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Advanced Manufacturing at the Forefront of Canadian Economy

Canada leverages a skilled work force and R&D initiatives to sustain its advanced manufacturing sector.

Beth Mattson-Teig (Location Canada 2012)
There is no question that advanced manufacturing plays an important role in Canada's economy. Canadian manufacturers build everything from computer parts to cars, buses, and jets. The country has been working hard to sustain and grow those key industries.

Automotive and aerospace are two clear leaders in Canada's advanced manufacturing sector. The country also is working to support healthy growth in its plastics and electronics industries. Combined, these clusters are home to hundreds of companies that produce billions of dollars in products for use both domestically and for export to the Unites States, as well as to countries around the globe.

"In a lot of advanced manufacturing sectors, Canada has really hit above its weight over the last 30 to 40 years," says Gregg Wassmansdorf, a vice president and manager of the Location Advisory and Incentives Practice at Colliers International in Toronto. Canada may rank 35th in the world for population, but the country is one of the world's largest exporters of automotive goods; its aerospace industry was recognized in 2008 and 2009 as fifth in the world for activity related to the aerospace industry; and Canada is the world's fourth-largest exporter of plastics molds and eighth-largest exporter of plastics processing machinery. The country has made a concentrated effort to diversify and grow this manufacturing base with public policy initiatives at both the federal and provincial level.

"Advanced manufacturing, which is growing here in Ontario, is one of the keys to our efforts to build a strong and prosperous future," says Ontario Minister of Economic Development and Innovation Brad Duguid. In fact, much of the country's manufacturing base is located in the province of Ontario, particularly southern Ontario, which has access to a prime transportation corridor and the U.S. market. Some 46 percent of manufacturing shipments out of Canada originate in Ontario and, according to the Ministry, its advanced manufacturers export more than $250 million each year.

Although Canada's manufacturing sector has not been immune to the global recession - suffering layoffs, plant closures, and low-cost competition in emerging markets - the nation has weathered the recession far better than others, with positive GDP growth of 3.1 percent over the past four years. Its advanced manufacturing sector is continuing to gain momentum as the global economy recovers.

Automotive
Automotive is Canada's largest manufacturing sector. According to Industry Canada, auto manufacturers produced revenues of $68.5 billion and exports worth $51.5 billion in 2010. Although activity within the sector has declined from peak production levels of 2007, automotive manufacturing is once again gaining traction.

The big five automakers - Chrysler, Ford, General Motors, Honda, and Toyota - all have major production facilities in Canada. In fact, the Canadian government contributed $3.3 billion to the bailout of General Motors and Chrysler in 2009, and is now poised to benefit from that action as the auto sector revs back into profitability.

General Motors, for example, has since repaid its loans and announced approximately $1 billion in new investments in Canada, that include a $480 million investment at its engine and transmission facility in St. Catharines, Ontario; a $117 million investment for the production of the new Cadillac XTS in Oshawa; and $96 million to expand capacity at its CAMI assembly plant in Ingersoll, Ontario.

In other major automotive news, Honda has announced that it will begin manufacturing the 2012 CR-V compact sport utility vehicles in Alliston, Ontario, in early 2012. The Japanese automaker says it has hired 400 workers to accommodate the new vehicle line and plans to produce all CR-Vs sold in Canada there. The new jobs will add to the 4,200 workers that Honda already employs in Alliston. This move is welcome news after production was hampered by both the tsunami in Japan and flooding in Thailand.

An emphasis on R&D spending has helped to foster growth throughout the automotive sector, which also includes heavy-duty truck and bus manufacturers such as Hino, Motor Coach Industries, PACCAR and Volvo Bus. R&D spending in the motor vehicle and parts industries has more than doubled in the last decade, thanks to rich federal tax credits. Other notable resources include Auto21, which is a national network of centers of excellence for automotive R&D. The network features 120 industry, government, and institutional partners that support top researchers at more than 35 academic institutions, government research facilities, and private-sector research labs across Canada.

Aerospace

Canada is a recognized world leader in aerospace with companies making everything from jets to landing gear. The Canadian aerospace industry is comprised of approximately 400 firms that employ more than 80,000 Canadians. Since 1990, Canadian aerospace industry sales have more than doubled, with the industry's revenues reaching $22.2 billion in 2009, according to Invest in Canada. In addition, the Canadian aerospace industry is the country's leading advanced technology exporter. Canada exports more than 80 percent of its aerospace output.

Manufacturers have built a solid reputation based on the industry's ability to deliver leading-edge and advanced technology solutions on time and at a competitive cost. Canada's aerospace leaders are active in civil and military aircraft, flight simulators, airborne defense systems, and aftermarket services. The country's global share of aerospace activity has tripled in the last 20 years, making Canada the world's fifth-largest aerospace producer.

Montreal, Quebec, is the hub of Canada's aerospace cluster, with more than 42,000 people working at aerospace firms in the province, including Bombardier, Bell Helicopter Textron, Pratt & Whitney, and Rolls Royce. In 2009 alone, Quebec's aerospace exports totaled more than $11.5 billion, according to Invest in Canada. That strong base is helping to foster growth among existing Canadian firms, as well as multi-nationals. For example, French aeronautics group Latecoere recently announced that it plans to establish a new Canadian subsidiary in Greater Montreal. The company, which specializes in aero structures, wiring systems, and engineering and services, plans to hire 60 employees by 2014.

Like the automotive sector, the aerospace sector benefits from its skilled work force and focus on R&D. The sector is leveraging its "knowledge advantage" to foster continued growth. Twenty universities offer advanced degrees in aerospace and aerospace engineering, and Canadian universities and colleges produce an estimated 3,000 aerospace graduates each year. Canada also supports the industry with resources such as the National Research Council's Institute for Aerospace Research, as well as public-private partnerships. For instance, Dalhousie University, in Halifax, Nova Scotia, is receiving funding from Boeing to support R&D projects that include advanced materials development, mobile graphics, and visual and text analytics.

Plastics and Electronics
Although Canada holds a dominate position in its automotive and aerospace sectors, the country is working harder to sustain its base of plastics and electronics manufacturers as well in the face of increasing global competition.

The $26.3 billion plastics industry is a multi-faceted sector that encompasses plastic products manufacturing, machinery, molds, and resins. Canada is home to approximately 3,200 plastics companies that employ approximately 91,530 workers, according to the Canadian Plastics Industry Association. The plastics sector also is important to Canada because it is often integrated with other advanced manufacturing sectors such as aerospace, automotive, medical devices, and telecommunications. Case in point: new high-tech carbon-fiber-reinforced plastics are helping make passenger aircraft lighter, more durable, and more fuel-efficient.

"We have a substantial and healthy plastics industry here in Canada," says Carol Hochu, president and CEO of the Canadian Plastics Industry Association. One of the strengths of Canada's plastics sector is that it boasts an abundance of supply partners that yield choice, adds Hochu. In addition, academia, private enterprise, and government are all collaborating to further the industry through R&D initiatives and commercialization. That focus on innovation is encouraging growth. For example, Calgary-based Nova Chemicals Corp. has announced plans to build two new polyethylene production facilities in Canada, one in Alberta and the other in Ontario. The facilities are expected to be completed between 2014 and 2017.

Innovation also is critical to the success of Canada's electronics manufacturers. Data prior to the recession shows that electronics manufacturing employed a sizable work force of 128,000 people and output represented 6 percent of Canadian manufacturing GDP, according to a research report by McKinsey & Company. Industry Canada shows that while production levels are still off pre-recession levels, GDP of computer and electronics manufacturers did improve in 2010 to C$6.1 billion.

Over the years, Canada has successfully developed regional clusters for electronics manufacturing in areas such as Waterloo and Ottawa, Ontario, where government organizations, corporations, and education centers work together to support the electronics sector's development and growth. One of the most notable homegrown success stories is Research in Motion (RIM). Founded in 1984, Waterloo-based RIM is a global leader in wireless innovation that revolutionized the mobile industry with the introduction of the BlackBerry® in 1999.

Nonetheless, the electronics sector has certainly experienced increased competition from lower-cost alternatives in other countries. One solution for further growth in the electronics industry is to increase specialization, as well as to focus on higher-value products, such as semi-conductors, and higher-value, innovative processes that take advantage of R&D and engineering design.

"The global economy remains very uncertain, and the competition for jobs and investment is absolutely fierce," says Duguid. "But we are very confident that we have invested in what we think are the key fundamentals in building a strong economy - a very strong work force, a solid infrastructure ranging from energy to transportation, a competitive tax environment, and a commitment to research and innovation that is becoming globally significant."
Location Canada 2014 Profiles

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