Cars for sale on the lot at the Toyota dealership in Toronto.Fred Lum/The Globe and Mail
For the auto sector to thrive, Canada must remain competitive in manufacturing, develop talented people at all levels, invest in new technology and do a better job of selling itself, a two-year study of the sector concludes.
The report presented on Monday to the Automotive Partnership Council of Canada, an advisory body made up of the industry, labour and government representatives, was undertaken by Ray Tanguay, special automotive adviser to the federal and Ontario governments and a long-time senior executive at Toyota Motor Manufacturing Canada Inc. and Toyota Motor Corp.
"We have an excellent reputation for building quality cars, for an educated work force, for national health care, low corporate taxes and a secure place to live in a diversified culture," Mr. Tanguay's report, entitled Drive to Win, concludes. "That story – the story of our strengths – still needs to be told repeatedly because the rest of the world still does not know what we have to offer."
There are also weaknesses, however, including what he calls high processing costs, driven by labour and electricity charges.
The recent adoption of Bill 148 will hurt Ontario's case with new investors, the report says. The legislation includes a mandatory allowance of personal emergency-leave days, although the auto industry convinced the provincial government to permit fewer days than other industries.
"When Ontario is compared to other automotive jurisdictions across North America, our local processing costs place us in the middle of the group," it says. "In targeting prospects for a stronger automotive industry in Canada, we have to understand and remove barriers for investors because in order for Canada to win investments we cannot just be competitive – we need to be better than other jurisdictions south of the border."
The examination of one of the country's critical industries – employment of 126,000 in vehicle and components manufacturing and annual exports of $86.5-billion – is the result of more than two years of research, consultation and study of the parts sector, vehicle assembly, technology companies, government programs and the impact of the education system.
Mr. Tanguay was appointed – and his report commissioned – in 2015, after he retired from Toyota. At that time, industry leaders concluded that Canada should create an investment board that would focus on attracting new automotive investment. Instead, the federal and Ontario governments appointed Mr. Tanguay, whose tenure at Toyota included being the driving force behind landing the most recent auto-assembly investment in Canada, the Toyota plant in Woodstock, Ont.
But since that plant opened in the depths of the 2008-09 recession, Canada has not won its usual share of new investment by auto makers. More recently, U.S. President Donald Trump has threatened to tear up the North American free-trade agreement, which would create havoc in an industry that relies on NAFTA to function smoothly and competitively and chill the climate for new investment in Canada.
Navdeep Bains, Minister of Innovation Science and Economic Development said winning new assembly plant investments is still critical to the future of the auto sector in Canada.
"I think there's a clear recognition of the benefits associated with those investments in Canada. Not does it strengthen our automotive footprint, but there's a multiplier of six additional jobs associated with that," Mr. Bains said after announcing a $49-million federal contribution to a Linamar Corp. project that will create 1,500 jobs over the next 10 years.
The biggest disadvantage Ontario has in trying to attract new automotive investment, Mr. Tanguay said, is the perception that it's too labour-friendly compared with Michigan and Indiana, for example, which in recent years have become right-to-work states, making it harder for unions to organize workplaces.
"The investments that are taking place now are mostly in the right-to-work states," he noted.
Two big auto-assembly investments were announced last week in Alabama and Michigan, both right-to-work states.
Toyota and Mazda Motor Corp. said they will build a $1.6-billion (U.S.) joint venture assembly plant in Huntsville, Ala., and Fiat Chrysler Automobiles NV said it will spend $1-billion to shift production of a heavy-duty pickup truck out of Mexico to a plant in a Detroit suburb. Fiat Chrysler said that move was enabled in part by the Trump administration slashing the corporate tax rate.
A lower corporate tax rate does not affect decisions for new plants, Mr. Tanguay said, but it's important for some auto makers once the plants are up and running.
His report said Canada needs to maintain a lower tax rate than the United States in order to stay competitive.