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Winter 2016
LEADREACHCONNECT and
The Official Publication of the Automotive Parts Manufacturers’ Association
The TRANS-
Pacific
Partnership:
Scrubbed and
Released
Strengthening
Quebec’s Manufacturing
Automotive Sector the Future of
the Automotive
Industry in Canada
R&D Outside the Box
Canada Post Publications Agreement Number 40609661
INSIDE
what’s
UP FRONT
7 F rom the Desk of the President of the Automotive Parts
Manufacturers’ Association
Canada has successfully concluded negotiations on the Trans-Pacific ON THE COVER
Partnership, the largest, most ambitious free trade initiative in he Trans-Pacific Partnership: Scrubbed and Released
10 T
history. The comprehensive, economic, strategic and balanced
agreement will increase Canada’s foothold in the Asia-Pacific, a FEATURES
region expected to comprise two-thirds of the world’s middle class
by 2030, and one-half of global gross domestic product (GDP) by
anufacturing the Future of the Automotive Industry in
15 M
Canada: The Assembly Footprint
2050. Find out how the new agreement will impact the industry in
the educational article by Birgit Matthiesen, Arent Fox, on page 10. 23 R&D Outside the Box
The countries involved in the Trans-Pacific Partnership include:
25 Strengthening Quebec’s Automotive Sector: A Hub for
Advanced Transportation Technologies
Australia Mexico 27 High-Impact Ways to Boost the Productivity of Your Business
Brunei New Zealand
IN EVERY ISSUE
Canada Peru 29 L eading Reaching & Connecting: 2015-16 APMA Highlights
Chile Singapore
31 M eet APMA’s Members
31 M eet APMA’s Newest Members
Japan USA 32 M eet CAMM’s Members
34 A PMA Membership Just Got Even Better!
Malaysia Vietnam
35 B ehind the Wheel of the All-New 2017 Ford GT
on the cover10 38 BUYER’S GUIDE
Winter 2016 Printed by: Editor-in-Chief Account Executives
Matrix Group Publishing Inc. Shannon Savory Angie Carroll, Bonnie Petrovsky, Chad
Lead, Reach & Connect Please return undeliverable ssavory@matrixgroupinc.net Morris, Emily Norsworthy, Frank
Published for: addresses to: Kenyeres, Jeff Cash, Jim Hamilton,
The Automotive Parts Manufacturers’ 309 Youville Street Editor Jonathan Tiberi, Mallory Owens,
Association Winnipeg, MB R2H 2S9 Alexandra Walld Renee Kent, Rick Kuzie, Rob Allan, Rob
10 Four Seasons Place, Suite 801 Toll free: (866) 999-1299 awalld@matrixgroupinc.net Gibson, Shalynn Ramsden, Stan Barnes,
Toronto, ON M9B 6H7 Toll free fax: (866) 244-2544 Taneesha Dalken, Tyler Robinson
Tel: (416) 620-4220 Finance/Accounting & Administration
www.matrixgroupinc.net Shoshana Weinberg, Pat Andress, Nathan Advertising Design
Fax: (416) 620-9730 Canada Post Mail Publications
www.apma.ca Redekop, Lloyd Weinberg James Robinson
Agreement Number: 40609661 accounting@matrixgroupinc.net
Disclaimer: The articles presented in President & CEO Director of Marketing & Circulation Layout & Design
this publication represent the opinions Jack Andress Kayti Taylor
Shoshana Weinberg
of the authors and the interviewees.
©2016 Matrix Group Publishing Inc. All rights
Their inclusion does not directly or Publishers Sales Manager - Winnipeg reserved. Contents may not be reproduced
implicitly denote concurrence or support Peter Schulz Neil Gottfred by any means, in whole or in part, without
by the Automotive Parts Manufacturers’ Jessica Potter prior written permission of the publisher. The
Association. Articles were reviewed by Sales Manager - Hamilton
opinions expressed in this publication are not
APMA staff and selected for inclusion Colleen Bell necessarily those of Matrix Group Publishing
as they represent issues of interest to Sales Team Leader Inc.
professionals in our industry. Brian MacIntyre
The Automotive Parts Manufacturers’ Association 5
UP FRONT
From the Desk of
the President of the
Automotive Parts
T
Manufacturers’ his past year was an important one for the Partnership Council, serving as key founding mem-
Association Automotive Parts Manufacturers’ Asso- bers of the Auto Advisor advisory board and the Auto-
ciation and the Canadian automotive sup- motive Supplier Innovation Program advisory board,
plier industry. We raised public awareness and launching a partnership with the Canadian Asso-
about issues important to our membership to an ciation of Mold Makers, 2015 was a very busy year
almost unprecedented level, successfully championed at APMA.
the cause of suppliers to both levels of government We carried your interests on the proposed Ontar-
with measurable results, and embarked on trade and io Retirement Pension Plan and the proposed Cap
export initiatives with an OEM focus in NAFTA. and Trade Program directly in meetings at Queens
As regulators weighed the cost and benefits of key Park, including with Premier Kathleen Wynne and
policy objectives like climate change, retirement sav- on OEM funding and attraction strategies at Par-
ings, corporate tax competitiveness, and transporta- liament Hill, including directly with former prime
tion safety, we represented your interests in person in minister Stephen Harper. We held multiple in-person
the halls of power. consultations with Ministers of Economic Develop-
This past year, we focused on collaborative efforts ment and Industry, Brad Duguid and James Moore,
with the Original Equipment Suppliers Association Ministers of Finance, Charles Sousa and Joe Oliver,
(OESA) and the Motor and Equipment Manufac- and Trade Minister Ed Fast on matters affecting our
Flavio Volpe turers Association (MEMA) in the U.S., and the industry as well.
President Industría Nacional de Autopartes (INA) in Mexico This year will bring new challenges including a
Automotive Parts Manufacturers’
on the cross-promotion of membership and industry new federal government under Prime Minister Jus-
Association
sectors with meaningful results. We were very happy, tin Trudeau and many upcoming mandate invest-
for example, to secure the invitation of APMA mem- ment decisions for new and current Canadian-based
bers to OESA member events and meaningful pro- OEMs. The new government has signalled formally
gramming such as their Purchasing Townhalls. In to all economic ministers that partnerships in invest-
addition, trade development planning with INA in ment and strategy with the automotive sector will
Mexico resulted in our joint advocacy and planning be a key priority and there is work to be done. We
relationship that focused on two-way trade and for- will continue to seek your insight and advice and
mulation of joint positions on key items facing all carry your objectives to the automotive capitals of
NAFTA suppliers. the world and to our government partners. We look
Over the course of the summer and throughout forward to venturing with you across North America
the 2015 federal election, you will have seen that and abroad once again, into India and Germany. We
APMA led the public discourse and formally created will need your help with identifying the issues that are
an unprecedented multi-national lobby strategy for most important to your daily business.
more robust automotive terms in the Trans-Pacific Our association and office exist to serve our mem-
Partnership Agreement. At Parliament Hill, in Wash- bers and I invite you to call or contact APMA if we
ington DC and in Mexico City, APMA was a lead can be of service to you at any time. Our team is com-
advocate for a Canada/U.S./Mexico supplier-specific mitted to meeting our members and speaking with
This year will bring trade position and our voice carried continuous lead- you on a daily basis. We are committed to driving
new challenges story coverage in the Globe and Mail, the National up and down the same highways your parts travel on
including a new Post, the New York Times, the Wall Street Journal, the to come and meet you where you do business. Please
Japan Times, the Guardian, CBC, BNN, CTV, Inside feel free to call me and invite us for a visit; we will be
federal government
U.S. Trade, Just-Auto.com and dozens of other media grateful for the opportunity to learn and share.
under Prime outlets across Canada, the U.S., Mexico, Japan, the I look forward to a continued and fruitful rela-
Minister Justin U.K. and across Asia. Together with our NAFTA tionship with you and to a strong 2016. ■
Trudeau and many partners, we sought and successfully achieved inclu-
upcoming mandate sion in negotiation due diligence and more reason-
investment able treatment in the negotiated terms than we were
first presented. There is much work to be done but
decisions for
we are leading the effort. Flavio Volpe
new and current Between conducting and compiling supplier com- President
Canadian-based petitiveness surveys for our OEM customers, advo- Automotive Parts Manufacturers’ Association
OEMs. cating supplier positions at the Canadian Automotive continued on 8
The Automotive Parts Manufacturers’ Association 7
APMA’S BOARD OF DIRECTORS
Barry Jones Keith Henry Peter LeBlanc Ken McDougall Roy Verstraete
Chairman, APMA President Director, Automotive Sales, NAFTA Group President Interim CEO
President Windsor Mold Group ArcelorMittal Dofasco Linamar Corporation Anchor Danly
Leggett & Platt Automotive 444 Hanna Street East PO Box 2460 545 Elmire Road North 2590 Ouellette Avenue
Group North America Windsor, ON N8X 2N4 1330 Burlington Street East Guelph, ON N1K 1C2 Windsor, ON N8X 1L7
Schukra of North America Ltd. Tel: (519) 258-3211 Hamilton, ON L8N 3J5 Tel: (226) 326-0115 Tel: (905) 330-2542
360 Silver Creek Industrial Drive Fax: (519) 258-2473 Tel: (905) 548-7200 Fax: (519) 822-7173 Fax: (519) 972-6862
R. R. #1, Tecumseh Fax: (905) 548-4880
Lakeshore, ON N8N 4Y3 Earl Hughson Jonathon Rodzik Greg Walton
Tel: (519) 727-7004 President Joe Loparco Corporate Sales Manager President & CEO
Fax: (519) 727-7091 Invotek Electronics Inc. Co-President The Narmco Group Dynaplas Ltd.
19 Ing Court AGS Automotive Systems 2575 Airport Road 380 Passmore Avenue
Flavio Volpe Aurora, ON L4G 0K5 200 Yorkland Boulevard, Suite 800 Windsor, ON N8W 1Z4 Scarborough, ON M1V 4B4
President Tel: (416) 569-0697 Toronto, ON M2J 5C1 Tel: (519) 969-3351 Tel: (416) 293-3855
APMA Fax: (416) 321-8823 Tel: (416) 438-6650 Fax: (519) 969-8559 Fax: (416) 293-2684
10 Four Seasons Place, Suite 801 Fax: (416) 438-6533
Toronto, ON M9B 6H7 Derek Kuhn Frank Seguin Steve Wilkins
Tel: (416) 620-4220 Vice-President, Sales & Marketing Martin Mazza President President
Fax: (416) 620-9730 QNX Software Systems Ltd. Senior Vice-President, Magna Closures Inc. Brose Canada Inc.
1001 Farrar Road Marketing & Global Sales 521 Newpark Blvd. 1500 Max Brose Drive
Fred Di Tosto Kanata, ON K2K 1Y5 The Woodbridge Group PO Box 354, Station Main London, ON N6N 1P7
CFO Tel: (613) 271-9323 4240 Sherwoodtowne Boulevard Newmarket, ON L3X 4X7 Tel: (519) 644-5201
Martinrea International Inc. Fax: (613) 271-9349 Mississauga, ON L4Z 2G6 Tel: (905) 830-5829 Fax: (519) 644-5290
3210 Langstaff Road Tel: (905) 896-3882 Fax: (905) 830-9340
Vaughan, ON L4K 5B2 Rob Kunihiro Fax: (905) 949-6119
Tel: (416) 749-0314 Co-Managing Director
Fax: (905) 264-0574 ABC Group
2 Norelco Drive
Toronto, ON M9L 2X6
Tel: (416) 246-1782
Fax: (416) 246-1997
8 www.apma.ca Winter 2016
KEY APMA CONACT INFORMATION
CAMM Representatives on the General Inquiries Janet Soutar APMA is Canada’s national
APMA Board 10 Four Seasons Place, Executive Assistant association representing
Suite 801 Ext.: 227 OEM producers of parts,
Jon Azzopardi
Toronto, ON M9B 6H7 E-mail: jsoutar@apma.ca equipment, tools, supplies
President Tel: (905) 620-4220 and services for the world-
Laval International Fax: (905) 620-9730 Vince Guglielmo wide automotive industry. To
4965 8th Concession Road www.apma.ca Vice President learn more about the asso-
R.R. #3 info@apma.ca Ext.: 233 ciation, its mission and val-
Maidstone, ON N0R 1K0 E-mail: vguglielmo@apma.ca ues, leadership and more,
Tel: (519) 737-1323 Flavio Volpe go to www.apma.ca.
President Glenda Tedesco
Fax: (519) 737-1747 Administrative Assistant
Ext.: 228
E-mail: fvolpe@apma.ca Ext.: 223
Mike Bilton E-mail: gtedesco@apma.ca
Advanced Engineering Manager
A.P. Plasman
5245 Burke Street
Windsor, ON N9A 6J3
Tel: (519) 737-6984
Fax: (519) 737-9366
Stay Connected
with APMA!
It’s now easier than ever. With today’s age of
mobile technology and social media, there are
more ways than ever before to stay connected
with the people and organizations that matter
to you most. Take advantage of these opportun-
ities to stay connected with APMA and have
your voice heard!
APMA WEBSITE: Read along as
APMA and industry experts post
updates on APMA’s website about cur-
rent issues affecting the automotive industry.
Everything from environmental issues to inter-
national business dilemmas is covered in this
space. Visit www.apma.ca.
Twitter: Another social medium
for you to stay connected with APMA.
Check in from home or on the go with
your smartphone (@APMACanada)!
LinkedIn: Social networking, the
professional way. Keep connected
with APMA through our LinkedIn
group and get the same great updates in a more
professional setting than other social mediums
(search for Automotive Parts Manufacturers’
Association (APMA) – Canada).
Join the discussion now!
The Automotive Parts Manufacturers’ Association 9
on the cover
“Dear Mr. Speaker .... I am pleased to notify the
Congress of my intention to enter into a free trade
agreement, known as the Trans-Pacific Partnership
(TPP) Agreement.”
—U.S. President Barack Obama,
November 5, 2015
The Trans-Pacific Pa
W
Scrubbed & Released
By Birgit Matthiesen & David R. Hamill, Arent Fox
With that letter from the White House to Congress, U.S. instances from their NAFTA counterpart requirements and
President Obama declared his intention of signing the TPP would become operational almost immediately upon entry
agreement. After over six years of wrangling and political jos- into force of the Agreement. Automotive executives will want
tling, negotiators from the 12 TPP countries had finally come to understand how rules might affect existing business models
to an agreement. All members, including the U.S., must still and how competitive products with favourable TPP treatment
ratify the agreement, and that process may get messy, but most arriving from TPP member countries would affect business
agree that the TPP is a case of a trade agreement that is too big operations and their bottom line.
and too important to fail. For companies with production and sourcing locations
Now, the TPP turns into something real for the business outside of the NAFTA territory, automotive executives will
world, particularly in the automotive parts sector. In board- want to consider not only the more obvious TPP domestic
rooms across Canada, company leaders will have to decide if content rules, but also the other TPP provisions and the vari-
the TPP is a risk or an opportunity—or both. Long-lasting ous side-agreements allowed into the TPP that present com-
decisions (plant locations and the development, enhancement, petitive opportunity and downside risk.
or abandonment of product lines) will be governed by an For any automotive parts manufacturer, however, the TPP
entirely new set of trade rules. is much more than a simple tariff agreement. It is a 6,000-plus-
The TPP is a game changer. For automotive parts man- page document that will influence decisions on what product
ufacturers in North America, the TPP rules vary in many a company makes, where the product is made, and in many
10 www.apma.ca Winter 2016But time has not stood still. Mexico and Japan reached an
agreement in 2005, giving Japan its first real economic foot
in the door to the North American marketplace. Meanwhile,
the U.S. agreed to open its market to South Korea in 2012,
as did Canada three years later. Looking beyond, there is the
European Union. And, finally, there is China. To no one’s
surprise, China will be “the big get” and will presumably seek
TPP membership sooner rather than later.
With these trade agreements, and now the TPP, the global
landscape is changing at the same time the automotive parts
artnership:
sector faces significant challenges, notably cost pressures. It
is also a time when innovation is paramount, from develop-
ing fuel efficient components and sub-assemblies, to meeting
demands caused by the advent of “smart” vehicles.
But innovation is also a a style of the leadership and vision
demonstrated by the North American automotive industry.
This is especially true for automotive parts manufacturers
cases, how it is made, regardless of the size of the company. constantly looking for gains in product expansion and capa- With these
Now that the Agreement is public, automotive companies bilities while adding shareholder value. trade
should take full measure of the agreement’s potential impact
agreements,
on their businesses, with respect to regional and global Employing a risk-based strategy
operations. The TPP comes when Canadian companies are develop- and now
When faced with uncertainty in the international trade ing and expanding risk management processes. Canadian the TPP,
arena by changing economic conditions or the prospect of companies have been at the forefront of Enterprise Risk the global
new trade rules, such as in the early 1990s with NAFTA, Management (ERM), which takes traditional risk manage- landscape
Canadian automotive parts companies, both large and small, ment approaches further by adopting a company-wide view is changing
have demonstrated their acumen and agility by promptly of risks.
at the same
meeting the marketplace challenges brought about by these Whether or not a Canadian company has formally
external forces. With the TPP process officially out of the adopted an enterprise risk management approach or a for- time the
gates, one of those critical times is now. mal ERM structure, the TPP is ideal for Canadian automo- automotive
tive parts companies to think of in terms of company-wide parts sector
The road to the TPP and beyond performance and a potential value-add mechanism. By fol- faces
Over 20 years ago, Canada, the U.S. and Mexico struck a lowing a multi-departmental approach, which might include significant
landmark trade agreement known as the North America Free manufacturing, engineering, procurement, operations, sales,
challenges,
Trade Agreement (NAFTA). The NAFTA has led to one of finance, legal, compliance, and audit, among other depart-
the world’s most integrated cross-border marketplaces, most ments, this group can effectively develop and institute notably cost
notably in the automotive sector. continued on 12 pressures.
The Automotive Parts Manufacturers’ Association 11on the coverThe Trans-Pacific Partnership
processes to identify and manage TPP risks and outcome determinations based on opera- Balancing TPP risks with
opportunities, including: tional factors, financial impact, and legal opportunities
• Identifying risk/strategic planning: Iden- requirements. In focusing on the potential benefits of the
tifying external threats and competitive • Implementation of risk strategies: Devel- TPP, we encourage automotive parts executives
opportunities presented by the TPP, along oping specific plans of action to mitigate to think broadly and consider all possibilities,
with formulating strategic initiatives and the risks and exploit the opportuni- including:
options to address them. This could be ties identified and analyzed. This could • Canadian automotive companies with an
organized by plant locations or prod- include a balance of proactive initiatives existing global footprint should explore
uct line families but should consider the and a “deep dive” into a company’s cur- opportunities to establish or expand their
effect on the entire company’s operations. rent global trade structure. presence in the Pacific Rim. An analysis
• Analyzing/quantifying risk: Establish- • Monitoring and reviewing risk strategies: should be undertaken to determine how the
ing various scenarios created by the TPP Continually assessing and reassessing the TPP benefits would affect the competitive-
and beyond and applying probability risk landscape of the TPP. ness of their exported goods and how the
TPP provides a competitive advantage for
companies in other regions of the TPP. This
should not be left to default whether a com-
pany has or does not currently have a plant
in a particular TPP country.
• Regional companies with little—if any—
history of exporting may discover the TPP
is not just for bigger automotive parts com-
panies. Tier 1 suppliers in Pacific Rim coun-
tries may create demand for specialized parts,
especially those of high quality produced by
Canadian companies.
• Canadian companies should not forget
about the large, better known U.S. market.
The TPP rules of origin are more liberal
and more flexible than the NAFTA rules
of origin. This means Canadian products
that otherwise might not have qualified for
NAFTA might meet a lower RVC TPP rule.
And for products that already qualified for
NAFTA under the higher NAFTA content
requirements, the TPP may allow Canadian
automotive parts companies to source from
cheaper non-TPP countries.
However, with opportunities come risks.
Increased competition from Asian automotive
parts producers is the main reason the TPP
has been called a risky path for North Ameri-
can automotive producers. It will be important
for automotive companies to determine which
of their current and prospective products and
product lines will be competitive with Pacific
Rim producers and in which markets. It will
be equally important to identify those products
that cannot effectively compete.
The TPP will likely force necessary changes
to many existing company systems and proce-
dures. The agreement also brings new document
and recordkeeping requirements. (Of particular
note, in contrast to NAFTA, it appears that
importers who claim TPP benefits—for imports
into the U.S., including non-resident Canadian
importers—will be able to certify those products
as TPP-eligible.) The challenge for companies
12 www.apma.ca Winter 2016will be to stay ahead of the curve while not over- The TPP represents more than just com- directors in Toronto on November 5, 2015. Birgit is
burdening overtaxed internal resources. paring tariff provisions and duty percentages. a well-known voice for Canadian business interests
Automotive executives need to be fully apprised in the U.S. and served at the Canadian Embassy in
The TPP automotive rules of origin: of how they do business and what changes Washington. David worked in the Office of General
More than just a number should be considered. It is how their enterprise Counsel at the U.S. Department of Treasury during
As the NAFTA automotive origin rules can reduce or minimize TPP risks while leverag- the U.S. implementation of the NAFTA. Their insights
proved, the calculation is more than the region- ing upside opportunities. In short, it is all about offer Canadian companies a unique and deep under-
al content value; it is how the origin counted. the value proposition to the bottom line. ■ standing of changes in the North American market-
Some industry insiders are glad to see that auto- place, and now with the TPP, the opportunities in
motive tracing rules are not in the TPP, due in Birgit Matthiesen and David Hamill co-chair the the global supply chain. Follow their alerts on the
large part to the additional administrative bur- Canada-U.S. Cross Border Business Affairs prac- TPP and other trade issues at www.arentfox.com/
den the tracing rules create. tice at Arent Fox LLP in Washington D.C. This article practices-industries/international-trade/canada-us-
While tracing is gone, there are some auto- builds upon their presentation to the APMA board of cross-border-business-affairs#.VkIHBNKrTs0.
motive parts that will meet TPP eligibility
through alternative, more flexible calculations
and determinations. Whether the TPP origin
rules benefit or harm Canada’s automotive parts
industry might be debated, but there should be
no argument that the new TPP rules are just as
complex as the NAFTA ones they would replace.
With new origin rules that could potentially
lead to an influx from new importers, it is likely
the customs administrations of TPP countries
will be provided with additional resources to
enforce the new rules. Enforcement of free
trade agreements is a particular sore spot for the
U.S. president. Consequently, we believe North
American automotive parts producers should
anticipate such risk by preparing for increased
audits of their special duty programs. A height-
ened enforcement focus could also expose a
company’s previous certifications under the
NAFTA, especially if these transactions previ-
ously escaped scrutiny.
Conclusion
The TPP stands to be a game changer; how-
ever, will it prove to be a risk or an opportunity?
Or both? If not now, when? It is not as simple
as sizing up the extent of a company’s existing
global footprint. Rather, the answer will pres-
ent itself in a company’s ability to ask the right
questions so the full canopy of options can be
diagnosed.
Accordingly, how the TPP automotive rules
will affect the Canadian automotive parts indus-
try will vary between companies. Any consensus
assessment that assumes all automotive parts
producers in Canada face identical risks and
can take advantage of the same opportunities
is clearly not the case. The business model and
rules the NAFTA put in place over 20 years ago
are often buried deep in a company’s structure,
with little—if any—remaining institutional
knowledge of why and how the company based
its decisions to comply with, and even take
advantage of, those rules.
The Automotive Parts Manufacturers’ Association 13Feature
Manufacturing
Future
the
of the Automotive
Industry in Canada:
R
The Assembly Footprint
By Joe McCabe, AutoForecast Solutions LLC
Regardless of desire and intention to increase the local vehicle all of the advantages Canada has to offer, let’s dive into what
manufacturing footprint, a financially sound business case is opportunities exist before figuring out what needs to be done to
necessary for the investment. One driving factor is meeting pro- attract the business.
duction volume levels to sustain profitability, or at a minimum, It is simple math and a basic tenant within the automotive
higher profitability in relation to import substitution. This is not community—jurisdictions with higher overall costs that main-
the only criteria, but it is an important hurdle to clear before tain vehicle production are better suited to support production
weighing other factors. This can be accomplished if the sales of vehicles with higher profitability, and vice versa. Examples that
volumes can be met to justify the investment. With the North support both the local sale and higher profitability justification
American Free Trade Agreement (NAFTA), and potentially soon include the Chevy Silverado and GMC Sierra. These vehicles
the replacement Trans-Pacific Partnership (TPP) plan, sales vol- were/are consistently the top-selling General Motors (GM) prod-
ume opportunity will increase, but so will competition. ucts in Canada, yet haven’t been assembled in Ontario since 2009.
The primary question is, ‘Why is assembly investment so Today, these vehicles are exclusively imported from the U.S.
important?’ The most effective methodology for increasing total A more current example is Fiat Chrysler Automotive’s (FCA)
automotive manufacturing capacity is to invest in final vehicle announcement to migrate small car production to Mexico
assembly operations. Labour studies have shown that one assem- and larger vehicle production to the U.S. This costly produc-
bly line worker translates to the creation of six to 10 additional tion footprint move is one of the results of the recent United
people in the labour force within the direct and indirect supply Auto Workers (UAW) negotiations and, unfortunately, does not
chain. This is an imperative to expanding or at least maintaining include Canada in the story.
a viable automotive footprint in Canada. With the free-flow of vehicles across NAFTA borders in
Aside from low domestic sales volume justifying an import North America, it is less likely to convince a vehicle manufactur-
strategy, there are many reasons a manufacturer will choose to er with an existing production footprint in the U.S. and Mexico
import vehicles over domestic production. Examples include to invest in greenfield operations in Canada. This will be expo-
large tariffs on vehicles such as small pick-up trucks (i.e., the nentially magnified if the TPP agreement is ratified, highlighting
“Chicken Tax”), low-cost vehicles from the Association of the cost benefits of other jurisdictions. In the current environ-
Southeast Asian Nations markets, and lack of infrastructure. ment, the migration of vehicle production south over the last
Canada continues to offer significant advantages to the several years is evidence of this fact, with few exceptions. Lower
global automotive community. These advantages range from total costs (in the form of improved labour, utilities, taxes, and
strong labour, free trade access, nationalized health care, a strong local financial and logistical enticements, to name a few) have
established supply chain, a safe and desirable place to live and driven this migration path and overshadowed other strengths
work, exchange rate benefits for export revenue, and many oth- such as innovation and manufacturing expertise; two core com-
ers which a mature automotive player is expected to maintain. ponents to the Canada value-add equation.
Yet, with these and many more advantages the area has to offer, This is neither new information nor a surprise to industry
the country continues to take a backseat to billions of dollars experts. To improve the Canadian vehicle production footprint,
of investment slated for the U.S. and Mexico. Therefore, taking continued on 16
The Automotive Parts Manufacturers’ Association 15featureManufacturing the Future of the Automotive Industry in Canada: The Assembly Footprint
the focus should be two-pronged: Improve recent UAW negotiations have resulted in Strengthening the argument of lower cost/
capacity use at existing Canadian facilities; both FCA and GM focusing on their U.S./ profitable vehicle migrations is further sup-
and/or identify opportunities that will attract Mexico production balance, with no language ported by Toyota’s latest move of Corollas to
new investment. At its most basic level, this set aside for Canada. A further dive into each Mexico. The concern now in Canada is the
investment must be centered on a localized vehicle manufacturer’s (VM) product port- delicate balance of VM penetration and the
footprint. To understand the opportunities, folio leaves no vehicles of significant volume effects on the local supplier community. With
one must focus on the vehicles with signifi- unaccounted for, making increases in current only 10 plants and a total of 2.26 million units
cant sales in the local and supported free-trade Canadian production difficult. Ford is not of production in 2015, additional decreases in
regions that currently are not produced locally the exception, with the investment for the vehicle production volume could accelerate
(Table 1 on page 19). global Edge at Oakville being its most recent, the ripple effect, penalizing the viability of
In most cases, improving the existing and most likely, last significant investment in suppliers (especially those in the mid to lower
capacity would be more feasible; however, Canada for the foreseeable future. tiers that don’t have the capital to follow their
customer base around the world). For this
reason, focus on new opportunities should be
heavily pursued.
Additional candidates to consider for the
opportunity list for local production include
those with heavy import tariffs, like small
trucks currently affected by the “Chicken
Tax.” The Ford Ranger, currently produced
in Thailand, falls within this category. A
growing global market alters the competitive
landscape, and so does the rationale for vehi-
cle assembly proximity. For example, GM’s
successful introduction of the Chevy Colo-
rado and GMC Canyon in North America
(coupled with low fuel prices) is expected to
impact Ford’s decision to shift Ranger pro-
duction to North America, but the U.S. is the
target. A similar case can be made for FCA’s
Jeep brand. Once primarily a North Ameri-
can-centric product, this iconic brand is now a
global player through platform commonality
and an expanded production footprint out-
side our local market.
Consider the most recent North America
greenfield investment. Volvo (via parent Geely
Group) is investing over $500 million in a
South Carolina facility to be the global pro-
duction source for the S60 (starting in 2018),
the XC60 (2019), and other future products.
The plant, which will employ 2,000 people,
will have an annual capacity of 100,000 vehi-
cles per year, with an initial run of 70,000 to
80,000 per year. Interestingly, BMW, via its
Spartanburg location, helped convince Volvo
on the South Carolina location; an excellent
example of the influence local stakeholders
provide in the decision-making process.
Using the Volvo example, let’s say a
100,000 unit capacity plant with at least 80
per cent use (of a mainstream vehicle) is nec-
essary to financially justify investing in a local
assembly facility—coupled with the strong
local sales—and let’s see who bubbles to
the surface. Let’s call this critical mass the
16 www.apma.ca Winter 2016“tipping point.” Starting at the vehicle brand
level, we see there are a few key brands that are
either a) not built here and are reaching the
production/sales tipping point, or b) main-
tain significantly more North American sales
in relation to their existing North American
manufacturing footprint. These become the
targets in which a North American jurisdic-
tion should focus to gain new investment.
Hyundai, Kia, and Mazda have exceeded
the tipping point with a substantial volume
currently imported. However, by 2017, Kia’s
NAFTA assembly footprint will balance with
domestic sales through its investment in Mex-
ico (Chart 1). Hyundai needs additional pro-
duction capacity; however, the recent free trade
agreement between Canada and South Korea
Chart 1. Source: WardsAuto/AutoForecast Solutions.
has removed the 6.1 per cent tariff and eased
the financial burden on Hyundai imports.
Mazda has a strong North American foot- Jaguar/Land Rover is on the edge of the tip- and the imperative for immediate action. For
print and supply base and should be considered. ping point and can be viewed as a strong can- example, Toyota decided to continue to invest
Additionally, products like the Mazda CX-5 didate, especially with its product suite. in Canada to expand both Lexus RX and
are solely sourced out of Japan for global mar- This article is not designed to capture RAV4 production as a result of the area’s high-
kets. If the Comprehensive Economic and Trade all of the candidates, nor all of the factors to quality manufacturing capabilities. Without
Agreement is cleared, this could provide a strong promote assembly investment in Canada. It more examples like this, the outlook is, for a
position for Mazda to supply both the U.S. is designed to shed light on opportunity, the lack of a better term, bleak.
and Europe from a Canada production base. current market situations, what can be done, continued on 19
The Automotive Parts Manufacturers’ Association 17featureManufacturing the Future of the Automotive Industry in Canada: The Assembly Footprint
North America
Key Brands January-September 2015
Sales Production
Hyundai 703,716 375,854
Kia 534,504 197,148
Mazda 336,545 147,255
Jaguar/Land Rover 67,116 -
Volvo 50,922 -
Table 1. Source: WardsAuto.
This article is not calling for the end of services, and various levels of local support. of competitive utility costs versus other juris-
the automotive footprint in Canada. On For example, Mexico is currently leveraging dictions should be quickly analyzed and exe-
the contrary, Canada has something to offer this process by providing easier access for cuted. It has taken a while for Canada to apply
that the other two NAFTA partners do not: automotive investment through one-channel, this level of focus, but recent actions like the
centralization and focus. With an Ontario- almost “concierge-like” involvement with appointment of Ray Tanguay as the domestic
centric automotive market, there are no other potential suitors. Auto-Czar are attempts to change this course.
jurisdictions within Canada to compete. The centralized nature of Canada pro- It is time for Canada to decide if it wants
This centralized nature provides a logistically vides the added benefit of focus. Organizing to continue to be in the automotive manufac-
strong supply base; a majority within four all stakeholders (i.e., VMs, suppliers, govern- turing business or not. Will the new leader-
hours of any manufacturing facility. Addi- ment, academia, utility companies, and the ship see the benefits and make the necessary
tionally, decision-making can be streamlined local community) into one unified front to investment? Time will tell—but that clock is
in terms of governmental (both local and fed- attract investment should be exponentially counting down.
eral) regulations, investment, logistics, social easier. For example, investigating the benefits Tick tock. ■
The Automotive Parts Manufacturers’ Association 19ADVERTISEMENT
ADVERTISEMENT
Feature By Warren Ali, AVM Equity
&
R D Outside the Box
So once again, the Canadian automotive
parts industry is on the verge of a trans-
formative point in its evolution and must
quickly adapt to the changing competitive
landscape that will emerge.
But Canada’s automotive supply indus-
try is an intelligent, strong and resilient
T
group. It has 80,000-plus workers and has over
$25 billion in annual sales, forming an integral
part of Canada’s automotive footprint and suc-
cess. Simply put, Canada’s automotive supply
industry is a world leader. It is second-to-none. There
A dual spindle The Canadian automotive parts industry is both suc- are capabilities in almost every product category with
twist axle CNC cessful and dynamic and has been ever-evolving and a highly skilled labour force that has a well-earned and
machining adapting throughout its 100-plus years of existence. It well-deserved reputation for the highest quality.
center designed
is comprised of a diversified mix of large multinational These Canadian suppliers are recognized for their
for completing
machining and corporations that is, in turn, supported and reinforced best-in-class manufacturing expertise and innovation;
part verification by a wide breadth and depth of small-medium sized this innovation is supported by a vibrant network of
dependent enterprises (SMEs). universities and research centres performing cutting-
on customer Throughout its history, the automotive supplier edge automotive research and development. To stay
requirements.
industry has been faced with a series of opportunities competitive and succeed in the growing global market-
and challenges resulting from Canada’s involvement place, these companies must make new product devel-
in international trade agreements. These trade deals opment the cornerstone of their business strategies.
include the North American Free Trade Agreement continued on 24
(NAFTA), Canada-Korea Free Trade Agree-
ment (CKFTA) and, most recently, the
Trans-Pacific Partnership Agreement (TPP).
The TPP is a large and complex agree-
ment. It involves 12 countries, including
To stay Canada, and covers a number of industries
competitive and their subsectors in addition to auto-
and succeed motive parts. It gives Canadian firms an
in the growing opportunity to gain footholds in Asian mar-
global kets. But, as with anything—and with this
agreement having so much potential—it
marketplace,
does not come without its share of risks.
these The large Canadian firms—those with
companies international operations and with the capa-
must make bility to move capital—will be getting tariff-
new product free access to new markets with lots of new
development opportunities. The flip-side to those oppor-
tunities is that Canadian SMEs—ones that
the
are much more heavily reliant on North
cornerstone of American sales—will, in all likelihood, face A Racer Machinery International CNC machine installed in a Mexican
their business new and very aggressive competition from automotive parts production facility. Photos in this layout provided by Racer
strategies. foreign companies in their own backyard. Machinery International.
The Automotive Parts Manufacturers’ Association 23featureR&D Outside the Box
One company that embodies all of these global benchmarks. Developed through budget being allocated to research and devel-
traits is Racer Machinery International RMI’s globally patented manufacturing pro- opment. And to make sure that its innovative
(RMI), which is based in Cambridge, ON. cess, Phantom Machines reduce environmen- agenda is used to its full potential, RMI puts
Established in 1990, RMI has grown into tal pollution while giving customers tailored a keen emphasis on optimizing government
a trusted and reliable source for high qual- solutions, increased productivity and reduced programs like SR&ED tax credits.
ity machine tools and service. It is the only operating costs. SR&ED tax credits are just one way that
engine lathe manufacturer in North America. Don Zoran, owner of RMI, is a proud and Canadian governments, at all levels, support
In fact, continuous improvement, quality vocal champion of Canadian-made products research and development and innovation.
and innovation are so much a part of RMI’s being able to compete in terms of quality, per- For many years now, both federal and provin-
DNA that they are written directly into the formance and price in a global marketplace. cial governments have been supporters and
company’s mission statement: “Machinery built with the Phantom strong proponents of innovation, especially in
“Racer Machinery International’s mis- Machine Technology™ manufacturing pro- the manufacturing sector. But with increasing
sion is to provide first-class quality and cess achieves performance levels that are levels of competition from new and grow-
innovative machine tools and service in unparalleled by anything currently on the ing industrial regions, much more work still
response to our customers’ needs. As well market,” says Don. The proof of that state- needs to be done by all stakeholders if Canada
to continuously improve in order to meet ment is demonstrated in the fact that over 90 is going to maintain its global status.
the ever-changing needs of our custom- per cent of RMI’s business is exported to the RMI is just one of the many focused and
ers. RMI also values the commitment, U.S., Mexico and the U.K. industrious companies in the automotive
skills, attitude and effort of its employees, Racer’s customers are the beneficiaries of parts supply and manufacturing industry that
which is essential for the success of the products that are adaptable, competitive and is continuously improving and adapting both
company.” efficient. RMI products, such as the DSHX its operations and its products to meet an
RMI is perpetually focusing on research 600 and DCVHX 1000, are used in the man- ever-demanding market. With the ongoing
and development, leading to revolutionary ufacturing of luxury brands like the 2016 and creative support of the entire stakeholder
breakthroughs like its Phantom Machine Tesla Models S and X as well as the Lincoln base, the Canadian automotive parts indus-
Technology™, an advanced machine tool MKC, respectively. With staff and resources try will be placed on a firm footing to grow
manufacturing process that has redefined dedicated to the pursuit of innovation, RMI and succeed, no matter what challenges and
the machine tool industry while setting new sees more than 50 per cent of its operating obstacles the industry faces in the future. ■
24 www.apma.ca Winter 2016Feature By Mario Bouchard, Ministry of the Economy, Innovation
and Exports, Government of Quebec
Strengthening Quebec’s
Automotive Sector:
A Hub for Advanced Transportation Technologies
Q
Quebec established a supply chain for the automotive industry 50
years ago when General Motors opened an assembly line. Since
then, the supply chain continues to meet the requirements of
North American automakers. It now employs over 6,700 work-
ers across 130 companies that mainly supply assembly plants in
Ontario and the northeastern U.S. The companies encompass
the entire supply chain and offer diversified products and services
such as rubber gaskets, aluminium control arms, electric drive-
trains, injection molds, and design services.
Avant-garde manufacturers
The Quebec transportation equipment industry encompasses
approximately 650 companies that employ 30,000 workers. This
diversified industry covers several sectors beyond the automobile
sector, in particular, buses (Volvo), commercial vehicles (Paccar),
recreational vehicles (Bombardier Recreational Products), special
vehicles and rail transport (Bombardier Transport). These com-
panies rely on qualified employees, agile supplier networks and
innovative research centres. Manufacturers such as Verbom, Rau-
foss and AMT Die Casting are recognized as North American
leaders in the realm of aluminium processing and produce lighter,
more robust components.
The province is looking to the future by adopting two new
strategies in transportation electrification and the use of low-car-
bon-footprint aluminium to take advantage of the emerging niche
for more ecological vehicles. Moreover, it is the first jurisdiction in
the world to launch a comprehensive strategy for the growth and
expansion of its aluminium industry. The Quebec Aluminium
Development Strategy aims at increasing the use of the metal to
satisfy greenhouse gas emission reduction requirements.
The Quebec government’s 2015-2020 Transportation Electri-
fication Action Plan establishes the means necessary to support
Top
and bolster the electric vehicles industry. The province’s electric
A crash test at PMG Technologies Test Centre measures vehicle safety
motors are noteworthy thanks to TM4, a Hydro-Quebec subsid- standards.
iary that designs and markets motors and control systems with the
best efficiency in the world. The industry is also highly regarded bottom
for the manufacturing of batteries and strategic materials used in An electric bus designed and assembled in Quebec by Nova Bus, a Volvo
their production. For example, Johnson Matthey manufactures Group company.
lithium iron phosphate that meets stringent purity standards, and
Solutions Bleues Canada produces lithium metal polymer batter-
ies for light-duty vehicles. continued on 26
The Automotive Parts Manufacturers’ Association 25featureStrengthening Quebec’s Automotive Sector: A Hub for Advanced Transportation Technologies
Cutting-edge research centres transferable to the intelligent transport sector, École polytechnique de Montreal, the École
Innovation is imperative for success in the which is seen as the industry’s future and is de technologie supérieure, the Université de
automotive industry. Quebec has solid univer- rapidly growing. Sherbrooke and the CEGEP de Saint-Jérôme.
sity, CEGEP and private research infrastruc- The Quebec intelligent connected systems The province is also North America’s
tures in key fields of advanced transportation. industry relies on precursor technology orga- biggest producer of hydroelectricity, a reli-
The Centre des technologies de l’aluminium nizations such as the National Optics Institute able, renewable and clean energy source. In
(CTA CNRC) and the Institut des matériaux (NOI), which designs optics and photonics addition, its electricity is among the most
industriels (IMI-CNRC) are cooperating, in solutions for industrial use. The Innovative affordable in the industrialized nations. This
particular, with the aluminium industry to Vehicle Institute (IVI), which recognized for advantage also applies to manpower and
enhance its manufacturing processes, thus its engineering expertise on electric cars, is fol- both industrial and office space. According to
making lighter and more economical products. lowing this new trend and offers research and KPMG’s Competitive Alternatives 2014 study,
The province has also made transportation development services in vehicular intelligence. the Quebec City area ranked first among the
electrification a priority, as confirmed by the In addition to these research centres, about 20 biggest cities in the northeastern U.S. and
Institut de recherche d’Hydro-Quebec (IREQ), 80 companies in the province propose prod- Canada for the competitiveness of operating
which has contributed for several years to sci- ucts applicable to the transportation sector. costs; Greater Montreal followed, in third
entific advances in the realm of battery mate- For example, ImmerVision, a world leader place. Further, Quebec is strategically located
rials and has designed energy storage systems. in optical and software technologies, offers in the northeastern part of North America and
The IREQ holds more than 800 patents and 360-degree vision solutions for cameras used is a veritable hub for freight transportation and
40 licences worldwide. The Institut de recher- in driver assistance. Nuance has developed is able to serve the main Ontario and U.S. pro-
che sur l’hydrogène (IRH) at the Université du voice-recognition software. Such innovative duction centres.
Quebec à Trois-Rivières focuses its research on advances will revolutionize the driving experi- Several assistance programs and resourc-
fuel cells as an energy source for electric vehicles. ence over the coming decade. es are available to guide entrepreneurs and
The unique Transport Canada Test and investors wishing to carry out megaprojects.
Research Centre, managed by PMG Technolo- A competitive business Since 2011, private investments in the elec-
gies, is also located in Quebec. The centre pos- environment tric transport industry have reached nearly
sesses state-of-the-art facilities that are among Quebec has undeniable advantages for the $200 million. The 2015-2020 Transportation
the most modern in North America. PMG transportation industry, starting with an out- Electrification Action Plan aims, among other
Technologies was awarded the title of Most standing pool of skilled workers. Manpower things, to encourage a total of $500 million
Accurate Crash Test Facility in the World and is the driving force of the economy, which is in investments by 2020. Economic agents in
Crash Test Facility of the Year in 2012. why the province is investing heavily in higher Quebec’s government offices and at Inves-
education. Several universities and colleges tissement Quebec provide a contact point for
Intelligent, connected systems offer programs tied to the transportation sec- international business people. They can offer
Several advances made in microelectron- tor, such as industrial engineering, equipment valuable assistance to ensure the success of
ics, telecommunications and software are design or business management, offered at the their projects.
Major events
This year, Quebec will host the 29th World
Electric Vehicle Symposium and Exhibition
(EVS29), which will take place in Montreal
from June 19 to 22, 2016, confirming the
province’s role as a world leader in transporta-
tion electrification. The event is intended to
answer the challenges the industry is facing
and to facilitate discussions of the latest inno-
vations in electric mobility.
Montreal has also been selected from
among 10 Canadian and American cities
to host the 24th ITS World Congress. The
event, which will be held from October 29
to November 2, 2017, promises to be a great
success.
These events provide an unparalleled
opportunity to meet with transportation
industry and government representatives from
Quebec, across the country, and around the
world. It’s a rendezvous! ■
26 www.apma.ca Winter 2016By the Business Development Bank of Canada
Feature
High-Impact Ways to Boost the
Productivity of Your Business
E
Many businesses are inefficient. Here is how you can cut
waste, stay competitive and increase your profits.
Entrepreneurs never like to see waste in their businesses. But figur- Rate your performance
ing out how to become leaner and more efficient isn’t always easy. Next, Lajevardi tours the business and rates 25 key operational
What is surprising is just how much inefficiency there is in most factors on a 0-to-5 scale, which includes inventory management,
businesses. We see it everywhere, from stores and offices, to manu- workplace organization, quality control, scheduling and planning,
facturers and service providers. and equipment maintenance. Using his assessment, Lajevardi pre-
“Only 15 to 20 per cent of each employee’s work day is spent pares a report with three to five priority improvements and a road
on purely productive activities in a typical small- or medium-sized map for implementing them.
business,” says Ali Lajevardi, BDC’s business consultant, who According to Lajevardi, an efficiency assessment is equally valu-
advises entrepreneurs on how to boost their operational efficiency able for manufacturing and service businesses. Entrepreneurs should
and effectiveness. aim to make assessing and implementing operational improvements a
continuous process—part of the company’s culture, he adds.
A matter of survival
“Businesses that don’t focus on operational efficiency are vul- Monitoring leads to improvement
nerable to competition,” notes Lajevardi. “One day, someone who The best way to implement operational improvements is by cre-
is leaner and more productive could come and take your business ating a system that allows managers and supervisors to monitor key
because they are able to generate more value from their resources. performance indicators using dashboards.
We see that all the time.” “It becomes natural to start every day by asking how you did
The first step to becoming leaner is to assess your current yesterday and how you can get better. It’s a cultural change,” says
level of efficiency, including how your company compares to the Lajevardi. “You become more observant and challenge yourself to
competition or the rest of your industry. Such an assessment will improve.”
show you where to focus in order to achieve some quick, high-
impact wins. You can then build on your success to take on further One entrepreneur’s experience
improvements. CR Slitter is one company that has achieved important gains
from an operational efficiency drive. Entrepreneur Alain Duclos, an
Identify sources of waste industrial engineer, was skeptical when a BDC consultant told him
The goal is to identify the sources of waste—unproductive he was missing out on huge productivity gains and the accompanying
activities. Since most entrepreneurs are focused on daily opera- profits.
tions, it often makes sense to bring in an outside specialist to iden- Despite his doubts, Duclos decided to give the consultant a shot
tify and help implement at his company, which cuts large coils of steel and aluminum into
improvements. specific sizes for manufacturing clients.
When he is assessing The results amazed Duclos. Idle time fell by 30 per cent, while
a company’s efficiency, output shot up by 15 per cent without any increase in staff or hours
Lajevardi first sits with worked by his 45 employees.
the entrepreneur and key “It was shocking,” says Duclos. “I always knew things could
managers to learn about improve, but I never thought we could make that much progress.”
the business, including
its context, strategies and For more tips about productivity, download BDC’s free
value proposition. e-Book, Create a Leaner, More Profitable Business: A
Then, he asks about Guide for Entrepreneurs, at bdc.ca/efficiency and check out its operational
production and value- efficiency hub at bdc.ca/operationalefficiency. If you want to know more
creation problems and about the financing or consulting services that may increase the productivity
discusses ways to address of your company, contact Steven Oliver, assistant vice-president with BDC’s
Photo credit: Yves Lacombe. them. Automotive Group, at steven.oliver@bdc.ca.
The Automotive Parts Manufacturers’ Association 27You can also read
