Knowledge Networks Feed Manufacturing Growth

April 26, 2007
A reputation for innovation and production excellence draws the world's best manufacturing companies to Ontario, Canada.

Editor's Note: "Look to Ontario" is a three-part series describing Ontario, Canada's recent efforts to build upon the province's competitive advantages as a manufacturing center, including its highly skilled and educated workforce; attractive investment climate and central location; and reputation for high-quality production and innovation. This is Part 2. Also see part 1, Why Isn't Ontario, Canada, Facing A Skilled Labor Shortage? and part 3, Balancing Site Selection Criteria.

When Toyota Motor Manufacturing Co. (TMMC) was searching for a place to build a new assembly plant, it didn't have to look far. Its award-winning Cambridge, Ontario, facility, which employs 4,300 workers who produce more than 300,000 Corolla, Matrix and Lexus RX330 models a year, is the only plant outside Japan to build the Lexus -- a tremendous vote of confidence in the company's Ontario operation. Now, Toyota has chosen Woodstock, a small town in the province's busy auto corridor, for the site of its new North American assembly plant. Slated to be up and running in 2008, the $900 million flexible facility will have the capacity to build 150,000 units a year and will start by producing the RAV4 sport utility vehicle. "Ontario is a great place to build cars," says TMMC President Ray Tanguay.

Toyota's not alone: DaimlerChrysler, Ford, GM, Honda and Suzuki all build vehicles in Ontario -- one of few jurisdictions that can make that claim. Last year, the province's auto assemblers produced over 2.6 million cars -- that's one in six in North America -- and exported 85% of them to the U.S. and around the world. In all, fourteen major auto assembly plants and more than 450+ auto parts factories, with 135,000 people, operate in Ontario. Last year the value of their shipments was close to $90 billion.

While other North American automobile manufacturing strongholds shrink, Ontario's auto sector continues to grow as its reputation for production excellence and innovation grows. In 2006 automotive companies invested $1.7+ billion in new plants and plant expansions. Investments by assemblers and parts manufacturers have topped $6 billion in the past two years alone and have averaged $2.6 billion a year for the past decade.

It's not hard to understand why: Ontario is home to four of North America's most productive auto assembly plants and 13 of 40 North American J.D. Power and Associations awards for new vehicle quality. As well, its auto industry is a leader in "in-sequence" manufacturing, injection and blow molding, hydroforming, ferrous and non-ferrous casting, powder metal coating and fabrication.

Ontario's reputation for production excellence and innovation goes well beyond auto sector, though. In addition to six of the world's largest automotive companies, Ontario hosts eight of the world's 10 largest chemical companies and nearly all the global biotech giants and international leaders in ICT and aerospace. Each of these and other key sectors, including pharmaceuticals and medical devices, use advanced manufacturing technologies such as robotics, innovative injection molding equipment and leading-edge visioning systems to produce exceptional quality products for customers in more than 170 countries.

Indeed, Ontario serves as Canadas manufacturing center, producing 55% of all manufacturing exports. In 2006 total trade (domestic exports plus imports) topped $410.9 billion a 30% increase over ten years ago, with the value of exports in the top five categories alone from cars to electronic equipment to plastics -- topping $100 billion.

The presence of the leading companies in key manufacturing sectors combines with what executives say is a very supportive and innovation-oriented Ontario government. "One of Ontario's strengths is its collaborative business/government environment," said Michael Grimaldi, former president of General Motors of Canada. Evidence for the province's deep commitment to research and innovation can be seen in the creation of a separate provincial department, the Ministry of Research and Innovation, about a year ago, which Premier Dalton McGuinty heads himself.

Acting on McGuinty's decision to strategically combine the province's different economic development activities, the provincial government now offers some of the world's most attractive tax credits for research and development. Federal and provincial government incentives can reduce R&D costs of $100 to less than $41 after tax.

The Ontario government has committed close to $1.7 billion over four years to support research and commercialization at the province's universities, colleges, hospitals and research institutes. Last December it announced the investment of $20 million to support 126 innovative projects under the Ontario Research Fund. The investment, which matches a funding commitment made by the Canada Foundation for Innovation (CFI), helps researchers obtain the tools they need to stay on the cutting-edge of innovation, including lab equipment, specimens and computer software.

In addition to financial support, provincially supported public-private partnerships are in place to support research and development, with an emphasis on commercialization. Among them:

  • The Ontario Research Corridor, which stretches from Canada's capital, Ottawa, in the eastern part of the province, to Windsor, in the southwest. There world-leading companies collaborate with more than 150 universities, college and public research centers to speed new discoveries and processes from the lab to the marketplace.
  • Thirty specialized research centers where industry innovations are tested and refined.
  • Eight universities that have state-of the-art capabilities in materials science and manufacturing technologies.
  • Ontario also makes it easy to bring together worldwide research or production teams. Work visas for key employees and their families can usually be obtained within days.

Also, Canadians rank third in the world when it comes to high-speed Internet access (which is seen as a key to future sales and profit growth), according to a recent report by the Geneva-based International Telecommunication Union.

With such support, Canada is one of the most cost-effective countries in the world for industrial R&D. KPMG's Competitive Alternatives 2004 reported that R&D costs in Canada were the lowest among 11 nations studied -- 21% lower than in the U.S.

This potent combination of innovation and production excellence supported by a collaborative government makes Ontario a fertile environment for manufacturing success. Executives understand that although breakthroughs may sometimes occur when a lone researcher burns the midnight oil in a quiet lab, discoveries more often emerge from the collaborations and cross-fertilization of ideas that come from being part of a vibrant network of people pushing the boundaries of knowledge. In Ontario, they have found such a place.

The Honorable Sandra Pupatello is the Ontario Minister of Economic Development and Trade. The goal of the Ontario Ministry of Economic Development and Trade is to build a strong economy for all Ontario. This is accomplished by helping Ontario businesses innovate and compete; attracting new investment for the province; and supporting Ontario businesses expanding their exports.

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