Flexible Production Tackles Lack Of Competitiveness

While the Canadian auto sector has been criticised in recent years for its lack of competitiveness, Ford Motor has announced investment of US$700mn in its Oakville plant, to introduce its flexible production strategy as a way of responding better to market behaviour. BMI believes there is still much to be done to address the competitiveness issue enough to attract more projects, but the ability to change production to suit the market is one way of tackling it head on.

The upgrade work will be complete by the end of 2014, providing a boost to a production segment, which has been lagging its North American peers. Canadian light vehicle output was down 7% y ear -o n -y ear (y-o-y) in H113, while production in the US and Mexico was up 6% y-o-y and 5% y-o-y respectively. While this can be partly attributed to plant closures and the fluctuating popularity of the models produced in the country, it is the result of a disparity in regional investment, which has been gradually worsening.

According to a report from the Michigan-based Centre for Automotive Research, of US$43bn invested in North American by autos firms between 2010 and 2012, only 5% (around US$2.3bn) went to Canada. Southern US states claimed US$4.9bn and Mexico US$7.8bn. Carmakers have cited high labour costs and the strong Canadian dollar as reasons for holding back investment.

Widening Gap
Total Vehicle Production By Country (CBUs)

Nevertheless, Ford has a commitment under its latest labour agreement with the former Canadian Auto Workers union to create 600 jobs, with Oakville being one of the main beneficiaries. Although new jobs have not been mentioned as part of the project, around 2,800 jobs at the plant will be secured. It also has the support of the federal government, which is contributing CAD71.9mn (US$69.9mn) and the government of Ontario adding a further CAD70.9mn (US$68.9mn).

There are also no details as yet on the models to be produced, although the nature of the flexible production system means that this can be tailored to suit the market with the tooling and capacity to produce a number of vehicle platforms. This has already been implemented at the Michigan Assembly Plant in Wayne, resulting in what Ford called its most flexible production plant in the world after a fifth vehicle was added to the line-up in November 2012 ( see 'Is Michigan A Blueprint For Europe?', November 14 2012).

The system can also lead to improved efficiency as Ford's Americas president Joe Hinrichs said this will enable the carmaker to change its production mix without closing the plant to retool. This should reduce costly downtime in a market where operational costs are already an issue.

This article is tagged to:
Sector: Autos
Geography: Canada, Canada, Canada, Canada

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