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Al Power is chief operating officer for aerospace manufacturer Precision Castparts Corp., and formally CEO of Canadian autoparts supplier Decoma International.

The new Ontario government faces many serious near-term challenges, including significant deficits, U.S. tariffs and NAFTA renegotiations; however, it’s good to see it prioritizing manufacturing jobs. With the threat of tariffs on the auto industry being very real, and automotive manufacturing in Ontario having been in a state of decline for some time, it’s time for Ontario to shift resources and focus toward aerospace manufacturing.

Historically, Ontario has made a significant effort to protect and enhance automotive and auto parts manufacturing and related jobs over other sectors. While automotive will remain an important part of the province’s and country’s economy, Canada and Ontario have a significant opportunity to shift their focus to further bolster their position in aerospace-related manufacturing over the next 10 years.

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A report by the Aerospace Industries Association of Canada (AIAC) and Innovation, Science and Economic Development Canada (ISED), states the industry contributed nearly $28-billion to the country’s GDP and 208,000 jobs to the Canadian economy in 2016. As the aerospace sector continues to expand, both in terms of size and employment, we would be wise to transition resources and incentives toward aerospace production.

Comparably, automotive employs approximately 130,000 and contributes $20-billion to the economy; however, employment has been trending down since the early 2000s. This is partly due to not having car manufacturers with global headquarters in Canada, lower costs of automation, as well as companies transitioning automotive-related jobs to lower-cost countries. As automotive manufacturers across North America look for cost reductions, the higher volumes in the automotive industry make it more practical to move automotive-related jobs to lower-cost manufacturing locations such as Mexico and China. A significant portion of the North American automotive assembly operations are moving to the southern United States and Mexico, making it more difficult for Canadian parts suppliers. Conversely, military restrictions prevent moving aerospace work to low-cost countries and the smaller volumes make automation less attractive. Also, transportation costs for aerospace parts are not nearly as sensitive as compared with automotive parts. If you add in the fact that the United States enjoys a significant global trade surplus in aerospace, protectionism is the last thing they would want in that industry.

The complexity and technical requirements in the aerospace industry require companies to hire many skilled workers. Heavily dependent on engineers and other technical staff, aerospace puts a premium on engineering and quality, which makes it easier for Canada and Ontario, with a highly skilled work force, to compete.

These advantages have resulted in aerospace being the largest manufacturing employer in California. According to management consulting firm A.T. Kearney, aerospace accounts for more than 200,000 direct and 500,000 indirect jobs in California, with a direct and indirect economic impact of more than US$100-billion. Aerospace wages in California are in the top 3 per cent and revenue is equivalent to the film industry and agriculture industry combined.

Internationally, commercial airplane deliveries have grown from 850 planes in 2008 to a projected 1,577 in 2018 and further growth to 1,850 planes by 2020, at a value in excess of US$1.5-trillion. Both Airbus and Boeing enjoy order backlogs in excess of eight years’ worth of production, making the industry much more recession-proof than most others, including automotive. Canadian shipments in the aerospace industry are up significantly in 2018; a 10.6-per-cent increase in March alone. Approximately 80 per cent of these products are exported to destinations across the globe.

Comparably, virtually all the growth in automotive is occurring in Asia. North American automotive manufacturing volumes are generally considered to be at or near their peak.

In aerospace, airplane production models tend to be sustained for at least 25 years and a long-term supply of replacement parts are required to maintain the aircraft. Aerospace supply contracts typically run for a minimum of five years and contract renewals are generally easier to obtain, thus protecting market share and related jobs over the long term.

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The retirement of existing aircraft fleets over the next 20 years – which will create significant demand for modern planes with greater efficiency – the continuing global expansion and the completion of the C Series joint venture between Airbus and Bombardier suggest that Canada, and Ontario, should be putting an equal or greater focus on preserving and expanding aerospace manufacturing and jobs in Canada versus the current, heavier focus on automotive.

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