The Six Inches Between Our Ears

It is time we started using those six inches!

Here is an article written by Dennis DesRosiers that he forwarded to me. It is his view of the changing nature of the Canadian auto industry and the impact that it will have as a new East-west Corridor has grown up around us. Read it closely since it may be our future if we do not act promptly and wisely!

Oh sure, some will say, it is DesRosiers talking again his gloom and doom so let's dismiss him! What a mistake that would be.

Back in my University days, I remember the work of Harold Innes, Canada's leading economist, whose thesis was that Canada was built East-West and not North-South. Perhaps Dennis is demonstrating what was true with the fur trade and railways may now be true with the auto industry.

Read what he says and forget about the red herrings that his opponents like to use to discredit him: his friendship with Hurst and his views of E C Row!

Let's even assume that Dennis is dead wrong about what he writes. So what! His article is a call to arms to fix the border and to get on with Regional economic redevelopment by using our "strong intellectual base [we] have been building over the last decade."

Frankly, who can argue with that.

• " I was in the Automotive Parts Manufacturing Association's office a few weeks ago and noticed an Ontario map on the wall where they had put pins in place representing all of Canada's parts manufacturing facilities. From looking at this map it dawned on me that the Canadian automotive sector may not have a long term problem with the Windsor - Detroit border after all. The simple fact of the matter is that the automotive sector in Canada is now more aligned along an East - West corridor starting in Sarnia and ending in Fort Erie than a North - South corridor starting in Windsor and ending in eastern Ontario. If you go back to 1904 when Henry Ford came across the river to Walkerville and 1908 when McLaughlin started producing Buicks in Oshawa, the automotive sector developed on a North - South Axis in Ontario with a strong union presence at each end. The Windsor border was the link to Michigan, the centre of the US automotive sector, and with more than 75 percent of our components being shipped to the US and most of our vehicles exported as well, the border at Windsor was critical to an efficient automotive sector in Canada.
  
  But times have changed and this may no longer be the case. First and foremost, the Michigan automotive sector has crashed. At one point they produced about 3.5 million vehicles, now they produce about 2.5 million vehicles and this will decline with the restructurings at GM, Ford and DCX. The US south now produces more vehicles than Michigan and their position is strengthening. Mexico is a viable manufacturing option and of course Ontario now produces more vehicles than Michigan. A substantial volume of Canadian automotive components no longer have to pass through the Windsor - Detroit border. There are a number of other border crossing options and possibly more efficient border options than sending goods through Windsor.
  
  Second, both Windsor and Oshawa's automotive sector have also deteriorated substantially. Together they have lost between 15,000 and
  20,000 automotive and closely related jobs over the last decade and another 5,000 to 10,000 will be lost with the DCX, Ford and GM restructurings. But understand that contrary to the CAW view of the world, the automotive sector in Canada is not in crisis. About 50,000 non-union assembly and parts jobs have come to Canada primarily from overseas players. Almost all of these jobs have aligned themselves along the East - West corridor starting in Sarnia and ending in Fort Erie. Indeed, London is the fastest growing jurisdiction for automotive parts companies from overseas. Most of the assembly plants and other parts plants are in mid-west Ontario with a strong assembly presence in Alliston with Honda, Cambridge and Woodstock with Toyota and Ingersol with Suzuki/GM/CAMI. There are strong prospects for assembly and parts investments in communities like Stratford, Brantford, Sarnia and the Niagara peninsula, all of which have been looked at seriously by the overseas players. For instance, Stratford and Brantford were seriously considered for the new Toyota plant that choose Woodstock. Most of these jurisdictions have a strong non-union bias. Ford in Oakville and DCX in Bramalea are also in the East - West corridor. St. Thomas is not that far out of the this corridor. Toronto and points North of Toronto all the way up to Barrie and Orillia have easy access to this corridor. Oshawa and Eastern Ontario also have easy access to the East - West corridor but also can access the US market through border crossings in the East. Development follows infrastructure, it’s that simple.
  
  And a lot has happened to strengthen the East - West corridor infrastructure. The Bluewater bridge in Sarnia was recently twinned and a new state of the art train tunnel that can handle Double Decker rail cars was built in Sarnia in the early 1990’s. The 403 highway between the 401 and Sarnia currently is being totally upgraded. There are now five and about to be six border crossings in the Niagara region with the twinning of one of their bridges. I understand that this is in the design stage and will be built over the next few years. Highway 403 is being linked to the QEW and Highway 406 might be extended to Fort Erie, hopefully in the near future. This will strengthen the connection between the 401 and the Niagara region. Within a decade the new mid-peninsula highway linking the 401 to New York through the Niagara Peninsula will be built. This project is in environmental review at this time and it looks like it will be built, possibly in less time than anticipated. If an OEM comes in ands builds an assembly plant at either or both ends of this East - West corridor then the Axis will be solidified and the Canadian automotive industry will have almost totally re-aligned itself away from its traditional unionized North - South corridor to a new primarily non-union East - West corridor. This new East - West corridor will have very strong border infrastructure at each end and a very well developed highway system linking all players in-between. This new East - West corridor is already a magnet for investments from the overseas players moving to North America.
  
  This is what our politicians at the Federal, Provincial and Local level in Windsor have not understood. They have vehimently opposed various border solutions, they have pandered to anti-border infrastructure groups and handed the border file over to lawyers for the last number of years. This behaviour is baffling given the fact that the auto sector is the most important industry in Windsor and indeed all of Canada. The auto sector does not have the luxury of waiting for this behaviour to resolve itself, the sector has to get on with its business. Thus the automotive sector has found a way around Windsor, more automotive trade now happens in this East - West corridor than through Windsor - Detroit. This re-alignment also has meant that Windsor is no longer in the investment plans of most companies in the automotive sector. To be sure, some of the current players in Windsor have invested like DCX and their new paint facility and some suppliers tied to DCX and Ford but for the most part almost all Greenfield investments (read: the future) have located in the new East - West corridor. This was very predictable. What would anyone think that the over 100 overseas supplier companies would do, sit and wait for the border in Windsor to be fixed. Business is interested in solutions right now, not at some undefined point in the future. They could not take this risk so they got on with business and went elsewhere to solve their logistics needs. And those solutions were and are East - West not North - South. This will likely be the new normal and unfortunately it was largely avoidable.
  
  Indeed I can build a very strong case that the communities along this East - West corridor and those with easy access to it will benefit tremendously from the strengthening of the infrastructure along this corridor. There are dozens of overseas suppliers that are likely to choose Canada for their North American location. Canada is one of the most successful countries anywhere in the world in attracting global OEMs to build vehicles and suppliers are following these assembly investments into Canada.
  
  And unfortunately, Windsor is being further isolated and left out of the loop for these investments opportunites which represent the future of the automotive sector in Canada. The border situation is a negative, Windsor's strong union roots is a negative, the lack of land available for development in Windsor is a negative and their high taxes are negative. Windsor is experiencing a slow painful death. I could even build a case that it would be in the best interest of GM, Ford and DCX to allocate new investments that may come to Canada in the future along this East - West corridor as well. Their existing assets in Windsor would be supported in the short term but ultimately will face serious challenges for survival as well. Indeed, DCX's recent musing about re-locating their head office into Central Ontario is a precursor of what might actually happen. They could build and operate a head office on their Brampton site much more cost effectively than their current Windsor head office. No land cost, no rent and a wealth of human resources to draw from roughly ten times what is available to them in Windsor. They would also be closer to their markets, the financial hub of Canada, most media and third party suppliers or services like advertising etc. They are at a serious disadvantage not being in the Toronto area with their head office and this would solve that problem. I hope they don't leave Windsor and I am not sure that they will but just the fact that they are musing about it, is symbolic of the problems in what used to be Canada's Motor City.
  
  The die is now cast for Windsor's automotive manufacturing sector. The East - West corridor is rapidly developing. The North - South corridor is rapidly deteriorating. Windsor continues to head towards losing most of its manufacturing related to the automotive sector. They are unlikely to stop the erosion of their manufacturing base but they do have a way out of this mess they have created for themselves. Supporting one of the options proposed by the Bi-national Committee to fix the border would slow their demise, for instance.
  
  But Windsor's real future more likely resides in developing the strong intellectual base they have been building over the last decade. Yves Landry, once said that "The future of the automotive sector in Ontario is the six inches between our ears". And he backed this view by successfully lobbying DCX to build a state of the art research facility in Windsor called ARDC. If you look at the Windsor automotive sector over the past decade almost all the success has been attracting intellectual capital into the area. Over a billion in capital dedicated to research, design, development and testing of vehicles and parts has come to Windsor. Auto21 is located at the University of Windsor, there are a number of research chairs at the U of Windsor, Ford has a research centre in Windsor, about a dozen suppliers have research centres in Windsor and International Truck recently choose Windsor as the location for two research centres. The prospects for more intellectual investments are great if the right moves are made by all levels of Government. Windsor can be salvaged.
  
  My rant for the week.
  
  Dennis
  
  DesRosiers Automotive Consultants Inc
  Dennis DesRosiers
  President