CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

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CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

Driving change

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by Tim Wilson

Market shifts hold the future for auto manufacturing

With the Canadian dollar hovering around US $0.80, Canadian manufacturers have been given some breathing space. But experts say it would be folly to use this as a crutch to avoid required investments in technology and highly skilled labour–two areas where Canada shines. This is particularly true given that Mexico is now competing on higher value production.

“What is worrying for Canada is that Mexico is developing advanced manufacturing,” says Dr. Sean McAlinden, executive VP of research and chief economist at the Center for Automotive Research (CAR) in Ann Arbor, MI.

Growth in automotive assembly in North America has gravitated towards Mexico and the southeast US. Canada has not been successful in landing new plants, though the current OEMs have made important reinvestment decisions here. As well, Canada has a strong assembly footprint, buffered by provincial and federal government partners. To sustain things for the long haul, however, the industry has to build on its strengths.

“Innovation is the key differentiator for Canadian suppliers to enter the customer supply chain,” says Flavio Volpe, president of the Automotive Parts Manufacturers Association (APMA). “We are not competitive on a commodity basis, but we have developed a culture of investment in product and process development to build a global reputation as a centre for innovative design and execution.”

A competitive dollar can help. “The dollar at 80 cents will help some suppliers,” says McAlinden. “The Canadian and US industries are tied together–a tremendous amount of parts are sent across from Michigan every day, and the same is true of Ontario-based suppliers shipping to the 12 plants located here.”

Given that 90 per cent of North American components are typically sent with 250 miles of a plant, Ontario has a built-in advantage. As well, the recent shift in the currency keeps us competitive with Mexico.

“The more favourable exchange rate we have been experiencing over the past few months is interesting and advantageous,” says Volpe. “As the Mexican peso continues to keep pace with the Canadian dollar, there may be some advantage for supplier spend in Canada versus the US for Mexican-based customers, and Canadian companies may be able to make some incremental gains.”

But Flavio also notes on a long-term structural basis, it is difficult from a supply standpoint to envision the advantage will have any permanent effects. After all, customers adjust their expectations, and input costs continue to be quoted in US dollars. And observers like McAlinden are not without criticism of how Canada has approached the market. “The problems for Canada are that it has relied too much on cheap labour based on the Canadian dollar. The Canadians didn’t invest in technology, and they didn’t care what products they were making.”

One positive development for the Canadian market has been the arrival of Stephen Carlisle as president of General Motors of Canada Ltd. He has been vocal about GM’s commitment to Canada, and the industry’s long-term viability. “Mr. Carlisle has taken it upon himself to reach out directly to the supply community and engage with them on the dynamics of investment decisions at GM,” says Volpe.

As it stands, Carlisle has been reluctant to play his hand with regard to GM Canada’s future commitments. It is on a solid footing with labour and government relations, but there have been rumblings it could pull out of Oshawa, ON, after 2017. SMT

Tim Wilson is a contributing editor. [email protected]

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