Linamar CEO and NGen Chair Linda Hasenfratz says GM's Oshawa plant closing doesn't herald the end of manufacturing. It shows that manufacturing is changing from the days when communities relied on single assembly plants to a new era based on increased automation, skilled people and new ideas.
How Ontario can future proof its manufacturing industries
The Globe and Mail
December 3, 2018
Since news broke that GM is shuttering its Oshawa factory, a narrative has taken hold: Ontario’s manufacturing sector is uncompetitive and in decline. In fact, the truth is the exact opposite. Manufacturing is entering a new, innovation-driven era that will play to our strengths.
Oshawa isn’t closing because it is uncompetitive. It’s closing because the particular vehicles it is tooled up to make are not selling to North American customers. Consumers are increasingly uninterested in buying sedans – they want crossovers, SUVs and light trucks: vehicles that can carry their families and all their gear, vehicles that make them feel safe and vehicles that they can work in. The same is true for the other facilities that are closing. Fifteen thousand jobs are being eliminated as a result of the GM shutdowns, 2,500 of them in Canada. That’s about 15 per cent of the total, which is not dissimilar to Canada’s share of overall North American production – so, frankly, proportionate and in no way reflective of the productivity of the Oshawa facility.
Over all, GM volumes probably won’t change that much after the Oshawa plant shutdown. Higher-selling vehicles manufactured in other facilities will make up all or at least most of the difference. Splitting that capacity among more plants just doesn’t make good investment sense.
What does make good business sense is investing in manufacturing in Ontario. Many manufacturers are thriving in Ontario and Canada – including in the auto industry.
Linamar is launching an unprecedented amount of business right now, adding thousands of jobs in Ontario and investing hundreds of millions of dollars. Our Guelph plants are our most productive globally.
Changing consumer preferences and the need for investment in many areas of mobility are leaving no sacred cows in terms of what is manufactured in-house and what suppliers can provide. We are seeing exciting opportunities in all types of vehicles: electric, hybrid and internal combustion, as well. There will continue to be a mix of vehicle types for at least the next two decades.
So how does Ontario win in this opportunistic environment? The answer is simple: innovation and efficiency. Innovation, whether product, process, material or back-office based, is what attracts customers. Customers want great technology that solves their problems and is cost effective, high quality and reliable. Innovation is the key to that. Efficiency is equally important: it drives improvements in every area, every single day with the ideas of every single team member.
Ontario is particularly well positioned globally today because we not only boast a world-class manufacturing sector but also a world-class technology sector. The Toronto-Waterloo corridor has the second-highest density of technology startups in the world, behind only Silicon Valley. This intersection of technology and manufacturing is the nucleus of advanced manufacturing.
The next generation of manufacturing facilities will make even greater use of sensors, robotics and artificial intelligence, which will require an ecosystem of innovative suppliers and skilled workers to support. Ontario has these in abundance. But to future-proof its industry, Ontario needs to double down on support for its innovation economy by focusing on three areas:
Invest in education for a changing workforce
Will there be fewer unskilled positions in the future? Yes. Should we be worried about that? No.
Linamar is a good example of what this transition looks like. In the past seven years, we have expanded our direct work force in Ontario (people loading and unloading machines) by 36 per cent, but we have increased our indirect work force (everyone else) by 62 per cent. At the same time, our payroll has grown 76 per cent, while our overall work force is up 47 per cent. I have no doubt our indirect work force will soon outnumber the direct one. That represents a shift toward jobs that are more interesting and pay more. That’s good, but it means we need more and more people with skills and different types of education.
Ontario’s manufacturing sector has been contending with a skills shortage for many years. The province needs to take a hard look at its education system to make sure it is graduating more students with the skills they need to find employment. The jobs are there; in fact, manufacturers are looking for more and more people.
We must also encourage companies to invest in boosting the skills of their labour force to help these workers adapt as the industry changes. In a future of increased automation, skilled people – and their innovative ideas – will be the heart of the manufacturing industry.
Continue to expand the startup ecosystem throughout the province
The best insurance against being buffeted by world currents is to build global companies across Ontario. Entrepreneurs can be found anywhere, from Whitby to Windsor, Sudbury to St. Catharines. Consider Real Tech, which is helping to modernize global water systems using artificial intelligence; or Myant, which is leading the world in textile computing to revolutionize the role textiles can play in our lives. By themselves, startups connected to MaRS, a Toronto innovation centre, employ more than 12,800 people, and will hire even more as they grow. Communitech in Waterloo has supported thousands of companies and created 16,000 jobs. Supporting entrepreneurship also offers a potential new path for laid-off workers who want to leverage their skills, experience and contacts into building a business of their own.
Build cross-sector partnerships that can help anticipate future developments
It’s vital that our manufacturers are plugged into the innovation sector to help them understand what capacities and work force skills they will need in the future. Consortiums such as the Autonomous Vehicle Innovation Network, or Ontario’s Advanced Manufacturing Supercluster, NGen, are crucial to bring together researchers and leaders from different industries to anticipate where disruption will come from, spot where the opportunities lie and work collaboratively to build solutions.
The days when a factory employed an entire town to assemble automobiles may be over – and we must acknowledge what that means for the communities affected – but reports of the death of manufacturing are wildly exaggerated. In the future it might look different, but manufacturing will absolutely still be the backbone of Ontario’s economy.
Chair, NGen Canada