Transcript Document

Clustering and SME Growth in
the Canadian Automotive Sector
Presented to
World SME Expo Hong Kong
November 17th, 2004
Robert (Bob) J. Armstrong, CITP
President and CEO, Canadian Association of Importers and Exporters (I.E.Canada)
President, Association of International Automobile Manufacturers of Canada (AIAMC)
What is clustering?
Dictionary: A group of the same or similar elements gathered or
occurring closely together; a bunch; a group of similar things
that are close together, sometimes surrounding something.
General: Clustering describes the propensity of manufacturers in
the same industry to locate operations in the same geographic
area.
Specific: A symbiotic relationship between automobile
manufacturers, tier I & II parts suppliers, and related service and
support industries.
Why is clustering effective?
•Reduces inventory costs
•Reduces transportation time and costs
•Reduces production time
•Increased productivity
•Improves R & D and decision making time
•Provides immediate quality control feedback
•Shortens response time
When and why did it begin?
Proximity to suppliers has always been important.
•Vertical integration
– Make everything under one roof too expensive
•Outside supplier base
– transportation costs and distance
•Just in time (JIT) delivery
– supply interruptions and logistics issues
•Next door supplier parks began in Europe as means
to support automotive manufacturers
•Clustering concept adopted by a variety of industries
Who is involved?
•Vehicle Manufacturer/Assembler
•Transportation & Logistics
•Tier 1, Tier II, Tier III Suppliers
•Sub-suppliers
•IT Providers
•Others
Key word: Collaborative partnering
Components of the Automotive Cluster
National Cluster:
•Original three clusters were Detroit, Germany, Japan
Regional Cluster:
•Michigan, Ohio Valley, Southern Ontario
Sub-Regional or Local Cluster:
•Includes supplier parks and co-location
The Great Lakes Auto The Great Lakes Auto Cluster
Canadian Automotive Cluster
A Case study
Canadian industry is part of the Great Lakes/mid-West
regional auto concentration
Close to 90 percent of all plants and employment in the
Canadian industry are located in southern Ontario
Reduced trade barriers make it easier to locate wherever
the optimal mix of low cost and high value is found
Canada is an ideal place for automakers and parts manufacturers to:
Serve the North American market
Expand production in the region
Reduce costs / add value / produce quality
Conduct R&D / technological innovation
Canada’s automotive advantages include:
Highly developed / integrated automotive environment
Excellent business climate and well-developed infrastructure
Availability of skilled and educated labor
Globally competitive costs, productivity and quality
Technology / R&D support
CANADA
Detroit/Windsor
U.S.A.
MEXICO
Business expansion opportunities in Canada:
Procurement of quality parts and materials
Vehicle assembly / production mandates
Auto parts manufacturing
Research and development
Part of an integrated
North American Market.
 The N.A. Free Trade Agreement
integrates Canada into a market with
annual sales of 20 million vehicles.
No tariffs on OE parts imported into
CANADA
Canada (vs 2.5% tariff in the U.S.)
Canada and the U.S. are actively
Montreal
Seattle
Toronto
expanding border capacity:
Detroit/Windsor
Chicago
800 km
U.S.A.


the “smart border” accord, FAST and
NEXUS programs
$300 million over five years for
Windsor-Detroit bridge, tunnel, road
improvements on the Ontario side
400 km
Atlanta
Los Angeles
Miami
MEXICO
Mexico City
Canada’s automotive infrastructure is
linked with the U.S. market:
Multiple border crossings
Integrated transportation system linking
suppliers and customers
401 / I-75 corridor
 road, rail, other

Abundant, reliable, low-cost utilities
electricity
 natural gas
 water / sewer

World-class telecommunications and
wireless
Within Ontario there are a number of sub-regional clusters:
•The Greater Toronto Area (GTA)
•Windsor
•Kitchener-Waterloo, Cambridge, Guelph
•Niagara Peninsula
•London
•Alliston/Barrie
Where are Ontario automotive manufacturers clustering?
13 Light Vehicle Plants
1
CAMI Automotive
2
DaimlerChrysler Brampton
3
DaimlerChrysler Windsor
4
Ford Oakville; Ontario Truck
5
Ford St. Thomas
6
GM Oshawa Car 1-2; Oshawa Truck
7
6
2
3
4
8
7
Honda Alliston 1-2
8
Toyota Cambridge 1-2
1
4 Truck and Bus Plants
1
Canadian Blue Bird Coach
2
Navistar
3
Orion Bus
4
Sterling Trucks
54
3
2
1
Auto Assembly
13 plants
Auto Parts
895 establishments
Magna International
Waterville TG
Denso Canada
Parts
Product Lines
Stamping, interior/exterior systems,
trim, powertrain components
Rubber weather stripping
Air conditioners
Woodbridge Group
Molded foam, interior trim, seating
ABCgroup
Plastics, blow and injection molded
Lear Canada
Seating
Dana Canada
Chassis components
TRW Canada
Steering, suspension components
Siemens
Electronic/electrical controls,
manifolds, fuel modules
F&P Mfg.
Stamped and hydroformed parts
One Industry or Eight?
Plants and Employment in 1999
GTA Cluster
•Three major auto assemblers—General Motors, Ford and
DaimlerChrysler—collectively operate six assembly plants in the GTA.
•General Motors, Ford, Honda, KIA, Mazda, Suzuki, Nissan, Volkswagen,
Toyota, Hyundai, Aston Martin Jaguar Land Rover, Subaru, Volvo, BMW,
and Mitsubishi—all chose the Greater Toronto Area (GTA) for their
Canadian headquarters.
•Over 500 parts manufacturers all help make the GTA one of the most vital
and diverse automotive clusters on the continent. In all, GTA automotive
companies employ more than 50,000 workers (a figure second only to
Detroit) and produce over 1.3 million cars, trucks and minivans per year.
That’s 63% of Ontario’s total vehicle production (2003).
Ontario Automotive Cluster Facts
• Ontario's automotive cluster has been annually producing roughly 5%
of the world's motor vehicles for each of the last four years
• The Ontario automotive industry is the eighth largest in the world.
• In 2002, 99% of Canadian-made vehicles were made in Ontario
• The value of production shipments has risen from $56 billion in 1991
To $99 billion in 2002
• In 2002, Canada exported US$56.33 billion of automotive parts and
vehicles -9.1% of global automotive exports; automotive exports grew
9.4% from 1993-2002
SME’s
“Canada is heading towards an era of unparalleled
diversity that will transform the face of this country's
small to medium-sized enterprises (SMEs).”
- RBC Financial Group study, October 2004
What is an SME?
Small to medium-sized enterprises (SMEs) are defined
differently by varied sectors, institutions and individuals.
Industry Canada defines a small business as one with fewer
than 100 employees and a medium-sized business as one with
up to 500 employees.
The Canadian Federation of Independent Businesses defines
a small business as one with fewer than 50 employees and a
medium-sized business as one with 50 to 499 employees.
Recent statistics indicate that small businesses account for
nearly 98 percent of all enterprises in Canada, 80% of which
have fewer than 5 employees.
SME facts
•There are 2.2 million established businesses
in Canada with less than 50 employees
•this represents 97% of all established businesses
considered as SOHO-SME
•58% (604,000) of established Canadian businesses
have less than 5 employees
•39% (858,000) of established Canadian businesses
have between 5-49 employees
•average annual growth of Canadian SME's is 2.6%
SMEs are the backbone of the Canadian economy.
There are 2.4 million SMEs in Canada and responsible
for 95% of all new jobs in Canada
Canada's small business sector is responsible
for nearly half of Canada's economic activity.
The Organization for Economic Co-operation and
Development (OECD) estimates that SMEs added
roughly 43% to Canada's private sector GDP in 2000.
Budget 2004 - The Government of Canada will prepare a national
strategic framework for the Canadian automotive sector in the
21st century, with a strong emphasis on R&D.
This strategic framework will consider the factors important to the
longer-term growth of Canada's automotive sector, including a
review of measures to support innovation related to the next
generation of smart, fuel-efficient and hybrid vehicles, and
renewable fuels.
For the coming year, Industry Canada's research and analysis
will focus on high-growth SMEs and the financing of innovative
firms in order to understand the marketplace gaps or barriers
these firms face.
Automotive opportunities for SME’s…
•Research & Development
•Rapid tooling
•Rapid design
Access to venture capital, Government grants, loans and
programs
Visit Industry Canada’s Website: http://strategis.ic.gc.ca
Thank You!
Visit us on the internet:
http://www.iecanada.com or http://www.aiamc.com