Agility, Persistence Help Gray Tool Succeed Alongside Big US Rivals. CANADIAN COMPETITIVENESS

ALEX GRAY is understandably proud that the company he runs and that his grandfather founded in 1912 survived the Great Depression and two world wars, and he believes it will survive the 1989 United States-Canada Free Trade Agreement (FTA) as well.

With many Canadian manufacturers looking for cover, and labor organizations howling as trade barriers fall and companies close, Gray Tool Company of Brampton, Ontario remains a stubborn competitor.

As Canada's lone remaining manufacturer of hand tools, Gray Tool is basking in a tough competitive environment it already knows quite well. Mr. Gray moved the company into the tough US market more than a decade ago.

Still, the company's ability to survive and thrive seems not to have made its president proud to a fault. Instead, the proximity of huge rivals across the border, has made him modest - and smart.

"When you're the flea, you tend to look out for the elephant," he says, adding that while his operation hardly compares in size, it may be the fleetest afoot.

Responding like lighting to customer needs is one of several ways Gray says he has kept US sales surging in the shadow of giant US toolmakers like Snap-On and Stanley. In the past decade the company has painstakingly won a chunk of the mature $5 billion North American market.

Gray says little has changed in his company's approach since the FTA went into effect. That's because the company long ago learned how to relentlessly pursue niche markets, especially those for metric tools. The company has kept overhead low and management ranks thin while broadening product lines.

"There are very few Canadian companies that have a size advantage when it comes to the American market," Gray says, "so the advantage is going to have be one of speed and better service, better quality, niche marketing."

During "Operation Desert Storm," for example, US commanders massing troops and tanks to push the Iraqis out of Kuwait discovered they were critically short of 29 millimeter open-end wrenches. It was not a common tool, and big US companies did not stock it in volume - nor did Gray Tool. But eight days later, Gray says his company had made 2,000 of the wrenches and shipped them to Saudi bases.

"I think the reality of free trade is that ... Canadians must adjust to the American market," Gray says. "If they don't adjust, they're not going to be here in a few years. I think a lot of Canadians are uncomfortable with that reality. On the other hand, the opportunity of doing business in the US is great."