Auto sector big part of Ontario's manufacturing recovery: report

Ontario manufacturing remains crucial source of growth for province's econony

Ontario's manufacturing sector turned the corner in 2010, and will power a disproportionate share of new jobs, GDP, and exports for the provincial economy in 2011 and 2012, according to a year-end report released today in Toronto.

Provincial manufacturing shipments grew 14 percent in 2010 (based on data to late autumn), and some 10,000 manufacturing jobs were created in the province (increasing Ontario's share of total Canadian manufacturing jobs).  Manufacturing exports from the province grew 15 percent - powering the fastest growth in exports of any region in Canada.

The data are contained in a new report from the Ontario Manufacturing Council (OMC), an advisory body representing business, labour, and community stakeholders in provincial manufacturing.  The full report, "A Better Year for Ontario Manufacturing," is downloadable at http://on.cme-mec.ca/download.php?file=gi99oczy.pdf.

According to Jayson Myers, President of the Canadian Manufacturers and Exporters and Vice Chair of the OMC, "This recovery is proving not only the resiliency of Ontario manufacturers but how important manufacturing is as an anchor of value creation and high paying jobs across all sectors of the Ontario economy."

The automotive sector played an especially important role in the overall recovery of manufacturing, accounting for 15 percent of direct manufacturing output - and much more than that when indirect supply chain effects are considered.  Motor vehicle assembly in Ontario rebounded by almost 50 percent in 2010.

The OMC study also presents new evidence, based on analysis performed by the Centre for Spatial Economics, regarding the continuing importance of manufacturing to Ontario's overall economic performance.  At least 9 distinct sectors of Ontario's economy depend on the manufacturing sector for over 15 percent of their total sales, and hence the rebounding provincial manufacturing will generate spillover momentum throughout the province.  The report estimates that each $1 billion increase in export-bound manufacturing output generates a total of 16,545 jobs in Ontario - a majority of which are located in non-manufacturing sectors (including construction, trade, professional services, and public services).

Robin Somerville, Economist at the Centre for Spatial Economics, concludes that "Ontario's manufacturing sector will punch well above its weight in 2011 and 2012, and will be a leading source of growth for output, exports and jobs in the province."

The report predicts that the manufacturing sector will account for over one-third of Ontario's GDP growth in the next two years, one-quarter of new jobs, and three-quarters of new exports.  These shares are all disproportionate compared to manufacturing's current role, indicating that manufacturing will be increasingly important to the provincial economy.

"Our manufacturing sector has always been a driving force of Ontario's economy and our government's immediate tax reforms and sound economic policy have provided the boost needed to get manufacturers back on track," said Sandra Pupatello, Minister of Economic Development and Trade. "Today's report shows that our government's Open Ontario Plan is working - accelerating economic recovery, creating jobs and positioning this province for future growth and prosperity."

Manufacturing also plays a disproportionate role in financing new innovation activity by Ontario businesses.  The sector accounts for over half of all business research and development spending in Canada, yet represents only 12 percent of national GDP.

"It's a mistaken stereotype that manufacturing is a fading, 'smokestack' industry," said Jim Stanford, Economist with the Canadian Auto Workers and the other Vice Chair of the OMC.  "Manufacturing has a vital structural importance, and it's essential to Ontario's overall prosperity that manufacturing continue to fulfil this role."

Comments

[Slim Fairview]

The growth of Canadian Manufacturing is contingent on cost-effectiveness, implementation of new technology, and a growing domestic and global market.

Witness the decline caused by outsourcing in the U.S. (No matter how much you cut costs you are not going to sell a lot of Oldsmobiles to a country where people make $5.00 a day--in anyone's currency. Oh, yeah. They didn't.)

The domestic market has to remain strong. Wages high enough to afford what Canadians manufacture, but low enough so that what they make is affordable. Read: cheap enough for other Canadians to purchase. Fine line, eh?

Now throw currency into the mix, balance of trade, foreign competition, and the rise in Canadian manufacturing is best accompanied by those who can see the path of the trajectory in the global economy and in international trade.

Sincerest regards,

Slim

[Slim Fairview]

Innovation!

For the manufacturing of automobiles to remain a stalwart of Canadian industry, look to the Japanese.

Technology and the advancement of technology are crucial. This covers several areas.

1. Innovation in the manufacturing process.
2. Innovation in the materials used.
3. Innovation in the operation of the automobile.

Then you have the establishment and maintenance of the reputation for reliability, and quality. Remember Chrysler before Lee Iacocca? (!)

Too, there is the great threat from the siren song of revenue enhancement.

Case in point: If the consumer wants to change a burned out tail light, he or she should not have to purchase a special screwdriver to remove a screw holding the shroud in place. What you make on the sale of that screwdriver might not cover the lost revenue from lost customers.

That the Canadian automobile industry is doing well is laudable. Don't rest on those laurels.
Technology is changing so fast that your innovation will be obsolete before it is implemented.

Regards,

Slim