Experts warn 2016 'critical year' to Canada's auto sector future

Wednesday, May 11, 2016

The Windsor Star/Doug Schmidt

Aggressive and speedy action is required, and it better be this year, or Canada risks losing its single-most important industry, a Windsor summit on the automotive sector heard Wednesday.

“There is an urgency here,” Deb Matthews, Ontario’s deputy premier and treasury board president, told the second biannual Windsor-Essex Policy & Solutions Forum.

Bureaucratic red tape and slow decision-making, as well as a perceived lack of government support for the industry and a failure of the education system to fill a shortage of technical workers were all cited as problems.

For the sake of a half-million Ontario workers and their families, “2016 is critical — we have to get our act together,” Matthews told about 200 attendees from business, labour, government and academia.

This year “will determine whether or not there is an industry,” said Unifor national president Jerry Dias. The forum was jointly hosted by the Windsor-Essex Regional Chamber of Commerce, Unifor Local 444, the University of Windsor and St. Clair College and was attended by some of Canada’s top automotive sector insiders.

Taking notes at the Caboto Club as the speakers — some of the globe’s top auto industry movers and shakers among them — listed the things needing to be done was Ray Tanguay, the former Toyota Canada chairman appointed last year as special auto adviser to the provincial and federal governments.

Tanguay, who hopes to report his findings and recommendations within the next six months, said it was “extremely important” that Canada do all it can to maintain its current automotive investment footprint.

The gathering heard that Canada is not only losing new auto investment to Mexico and American jurisdictions offering better incentives but also to a growing number of new countries around the world entering the lucrative industrial sector, including Indonesia, Turkey and Thailand.

Tanguay said it was troubling to hear at an industry gathering he attended in Michigan that, among automotive decision-makers, Canada didn’t even make the list of potential investment sites for new product.

Steve Rodgers, president of GS Global Solutions, said Canada is expected to slip from ninth place in world automotive production in 2013 to the 15th spot by 2020. He said it’s not that Canada is losing production but that other countries are capturing all the new growth of an expanding global automotive sector.

Predicting that “cars will change more in the next 10 years than in the last 120 years,” Rodgers said Canada’s focus should be on innovation and technology and educating and training a new generation of knowledge workers in skilled trades. To a question on workers’ wages, he replied: “It isn’t about the labour cost,” adding the “Canadian labour movement really gets this, they understand.”

Rodgers said other jurisdictions, hungrier for automotive jobs, see government incentives as a public investment with a relatively quick payback. Unifor’s Dias said too many Canadians still view such public investment in private companies as corporate welfare and something to avoid.

“I’m not convinced it gets the respect it deserves,” said Dias, adding Canada’s automotive sector generates over $5 million a day in government tax revenues. He said a public investment in a new automotive assembly plant has a three-year payback for a facility that typically maintains large numbers of well-paid jobs for 25 years.

“We live in a highly competitive environment,” said Matthews, who told the forum that the auto sector is “not for the faint-hearted.”

Anthony Papa, vice-president of Federal Mogul, said in places like Mexico, Turkey or China, it’s a “no-brainer” to have public investment and governments which help facilitate new manufacturing plants becoming established. University of Windsor science director and Auto21 CEO Peter Frise said those countries, as well as Germany and China, treat their auto sectors as key drivers for their national economies, not just as another industry.

Michigan is beating Ontario in auto investment by a wide margin because “Michigan treated its auto sector as a strategic asset,” said Frise. In Canada, he added, there’s no such urgency.

“How’s it working out for us? Not so good,” said Frise.

One of Tanguay’s likely recommendations will be for Canada to establish the type of “one-stop shop” for automotive investment that Mexico created with ProMéxico, an agency tasked with pursuing and helping facilitate international investment. Comparing Canadian and Mexican governments when it comes to potential new auto investment, Tanguay said: “We negotiate, they facilitate.”

Consultant Nick Marentette, a former auto executive said that, “in our business, there are winners and losers … there’s no second place.”

Rodgers said there are few countries in the world where all the potential partners work as well together. Canadian universities and colleges, which have already established strong ties to the automotive sector, is one area of competitive advantage, panelists said, as is the domestic auto labour force, where the turnover rate is much lower than in parts of the U.S. or Mexico.

Trade missions abroad are great, said Marentette, but just as important is getting the world’s auto investment decision-makers to visit here. He described how “pleasantly surprised” a group of German automakers was when he brought them to Ontario.

“You need to get people here to show them the culture here is conducive to growth,” said Marentette.

Matthews said she was “really taken aback” when she first experienced how closely business and labour work together in Windsor, and she described Wednesday’s forum, with those two parties, joined by government and academia, as “remarkable … historic, actually,” and a model to emulate.

“When we work together, we are the best in the world,” said Tanguay.