September 16, 2008
by Julian Beltrame
Canada’s troubled manufacturing sector can survive and even thrive, but only by becoming more global, leaner and smarter and outsourcing jobs to low-wage countries such as China and India, a massive new survey of manufacturers has found.
The prescription, in a Deloitte consulting firm survey of 321 leading manufacturing executives in Canada, the US and Mexico, will come as both welcome and bitter news to the about 2 million Canadians still employed in the sector.
The survey, conducted by Deloitte with North American manufacturing groups, included the Canadian Manufacturers & Exporters (CME).
“What surprised me is how optimistic not only Canadian, but North American manufacturers are about the future of the business,” says CME president Jayson Myers.
“Far too many people dismiss manufacturing and say it’s going out of business. This is a $600-billion business in Canada that may be employing fewer people and may be going through tremendous change and challenges right now, but by no means is manufacturing going out of business.”
Myers concedes the sector must adapt to a high-dollar environment, the slowdown in US demand and more importantly, the unrelenting and growing competition from China, India, Brazil and other emerging economies.
As the study reports, the adaptation is already occurring.
Many firms are looking to expand outside Canadian borders to join global supply chains. Only 24% of the more than 100 Canadian executives surveyed said they planned to expand domestically.
Only about a third of executives felt they were currently globally competitive, but many recognized the future lies outside North America and 46% said they expected to be ready to take on the world within five years.
While the survey does not deal directly with jobs, it’s clear executives are expecting there will be even fewer factory jobs in Canada in the future, despite the sector shedding more than 300,000 in the last five years.
The untold story, says Myers, is that while the sector was laying off workers, it was increasing production.
“Even with the appreciation of the dollar, value production was increasing up until last year (when US demand collapsed),” he notes. “Manufacturing output in Canada reached a peak in March last year of about $610 billion and that was up from $280 billion in 1990.”