Windsor's Auto R&D Future

Inside moles are a valuable source of information when an issue arises. They have the background knowledge, or they know where to get it, to help put matters into a proper context.

They are everywhere... inside the Star, City Hall, Queen's Park, at the University. The fun for me is having several different insiders give me bits of seemingly unconnected information and then being able to bring it all together for you, dear reader, to understand.

You read it here first about the key role played by Ed Lumley in bringing this huge investment to Windsor. And who wrote first about an R&D Tech Centre, and not necessarily downtown. No, I am not trying to pat myself on the back but telling you not to accept at face-value what everyone seems to be saying. There is a lot going on behind-the-scenes.

I find it fascinating that along with Lumley's name, Gord Henderson also mentioned that of Dennis DesRosiers in his column. Was he trying to make up for the dust-up that he and Dennis had some time ago? The interesting comment was that Dennis and Eddie "huddled" and that they "departed on amiable terms." Will Eddie now retain DesRosiers as Hurst did to assist the City to develop a meaningful auto strategy and to take advantage of his auto industry contacts? Was Gord telling Eddie it was OK to do so!

I give you all of this as background. With all of the talk of economic development, the auto industry and our future, I heard about a report from our past. So I asked around for it and a mole found it for me. It makes great reading for our leaders in Government, Education and Economic Development.

This Report was prepared for the previous Mayor, Mike Hurst and then ignored it seems by Eddie. It seems that some are now trying to take credit for an idea that has been around for years. You know what, let them today pretend that what is going on is a fresh idea but let's get on with it!

Here are some interesting excerpts from the Report. This Report was insightful in predicting the demise of Windsor's manufacturing base and the potential growth of the region as the centre of intellectual capital in the automotive sector. It must be painful for Eddie to realize that his nemesis Mike Hurst was responsible for commissioning the Report and even more painful for him to know that Dennis DesRosiers wrote it:

• Automotive Sector Strategic Plan
  A Research Report Prepared by
  DesRosiers Automotive.Consultants.Inc
  
  General
  
  The Windsor-Essex County Development Commission’s business development strategy for the automotive sector will be supported by two foundations:
  
  1. Windsor is at the centre of the North American automotive industry
  2. Ontario is a competitive location.
  
  These foundations will support four “pillars” or targeted initiatives of a business development strategy:
  
  1. Developing Windsor as the “Intellectual Capital” of the Canadian and North American automotive sector.
  2. Targeting high value-added OE parts manufacturing and MTDM.
  3. Linking a human resource strategy to an economic development strategy.
  4. Examining the full length of the value chain.
  
  Windsor is at the Centre of the North American Automotive Industry
  
  Windsor is situated on the frontier between Ontario and Michigan, the two leading motor vehicle manufacturing jurisdictions. It is also in immediate proximity to the world headquarters of Ford and General Motors, the North American headquarters of DaimlerChrysler and dozens of Tier 1 parts manufacturers. Major concentrations of assembly plants in Indiana and Ohio are also within a few hours’ driving time. Highway 401 and Interstate Highway 75 provide a direct connection to North America’s core concentration of manufacturing plants. Jurisdictions where automotive manufacturing capacity lies within 500 km. of I-75 and Highway 401 accounted for almost three quarters of North American vehicle production in 1999...
  
  However, by 2010, we still expect Windsor-Essex County to be within 1,000 kilometres of 69.6 percent of vehicle assembly capacity, 67.9 percent of engine capacity, and 63.1 percent of transmission capacity.
  
  Equally important, Windsor is directly adjacent to Detroit, the nerve centre of the North American automotive manufacturing industry. This proximity to the industry’s senior decision makers means that Windsor is uniquely placed within Canada to attract automotive research, design, development and testing capabilities. The key automotive business development opportunity for Windsor-Essex County may be its potential to become the “intellectual capital” of the Canadian automotive sector. This is discussed in more detail later in this section.
  
  Ontario Offers an Attractive Investment Climate
  
  In 1999, Ontario produced almost 3 million vehicles, ranking only slightly behind Michigan among North American jurisdictions (Table 6.9). When compared with vehicle producing countries, Ontario ranks fifth globally, behind the United States, Japan, Germany and France.
  
  Support for Research & Development
  
  Tax incentives for research and development are channelled through the federal government’s Scientific Research and Experimental Development Tax Credit program, and the Ontario Innovation Tax Credit. The after-tax cost of one dollar spent on R&D is $0.49, one of the lowest in the world...
  
  Proprietary product and process technologies have become a key source of competitive advantage in a rationalizing and globally competitive automotive manufacturing sector.
  
  Initially the dynamics of outsourcing and rationalization favoured the concentration of research, design, development and testing by OEMs and parts manufacturers in facilities in close proximity to vehicle company head offices in Detroit. Windsor, despite its location just across the Detroit River from those offices, historically was prevented from fully participating in this automotive technology cluster because of the Canada-U.S. border. In the past, border delays, the need for what the industry calls “face time” and the lack of a communication infrastructure were seen by OEM executives as an impediment to the ready sharing of information between the vehicle company head offices and their suppliers R&D facilities. Even Canadian-based suppliers such as Magna International and The Woodbridge Group were compelled to concentrate their R&D activities on the Michigan side of the border in order to be able to provide customers with the desired level of day to day interaction.
  
  Advances in information technology have made “face time” and the international boundary less of an issue by facilitating real-time interaction and sharing of technical information between head offices and R&D centres without onsite visits. Windsor’s geographic proximity to Detroit, however, is a significant draw to R&D activity, and it is thus emerging as the most favoured location for automotive technological research in Canada. DaimlerChrysler and Ford have established new R&D facilities in Windsor within the past couple of years.
  
  Several elements of infrastructure are in place to support the continued growth of Windsor as the “intellectual capital” of Canada’s automotive industry. The engineering school at the University of Windsor has been a growing source of engineers for automotive manufacturers and is increasingly focusing on automotive engineering, although they have not been able to meet the total engineering needs of the area’s automotive sector. St. Clair College is the principal outside source of skilled trades training for area automotive manufacturers. It recently announced the founding of a Centre for Manufacturing Excellence. Windsor is a North American centre of automotive MTDM, a sector that is becoming increasingly capital and technology-intensive and employing increasing numbers of engineers. The Ford and DaimlerChrysler R&D centres are providing nuclei for the emergent automotive technology cluster, and generous federal and provincial tax credits, in conjunction with Windsor’s other locational advatages discussed earlier, provide a powerful incentive.
  
  The missing pieces in the technological infrastructure are:
  
   An adequate supply of engineering graduates from Canadian universities
   Compensation for engineers that is competitive with that of the U.S. automotive industry. The low value of the Canadian dollar in recent years has exacerbated a “brain drain” of automotive engineering talent to the United States.
   A designated Automotive Engineering field of specialization at a Canadian university. The University of Windsor is working on further developing the automotive capabilities of its Applied Science faculty, and developing automotive streams in Business Administration and Law. An adequate emphasis on trade and technology at the high school level.
   There are likely further requirements to develop Windsor-Essex County Counties IT infrastructure, although this was not a focus of this study.
  
  Filling in these missing pieces will require a concentrated collabourative effort on the part of industry leaders, educators, organized labour, and elected and administrative officials of all three levels of government. Union leaders might, at first, be expected to be skeptical of an “intellectual capital” strategy that could be seen as focusing on creating white-collar/professional jobs, rather than unionized blue-collar positions. However, R&D and engineering facilities in fact employ large numbers of unionized skilled tradespeople and support a significant number of production jobs tied to these engineering centres.
  
  The “intellectual capital” strategy will also serve a fundamental community-building purpose. Sons and daughters of blue-collar workers who attend university and seek “upward mobility” will be presented with employment opportunities within Windsor-Essex County, rather than having to relocate elsewhere in North America.
  
  
  6.7.2 Focus on High Value Added OE Parts Manufacturing and MTDM
  
  The focus of Windsor-Essex County Development Commission’s automotive business development activities, therefore will need to be on high value-added OE parts manufacturing, particularly powertrain components.
  
  Advantages to be leveraged in attracting manufacturers of high value-added parts include:
  
   The presence of two Ford engine facilities and the GM transmission plant.
   Proximity to North America’s core concentration of assembly and engine manufacturing plants in southeastern Michigan, Indiana, Ohio and southwestern Ontario
   Windsor-Essex County’s critical mass in parts manufacturing and MTDM, resulting in a large pool of skilled and experience workers
   Access for parts suppliers to the area’s highly developed MTDM capabilities
   Windsor-Essex County’s developing technological infrastructure
  
  Windsor-Essex County has been particularly successful in attracting investments by German-based parts suppliers, but less successful in drawing in Japanese companies. Although they should not be ignored, in terms of attracting global investors, the Windsor-Essex County Development Commission might be advised to continue to focus on European players. Japanese-based assemblers and parts suppliers deal with relatively flexible company unions in the home market, and have historically displayed a strong preference for jurisdictions without a strong union presence in North America. European parts companies, by contrast, are accustomed to dealing with powerful unions such as IG Metall in Germany, and tend to be less daunted by the CAW presence in Windsor-Essex County. DaimlerChrysler’s strong presence in Windsor should also offer unique opportunities with European suppliers.
  
  The “union issue” could also be sidestepped by a focus on machine, tool die and mold, since the majority of Windsor-Essex County MTDM shops are non-union. This sector also produces very high-paying jobs with skilled trades employees frequently earning six-figure incomes with overtime and has established a strong track record of locally-generated growth.
  
  In many of the executive interviews, the shortage of engineers was described as critical and identified as the number one obstacle to expanding research, design, development and testing activities. In other words, it is the most formidable barrier to the “Intellectual Capital” pillar of Windsor-Essex County’s automotive business development strategy.
  
  Media reports indicate that a shortfall of engineers is a problem experienced by a number of manufacturing sectors across Canada. In the Windsor-Essex automotive manufacturing sector, the engineering squeeze is exacerbated by a “brain drain” to Michigan. Canadian engineers can easily obtain U.S. work permits under the “Treaty Canada” provisions of the Free Trade Agreement, and those employed by Windsor-Essex County automotive manufacturers often find the substantially higher after-tax incomes available just across the Detroit River difficult to resist. This is occurring just as downloading of design, development and testing responsibilities and the increasing technological sophistication of MTDM is creating unprecedented demand for engineering talent within the Windsor-Essex automotive manufacturing sector.
  
  The above types of problems are not unique to Windsor-Essex County or to the automotive manufacturing sector. Practically every jurisdiction in North America where the key economic sectors are facing fundamental technological and structural change are grappling with skill shortages and training issues.
  
  Those jurisdictions that are proactive and successful in addressing skill shortages and other critical human resource issues will create sustainable competitive advantages in attracting new investment...
  
  Windsor-Essex County stands out within the North American automotive manufacturing belt in its ethnic and cultural diversity. This fundamental community strength remains to be fully harnessed by the region’s automotive manufacturers.
  
  The key to building diversity and skills in the Windsor-Essex County automotive workforce lies in recognizing that human resource and business development strategies for a given jurisdiction cannot be developed in isolation. Building on human resource strengths and addressing shortages and weaknesses in skill sets is a critical pillar of any effective business development plan...
  
  Engineering services. Ford and DaimlerChrysler have recently made major commitments to automotive R&D in Windsor. North American vehicle manufacturers, however, also make extensive use of independent testing laboratories and engineering firms around Detroit and elsewhere in the United States. Windsor, with its proximity to Detroit, could be marketed as an attractive location to some of these players.

There's the outline of a strategy to make Windsor #1 in Canada and a major player in the world auto industry for R&D. We have the blueprints in the DesRosiers Report. If you look at what is going on now and what was announced yesterday, a lot of the building blocks are here and available. All we have to do is to have everyone working together to cement them in place. We have the foundation. Now we better build the rest of the Complex.

And leave the egos at the door!