Manufacturing in Canada Current Conditions & Outlook: Manufacturing in Canada Current Conditions & Outlook Ian Howcroft, Vice President Canadian Manufacturers & Exporters Ontario Division November 7th, 2007


The Importance of Manufacturing in Canada: The Importance of Manufacturing in Canada Single largest business sector in Canada Directly accounts for 16% of Canada’s GDP Every $1 of manufacturing output generates $3.05 in total economic activity – largest economic multiplier Approximately $600 billion in annual shipments 2.1 million Canadians employed in manufacturing Wage levels 22% above national average Accounts for 2/3 of Canada’s goods & services exports = $450 billion Accounts for 2/3 of private sector R&D in Canada Manufacturers reduced GHG emissions by 9.3% between 1990 and 2005.


Jobs Depend on Manufacturing: Jobs Depend on Manufacturing


Canada: Manufacturing Shipments: Canada: Manufacturing Shipments


Shipments Performance By Province (2004-2007): Shipments Performance By Province (2004-2007)


Shipments Performance By Sector: Shipments Performance By Sector


Shipments Performance By Sector: Shipments Performance By Sector


Slide8: Canadian Export Performance July 2006 – July 2007


Slide9: Canadian Export Performance July 2006 – July 2007


Slide10: Destinations for Canadian Exports July 2007


Manufacturers’ Cost Squeeze(1st Qtr 2002 – 2th Qtr 2007): Manufacturers’ Cost Squeeze (1st Qtr 2002 – 2th Qtr 2007)


Breakeven Time: Breakeven Time


Improving Conditions: Improving Conditions


Deteriorating Conditions: Deteriorating Conditions


Slide15: Most Pressing Challenges


Slide16: The Impact of Dollar Appreciation


Slide17: Responding to Dollar Appreciation


The Dollar & Employment: The Dollar & Employment


Outlook for 2007/08: Outlook for 2007/08 The Good News Strong growth outside North America The boom will continue in Western Canada The Bad News High dollar – Prepare to compete over par! High commodity & energy costs Weaker overall economic growth across North America Continuing competitive pressures


Outlook for Sales & Export Revenue: Outlook for Sales & Export Revenue


Outlook for Production & Profit Performance: Outlook for Production & Profit Performance


Outlook for Investment in Facilities, Equipment, & R&D: Outlook for Investment in Facilities, Equipment, & R&D


Outlook for Employment & Training Budgets: Outlook for Employment & Training Budgets


Strategic Challenges: Strategic Challenges


Main Determinants of Growth: Main Determinants of Growth


Key Capacity Constraints on Export Development: Key Capacity Constraints on Export Development


Constraints on Performance Improvement: Constraints on Performance Improvement


Impact of Skills Shortages: Impact of Skills Shortages


Future Competitive Advantage: Future Competitive Advantage Focus on Customer & Supplier Success Mastering global supply chains Knowledge management Specialized products & services Innovation – Continuous commercialization of new and improved products & processes New technologies & automation systems New business models and global value networks New market opportunities Agility & Customization Customer Value – Design, Engineering, Service, Financing Time – Product Development to Customer Response Lean – Products, Processes, Enterprise, Business Networks Total Delivered Cost


Critical Success Factors: Critical Success Factors Leadership & Image of Manufacturing Workforce Capabilities Availability of Skilled Personnel Workforce Mobilization Innovation & Continuous Improvement International Business Opportunities Competitive Business Services & Financing Available & Competitive Infrastructure Energy, Transportation, Communication Competitive Business Environment Tax & Regulatory Environment


Business Strategies Have to Change: Business Strategies Have to Change “It’s never easy to climb into the crow’s nest in the midst of a storm…” Focus on Customer & Supplier Success Focus on Solutions not Products Focus on new Global Opportunities Focus on Internal Excellence Process Perfection Elimination of Waste Everywhere Bottom Line Results Focus on Achieving Results through People


CME Current Policy Initiatives: CME Current Policy Initiatives Goal: A value-adding strategy for manufacturing adopted by governments across Canada. Make manufacturing issues a priority for federal & provincial governments. Launch of Manufacturing Councils in Ontario, Quebec, & Manitoba. Canadian Manufacturing Coalition = 35 associations – Letter to PM to identify policy priorities. 2-year write-off – working to extend to 2012. Corporate Tax Reform 22% combined general corporate tax rate Sales tax/GST harmonization Property tax review


CME Current Policy Initiatives: Global Commerce Strategy Strengthen support for Canadian exporters in priority markets Border Efficiency Leading Washington lobby to expedite border crossing process for CTPAT, FAST companies Fair Trade Effective implementation of trade rules to prevent subsidies, dumping, counterfeit Environment Raise awareness about manufacturing achievements in improving energy efficiency & reducing GHG emissions Keep regulatory costs low Connect to business opportunities Infrastructure & Energy National Logistics Strategy Reliable & cost-competitive energy CME Current Policy Initiatives


CME Current Policy Initiatives: Skills & Workforce Mobilization Employers’ Training Tax Credit HR Capacity Building program Improve access into industrial workforce for immigrants, people with disabilities, aboriginal community Colleges, trades & technical training, apprenticeships Applied math & science in High School curricula Innovation Initiated SR&ED Tax Credit Review – Refundable credits; Extend to pre-commercial development; consistent administration Strengthening connections between researchers & industry CME Current Policy Initiatives


CME Taking the Lead: CME Taking the Lead Our Purpose: Help our members compete & win in global markets. Our Role: Develop and advocate policy solutions to build a better business environment in Canada and open markets around the world for Canadian business. Enable access to business solutions and new business opportunities. What We Do Best: Results-based policy development & advocacy. Partnerships. Our Strength: Our Members.


Going Forward - Partnerships: Going Forward - Partnerships Strengthening CME’s policy leadership Canadian Manufacturing Coalition Campaign for Manufacturing Local engagement President’s Councils Association memberships Improving access to value-adding services CME member advisors Networks of manufacturing excellence Education, financial & business services Building critical mass Membership engagement Network of networks Working together for success


Current Global Market: Current Global Market Price ~ $ 90 per barrel Political turmoil Production – Fall 2007 86 mb/d OPEC - 31 mb/d Non-OPEC - 55 mb/d


Canadian Oil & Gas in the world: Canadian Oil & Gas in the world Global oil resources 9 – 13 trillion barrels Canadian oil resources 180+ billion barrels of proven oil reserves Canada's crude oil reserve is 2nd largest in the world 9th largest producer of crude oil 2.7 mb/d 3rd largest producer of natural gas in the world


Alberta - Non-Conventional Oil: Alberta - Non-Conventional Oil 2nd largest proven reserve in the world Alberta oil sand reserves Athabasca Peace River Cold lake 141, 000 km2 of land 20% of the entire land Larger than Florida 1.7 trillion barrels in place 180 billion barrels of proven crude bitumen


Alberta Oil Sands - Capital Investment: Alberta Oil Sands - Capital Investment Over $ 153 Billion expected between 2005 and 2015 More than $ 1 trillion in economic activity for Canada Employment New investment opportunities Additional public sector revenue Equivalent of 86 years of exporting to China


Growth & Capacity Constraints: Growth & Capacity Constraints Policy changes Natural gas & Conventional Oil Increased value of Canadian dollar Labour shortage Infrastructure Logistics Escalating costs & Time delays Slower economic growth 3.2% forecast for 2008


Solution - Partnering to Meet Demand: Solution - Partnering to Meet Demand There are significant business opportunities for companies across Canada to partner with Alberta business Alberta companies must partner to expand capacity


CME’s Oil Sands Initiative: CME’s Oil Sands Initiative Founding partners Ontario Ministry of Economic Development and Trade Alberta Employment Immigration & Industry Industry Canada Goal – Maximize the economic benefit for Canadian Manufacturers


CME’s Oil Sands Initiative: CME’s Oil Sands Initiative Raise awareness about oil sands opportunities Publications Cross-country SMART Sessions Help companies become market ready Oil Sands 101 – How to do Business in Alberta Facilitate business partnerships Trade missions Traditional and reverse National Buyer-Seller Forum www.icosmo.ca Facilitate partnerships between buyers & sellers Pre-qualify potential partners & suppliers


Business Takes Action: Employment of Persons with Disabilities: Business Takes Action: Employment of Persons with Disabilities Breaking the Mold: R³A³ 10/20 CHALLENGE: 10 PERCENT OF NEW HIRES ARE PERSONS WITH DISABILITIES BY THE YEAR 2020


Statistics:: Statistics: 48% of firms report that labour shortages are a constraint on growth. 32% say that specific skill shortages are constraining growth 20% say that general labour shortages are constraining their growth potential.


10/20 CHALLENGE:: 10/20 CHALLENGE: We heard what you said during the 20/20 consultation. We must take the initiative to change our image of our industry and attract a wide pool of candidates for the careers available to young people. We need to develop workforce strategies that are proactive and innovative and resolve the issues of skill shortages We need to strengthen collaborative relations between a wide variety of groups. We need to implement innovative solutions in the workplace and continually upgrade skills and competencies.


CME’s Challenge is that 10% of all new hires will be persons w/ disabilities: CME’s Challenge is that 10% of all new hires will be persons w/ disabilities CME will be here to support you in this new initiative. CME will assist you with putting policies in place to achieve this goal. CME will link you to stakeholders in the community that markets skilled workers who happen to have a disability. CME will link you with stakeholders that have the knowledge, expertise and support to educate your human resource personnel, supervisors and staff. CME will link you with stakeholders to provide your workers, managers and supervisors on accommodating new personnel.


Challenge Con’t.: Challenge Con’t. CME will have access to qualified skilled persons with disabilities to place in your firm Enhancing productivity and attracting and retaining skilled workers requires new action. Putting key policies in place that lets you access a large untapped market of eager, trained, technologically innovative individuals will add value and enhance your bottom line. P.S. The small, medium and large corporations with the most hires will be recognized at an end of the year awards ceremony!


Benefits of becoming a Challenge Club member:: Benefits of becoming a Challenge Club member: Free access to the following - Full Access to our One-Stop Web Portal www.ten20action.com Access to the Job Portal and Community Partnerships Outreach and Access to Untapped Labour Pool of Committed and Pre-Screened talent Public Recognition of your company’s commitment to leadership, innovation and creating an equitable workplace Full Service/ One-on-one Support in planning and implementing your recruitment plan and accommodation strategies


Benefits Con’t. : Benefits Con’t. Up to date news on policies affecting your business Information on Best Practices Access to Sensitivity training in your workplace Mentorship linkages for guiding your staff Internship and access to available Subsidies/ Incentives Case Studies of program in action Raise awareness of the value of hiring persons with disabilities and create a more inclusive community www.ten20action.com


CME/EAC Safety Group: CME/EAC Safety Group Safety Group firms celebrate rebate of $767,200! Meeting together, members of this highly successful safety group earn yearly rebates of up to six per cent of their premiums paid to the Workplace Safety & Insurance Board (WSIB). In addition to the rebate, the group collectively have reduced their accident frequency (lost-time injury rate) and their severity rate (lost-time days) every year since the group began in 2000. Our 2006 members reduced their Frequency by 27.03 per cent and their severity by 24.13 per cent.


Safety Groups Con’t.: Safety Groups Con’t. The group meets five times a year to share programs, policies and best practices. Members have described the networking opportunities as rewarding and value-added. Topics at the meetings assist employers to implement health and safety programs in their workplace. As well claims management and return to work training is provided.


Safety Group Con’t.: Safety Group Con’t. Other Safety Groups that CME/EAC administers are: Magna group of companies Sobey’s Canadian Vehicle Manufacturers Assn. (CVMA)


Canada-US Manufacturing Trade Summit November 13, 2007 - Mississauga: Canada-US Manufacturing Trade Summit November 13, 2007 - Mississauga The rapid appreciation of the Loonie has cut into export sales and, coupled with escalating commodity and energy costs, significantly eroded profit performance for most companies. Cash flow is under tremendous pressure and weakening demand in the US market only compounds the difficulties that you face in North American markets.


Summit Con’t.: Summit Con’t. This Canada - US Manufacturing Trade Summit will focus on how Canadian and US companies can adapt and continue to grow their businesses in the current business environment. Agenda will include: Future of Manufacturing Breakfast, Jayson Myers, president, CME Panel on the Canadian Dollar - Outlook for the Canadian Dollar and Responding to Dollar Appreciation Regulatory Look at Canada-US Borders Outlook for US Economy Panel Ask the Expert Roundtables Register today: www.cme-mec.ca/on


Questions:: Questions: Ian Howcroft, Vice President CME, Ontario Division www.cme-mec.ca Ian.howcroft@cme-mec.ca