There's a major shakeout occurring at both General Motors and Ford that will reverberate throughout the Canadian automotive sector.
Cuts at the two largest auto makers will be significantly felt by Canadian parts suppliers and retailers that serve the two struggling giants.
To address these issues, the Canadian Automotive Summit is being held Feb. 15. Speaking at this event will be Michael Grimaldi, president of General Motors Canada; Steven Landry, president and CEO, DaimlerChrysler Canada; Peter Horbury, executive director, North American design, Ford Motor Co.; Ray Tanguay, president of Toyota Motor Manufacturing Canada; Mark Hogan, president of Magna International, and several other senior executives in the Canadian automotive industry.
The summit is sponsored by PricewaterhouseCoopers and The Globe and Mail, and will be hosted by Globe Auto's Michael Vaughan and Jeremy Cato.
Dean Mullett is the national leader of PriceWaterhouseCoopers' automotive and industrial products practice, and is well-known among industry executives. He has spent the past 10 years working closely with auto makers and their suppliers, advising them on business strategy.
Vaughan: What is the situation facing the Canadian auto industry?
Mullett: The automotive industry is a huge contributor to the overall Canadian economy, from design and manufacture through to the automotive retailers, financial institutions and other service organizations that support the industry and the end consumer.
While we have seen the headlines about the challenges the industry is facing, not enough has been said about the positives that are also happening.
The thinking behind the Canadian Automotive Summit was to get people to start looking at the automotive industry in a different manner, one not so much fixated on the negative, but rather looking toward a successful future.
We are trying to foster the spirit of working together for a better future by recognizing our successes to remind us that we can and will succeed.
Vaughan: What are the changes the industry needs to make? And have you seen anything in your work that indicates this transition is taking place?
Mullett: Well, the big change is just how fast things have to be done today.
Historically, the automotive industry operated on a "sell-what-you-build" philosophy. But today it is a much more globally competitive environment and the product choices available to the consumer are vast.
We have also seen significant erosion in the pricing power of the auto makers. Consumers get so much more for their money today. And we have seen large swings in auto maker market share.
The key is cutting the design-to-build stage so that products are introduced while the cars still meet current trends. What's hot is hot today, but maybe not tomorrow, so it's important for auto makers to be able to capitalize on market opportunities in the moment.
In years past, it could take more than 36 months to bring concepts to market, but now it's often less than 20 months. And efforts are continuing to significantly reduce this.
You need look no further than Brampton, Ont., and the Chrysler 300 to see what a well-designed product that brings consumers into the showroom can do for the fortunes of an auto maker.
Vaughan: How can Canada do better in attracting investment in new automotive manufacturing facilities?
Mullett: Southern U.S. states such as Alabama and Tennessee have dramatically increased their participation in the auto industry by building infrastructure to support the industry, as well as through direct and indirect government incentives.
But don't overlook Toyota's recent announcement of the new plant planned for Woodstock, Ont., as an example of a great win for Canada. It has been more than 10 years since a new assembly plant was built in Canada. Also, it is great to see Toyota build on its success in Cambridge, Ont., and especially the successful launch of the domestically produced Lexus RX 330.
Ford and General Motors have also announced multibillion-dollar reinvestment programs in their Canadian operations over the past 24 months, although they've also announced cuts in the past few months.
Vaughan: Is it just suppliers and manufacturers?
Mullett: It doesn't matter whether you are an auto maker, a supplier or an automotive retailer -- you are all working toward the same end -- providing consumers with exciting high-quality cars that make buyers stampede into the showroom.
Car dealers are on the front lines with the customers. They know what consumers are asking for and what they're unhappy about, so they play an important role with the auto makers in bringing the product to market that consumers want.
Vaughan: But why would competitors share their secrets?
Mullett: When we are talking about change to the level that is required for the Canadian automotive industry, it takes more than just trade secrets to make any one company successful.
For the Canadian automotive industry to be healthy over the long term, it needs strong participants throughout the supply chain. Problems at the auto maker level will always trickle down to its suppliers and dealers. Troubles at suppliers and retailers work their way up to the auto makers.
So what we are talking about here is a collective effort to strengthen the Canadian automotive industry.
We need to see successes at the auto makers to create opportunities for local suppliers, and exciting new products that will drive more traffic for the retailers. I think that all of the participants in the Canadian Automotive Summit recognize their role in our collective successes, so I do expect a flurry of open and frank discussion.
The Canadian Automotive Summit will be held Wed., Feb. 15, starting at 6 p.m. in the John Bassett Theatre in the North building of the Metro Toronto Convention Centre at 255 Front. St. West. Globe readers can register for a limited number of free tickets at pwc.com/ca/autoevent/globereaders
Michael Vaughan is co-host with Jeremy Cato of Car/Business, which appears Fridays at 8:30 p.m. on Report on Business Television and Saturdays at 2 p.m. on CTV.
