Auto czar says Ontario can compete
Ray Tanguay claims low dollar can help retrieve production from Mexico, southern U.S.
The Canadian and Ontario governments need to make sure their auto industry incentive programs are competitive with the southern U.S. and Mexico, says the country’s new auto industry czar.
“That doesn’t mean you have to offer exactly the same incentives. To be competitive means we have to support and be partners with industry,” Ray Tanguay said in his first major interview since being appointed auto industry adviser to the federal and Ontario governments in June 2015. “We have to look at it like a business decision. What is the return on investment?”
The former chairman and chief executive officer of Toyota Motor Manufacturing Canada was seen as the ideal insider to advise governments on how to attract more business while also selling Ontario to the auto industry.
His appointment came amid growing concern the province was losing out in the global competition for auto assembly plants and jobs.
Globally, automakers invested $24.1 billion in new auto assembly plants in 2014, a 36.9-per-cent increase over the previous year, according to the annual Auto Assembler Investment Report by the University of Windsor’s Odette School of Business. None of that money came to Canada. In fact, Canada’s share of North American production has fallen to 14.2 per cent from a high of 17.6 per cent as automakers pour more money into Mexico and the southern U.S., citing lower labour costs and higher government incentives.
Tanguy said Ontario doesn’t have to offer the same kind of incentives as Mexico and the southern U.S., because its auto industry is mature.
The province has a skilled workforce, excellent research facilities and access to suppliers and premium markets.
As for high labour costs in Canada, Tanguay said that was true when the Canadian dollar was briefly at par with the U.S. currency back in 2007. But the loonie historically trades around 80 to 82 cents U.S., a level at which Canadian auto wages are lower than the U.S. The Canadian dollar is currently trading closer 72 cents U.S.
Tanguay said Ontario has a lot to offer the auto industry, but has done a poor job of delivering the message.
“One of the big findings we discovered is the negative perception of Canada. That we’re not on the map. That people were not considering us, especially the site selection consultants. That was very disturbing,” Tanguay said in a telephone interview Wednesday.
The province produces more vehicles annually than any other state in North America or Mexico and is home to the second largest information technology hub outside Silicon Valley.
Tanguay said his mandate falls short of addressing the immediate fate of two existing auto industry plants — General Motors consolidated plant in Oshawa and Fiat Chrysler’s plant in Brampton.
While acknowledging both need new investment, he said, it’s up to the Canadian presidents of those com-
“One of the big findings we discovered is the negative perception of Canada. That we’re not on the map. That people were not considering us, especially the site selection consultants. That was very disturbing.” RAY TANGUAY AUTO CZAR
panies to demonstrate they’re a good investment, he said.
Tanguay said his job is to build the province’s capacity to attract new investment, including skills development, technological capacity and government support and incentives.
To that end, he says, the province and the federal government are already talking about creating a joint investment office to streamline the process for automakers.
Mexico’s government mandated PROMexico, created to promote the country as an attractive, safe and competitive place to invest, is oft cited as a success.
Major automakers have pledged $4 billion in investments in Ontario since Nov. 2014, but all of it is earmarked for upgrades to existing plants, with half going to Fiat Chrysler’s minivan plant in Windsor.
None is creating new assembly plants or jobs.
Indeed, when Tanguay was appointed in June 2015, the goal was to save Ontario’s existing auto plants, said Don Walker, chair of the Canadian Automotive Partnership Council and chief executive officer of Magna International Inc.
Trying to attract new automakers or plants will be much more difficult, Walker said.