Ontario 2006: In Front of the Pack | Ontario Ministry of Economic Development

"Last year, 2.7 million vehicles were made here, which is a larger number than any other jurisdiction in North America," says John Langley, director of the investment branch at the Ontario Ministry of Economic Development and Trade. Expect that figure to grow in the coming years, as more assembly capacity comes online, and watch for the industry's impact to compound as an increasing number of suppliers also choose Ontario locations.

One announcement with especially significant impact came last year from Toyota, which chose the province for a brand-new factory to build its RAV4 sport-utility vehicle. "Any announcement of a greenfield plant is big news in general, and it's going to bring a number of Toyota suppliers to Ontario," Langley says. "It has brought attention from people not just in the automotive industry but even from industries as diverse as pharmaceuticals. They feel that if a company as good as Toyota is building in Ontario, it's worth looking at the province."

The fact that the ripple effect extends beyond the automotive sector is good news for Ontario's leaders, who know better than to put all of their economic eggs in one basket. Indeed, the province has many other stories to tell, success stories in industries ranging from the life sciences to call centers to IT.

Wheeling Into the Future
"The biggest development in the past year is the announcement of the Toyota plant in Woodstock," Langley says. "They announced it last June, and in February they announced that it's going to be expanded even further." The plant will take an investment of about a billion Canadian dollars, and will employ some 2,000 people who will turn out 150,000 RAV4 vehicles a year, up from the 100,000 capacity originally planned.

The Woodstock operation will be Toyota's first greenfield assembly plant in Canada in two decades. It will be operated by Toyota Motor Manufacturing Canada Inc., based in nearby Cambridge, where some 4,300 employees build the Toyota Corolla and Matrix and the Lexus RX330. According to Toyota Motor Manufacturing Canada President Ray Tanguay, "It is recognition of almost 17 years of manufacturing success in Cambridge, and opens the page to a whole new chapter for Toyota in Canada."

In making the initial announcement last year, Toyota Motor Corp. Senior Managing Director Atsushi Niimi said the Woodstock location will allow the company to capitalize on its Cambridge operation: "Its proximity to suppliers on both sides of the border will benefit both countries, and it will mean new opportunities for those suppliers." Jobs will be created not just in Ontario but also across North America, he said.

Can one get too much of a good thing? Apparently not when it's a Toyota plant. Initial plant construction was only a few months old when Toyota earlier this year announced an expansion. Ontario Economic Development and Trade Minister Joe Cordiano says it's a recognition of Ontario's manufacturing environment. "Toyota's continued investment in Woodstock is a strong vote of confidence in Ontario's highly skilled work force."

As always is the case, the big fish is being followed by schools of smaller fish - suppliers that are intent on building upon Toyota's success. One such development came in March, when Toyotetsu Canada announced the construction of its first plant in Ontario. Toyotetsu will provide stamped and assembled parts to the Toyota assembly plants in Cambridge and Woodstock. Its C$50 million startup plant in Simcoe will employ about 250 associates during the first year.

A smaller, nearby automotive venture was disclosed in March, when Hino Motor Sales Canada announced a new diesel truck manufacturing facility in Woodstock. The company already operated a sales office in Mississauga and sold more than a thousand trucks in Canada last year. The manufacturing operation required an investment of C$3 million worth of equipment and is creating about four- dozen jobs.

And the good automotive news keeps on coming. In mid-May, Honda Canada announced a C$154 million greenfield investment that will build fuel-efficient four-liter engines for Honda Civics beginning in 2008. The project will bring another 340 jobs to Alliston, where Honda first built an assembly plant 20 years ago, then added a truck plant 10 years ago. Those two plants employ 4,300 people and together made 385,000 vehicles last year. According to Cordiano, "Honda's project is the latest in an unprecedented line of new automotive investments worth more than C$7 billion for our province that have brought thousands of jobs."

In announcing the Honda plant, Ontario Premier Dalton McGuinty noted that the victory has a lot to do with the province's labor pool and the fact that companies locating there aren't saddled with the kinds of healthcare expenses that have hobbled such companies as General Motors in the United States. "Honda knows that Ontario's work force is among the most productive in the world, and our Medicare system gives investors the stable business costs they're looking for."

The effort to boost the auto industry continues. In May, a group of Italian auto-industry executives took a weeklong tour of Ontario to learn more about manufacturing opportunities.

A Trip to MaRS to Boost Technology
No, the red planet is not a hot spot for science and technology innovation, not outside of science fiction, anyway. In real life, though, there's a technology magnet known as MaRS - this one much closer, in Toronto. MaRS is short for "medical and related sciences," and the MaRS Discovery District is a not-for-profit corporation, a public-private collaboration created to improve commercial outcomes from Canadian science and technology innovation.

The term "Discovery District" refers to Toronto's downtown research cluster that includes the prestigious University of Toronto, seven teaching hospitals, and more than 30 research centers. More than $400 million worth of research and development takes place in the district every year. Less than a mile away is the country's largest concentration of financial enterprises and corporate head offices.

"The proximity to this kind of capacity in research, finance, and the broad mix of established and growing technology companies in the region - along with direct subway access to a thriving, creative, multicultural, urban community - is a truly unique advantage for MaRS in the global marketplace," says Dr. Ilse Treurnicht, the CEO of MaRS.

A major focus of the MaRS collaboration is a state-of-the-art facility called the MaRS Centre. Its first phase totals 700,000 square feet and is fully leased. Tenants include startup, mid-sized, and multinational high-technology companies, researchers from the University Health Network and The Hospital for Sick Children, venture-capital firms, and a wide range of services such as technology-transfer groups, accountants, lawyers, networking organizations, and funding agencies. A million-square-foot second phase has a target completion date of 2008 and is expected to attract a wide range of multinational technology businesses and leading research organizations.

"Toronto's vibrant medical and research institutions have demonstrated a strong track record for clinical trials initiatives with several of the world's leading pharmaceutical entities," according to Dr. Mansoor Mohammed, chief scientific officer and vice president of CombiMatrix Molecular Diagnostics. The producer of gene-based diagnostic products and services established a new facility this spring in the MaRS Discovery District. "We anticipate drawing heavily from the researchers trained within the greater Toronto medical research community."

"Life sciences is certainly an industry that we're focusing on where we have some big advantages," says Langley. "We have an excellent work force. About 57 percent have postsecondary education - about 25 percent have university degrees and the balance have college diplomas or full-time apprenticeships. Toronto is one of the major life-sciences locations in North America."

Along with strong research operations and facilities, plus the highly skilled workers required to take advantage of them, Ontario boasts strong advantages in research costs, Langley says. "We're considerably less expensive than the United States and Europe.We have an excellent R&D tax credit that effectively gives you roughly 50 cents on the dollar of costs. This is one of the most attractive tax credits in the industrialized world."

Nearly every jurisdiction on the planet wants a piece of the life-sciences pie, but economic development officials in Ontario know that competition is not the only route to success. They recently found common ground with their counterparts in the state of Illinois, signing a five-year agreement to collaborate on biotechnology research and trade. Among other things, the memorandum of understanding covers:

• Development of bio-products networks to take advantage of trends and opportunities;
• Information and technology exchanges across business and research institutions with the goal of developing and commercializing biomaterials, bio-fuels, agricultural sciences, plant and animal genomics, environmental sustainability, food science, and nutrition;
• Trade development and business partnership opportunities; and
• Identification of issues that Ontario and Illinois might bring to the attention of their respective federal governments.

Business Success Stories
The province of Ontario enjoys a balanced and thriving economy, with numerous prosperous sectors beyond automotive manufacturing and the life sciences. Just a few of the other success stories include:

• Information and Communications Technology (ICT) - About a quarter million people are employed in this field in Ontario, at more than 5,000 companies that include most of the world's biggest IT names. The province is the site of R&D and manufacturing in a wide range of ICT sectors, including telecom equipment, software development and services, digital media and the Web, microelectronics, voice over Internet protocol, wireless broadband, and photonics.

• Call Centers - Low costs, high productivity, and amazingly diverse language skills allow Ontario to land a large share of Canada's call-center industry. "Contact centers continue to be very strong for us, notwithstanding intense competition from India these days," Langley says. Telecom technology is state-of-the-art, and one recent study charted call-center labor costs some 14 percent below competing U.S. communities. Among numerous announcements in recent months were plans to locate a 650-job Teleperformance Canada call center in the community of Cornwall.

• Alternative Energies - This could prove to be one of the world's hottest businesses in the coming years, and Ontario is on the cutting edge. The province hopes to produce at least 10 percent of its energy from renewable sources by 2010. Among other developments, SIAG Great Lakes LP is bringing 140 high-wage jobs to Sault Ste. Marie to make steel wind towers. The province also has a burgeoning industry working to develop and commercialize fuel-cell technology.

• Plastics - The province ranks among North America's top-three plastics-producing jurisdictions, with operations along the entire supply chain, from resin and material suppliers and mold-makers to processors. It helps that the province enjoys a wide range of end-user industries, such as automotive, electronics, packaging, and construction.

• Food Products - More than 200 agricultural commodities are produced in Ontario. As is typical there, the province adds high-technology twists, and is recognized as a world leader in food-technology research and development. Among the newest faces is Blommer Chocolate Co., a Chicago-based company that earlier this year acquired an 85,000-square-foot chocolate-manufacturing facility in Campbellford.

• Aerospace - More than 350 aerospace firms are involved in aerospace and aviation design, manufacturing, and product support. Aircraft component costs in Canada are among the lowest in the world.

• Other Successes - In general, the province benefits from high concentrations of manufacturing and financial and business services. On the rise are export-oriented, higher-value-added industries. For example, notes Langley, "We rank third in North America in terms of biotech companies, and that's an industry we're looking to build up."

Reaching the World from Ontario
Last year Ontario's exports totaled C$201 billion, nearly half of all Canadian exports. It's a major international-trading economy, with more exports per capita than any other Canadian jurisdiction and more than the other G8 countries.

The bulk of those exports are destined for the United States, with other major markets including the United Kingdom, China, Norway, Mexico, Japan, Germany, and France. Because export jobs are so critical to prosperity, the provincial government is working to raise Ontario's profile in the global marketplace.

The Ministry of Economic Development and Trade recently opened up four new "international marketing centers" in Tokyo, London, Los Angeles, and New Delhi. The province already operates similar centers in Shanghai, Munich, and New York, Langley says. The centers are co-located in existing Canadian embassies and consulates, and give the province a full-time presence in key global markets.

Advancing Manufacturing and the Work Force
A common denominator underlying the success of many of Ontario's industrial sectors is technology. As most manufacturing-heavy jurisdictions have realized, the key to success in a globally competitive marketplace is improvement in manufacturing processes.

That's the philosophy behind the province's Advanced Manufacturing Investment Strategy. "With this strategy we are investing in our highly skilled work force by helping manufacturers stay at the cutting edge of technology," Cordiano says.

The centerpiece is a new $500 million repayable loan program. It's designed to help companies take immediate steps to develop and use leading technologies and innovations. Loans focus on manufacturing processes and technologies, materials innovations, innovative waste-management technologies, and energy efficiencies. They're interest-free for up to the first five years, and provide up to 10 percent of eligible project costs. Up to three calls for proposals will be made each year for five years, depending upon how many successful projects are funded.

Ontario's government also is pumping big dollars into postsecondary education. Last year it unveiled a provincial budget that included $6 billion for postsecondary education over five years. "We're trying, like many of our competitors, to upgrade skills," Langley says. "We can't always compete on a pure cost basis with the rising countries of Southeast Asia, so we have to upgrade our labor. We have to be innovative and improve our productivity to be able to compete."

The province's educational system is highly regarded and exhibits some key differences from typical U.S. programs. Elementary schools typically begin with junior kindergarten programs available to children as young as 4, and the public and parochial systems both receive public funding.

The postsecondary system includes a network of publicly funded institutions - 24 colleges of applied arts and technology, three agricultural colleges, the Michener Institute for Applied Health Sciences, and 20 universities. There are co-op programs that blend school and work experience, as well as formal apprenticeship and trade qualifications systems that partner businesses with educational institutions.

Cost-Effective
One of the many keys to Ontario's economic success is the cost factor. Exchange rates used to play a significant role, but "in spite of the strong Canadian dollar, we still have a cost advantage over the United States," Langley says.

Healthcare is a big reason. Rising costs that are wreaking havoc with benefits budgets in the United States reveal a major difference in Canada, where universal coverage is the standard. Though corporate taxes help to support the provincial system, it's much more efficient and saves companies money. In fact, KPMG reports that the average Canadian employer paid 28 percent of salary in statutory and employer-sponsored benefits, while the comparable U.S. figure is 36 percent, due mostly to health-benefit costs.

KPMG's Competitive Alternatives reports significant cost advantages, even in Ontario's biggest city, Toronto. With U.S. costs as the baseline of 100, Toronto's overall costs earn a tally of 96.5, with costs in some sectors as low as 92 percent of the U.S. average and only one sector higher. Ottawa comes in a point and a half lower, and other Ontario cities record even lower costs.

Cost factors are among the reasons Convergys Corp. has two contact centers in Ontario, says the company's Jim Boyce. "As is the case throughout Canada, the province of Ontario offers business cost advantages, an educated labor force, and low turnover rates at contact centers. Other key competitive factors for Ontario are the low combined general corporate income tax rate and technology and transportation infrastructure."

Also helpful have been the province's multiple recruitment and training programs, which Boyce says "allow Convergys to utilize valuable labor pools - including youth, new immigrants, and persons with disabilities - to create and maintain a diverse work force."

Like so many other growing employers there, Boyce says Convergys sees a prosperous future in Ontario: "The province is a good fit for our needs. With the incredible pool of resources available, we believe there is ample opportunity for future growth."