffs. This in itself has created significant hardships because we have long-term agreements with our customers, and material pass-throughs are terms that make our relationships with our customers extremely strained. They will not give us the pass-throughs that we're asking for.
In conjunction with this price increase, we're now dealing with an additional 25% uptick in the form of tariffs. Although there is a process for drawbacks, the administration is time-consuming, and it ties up a significant portion of our working capital. The process is also expensive. It's costing us up to 5% of the total cost.
The next cost impact is in the area of consumables. As the steel price increases, so does the cost of our metal components and welding wire. This, all told, has taken a Canadian company and its team from tight margins, but very successful, to one that struggles to come close to the break-even point.
The cost increases are not controlled by the dedicated team on the ground at Vineland, but by external forces. They are controlled first by the U.S. administration and second by our government's counteractions, reducing profitability and strangling cash flow.
My second example is maybe a bit redundant now, but I'd like to go through it. It's the potential of the auto tariffs and how they will impact us.
At Niagara Piston Inc., we supply braking components to the North American market. Again, over 90% are supplied to the U.S. If tariffs are imposed, and there's still a possibility of that, the following sequence of events will occur.
As the U.S. tariffs are not applied to Canadian suppliers such as us, they will be imposed upstream to our U.S. customers. The North American automotive manufacturers have messaged very strongly that they will not pay for these tariffs, nor will the tier one suppliers, and they will push them back down into the supply base. As a tier two supplier, we cannot bear the impact of these as there is no means of drawback from the U.S. tariffs. As a business that operates at razor-thin margins, we cannot absorb these additional costs. We will either run at significant losses, or we'll be forced to shut down production and operations until there is a resolution. Both options come at a significant cost to our company and to the livelihood of our employees. Neither of these courses is tenable.
The result is that, in most cases, there are very few sources for products, so the North American auto industry would quickly run out of parts and would come to a complete shutdown. We are only one of hundreds of suppliers in the same situation.
The possible imposition of these tariffs is ill-conceived, and we hope that through the ratification of the USMCA this issue will be behind us.
How has this impacted our company?