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