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Saving Canadian Manufacturing From Jeopardy

Pressures From China, Higher Canadian Dollar Leading To Job Losses

Column which ran in the

Hope is on the horizon, but it will take a massive, coordinated effort

Welcome to this weeks game of "Manufacturing Jeopardy." The opening category is Catastrophic Losses. And our first answer is: More than 100,000!

Ooh! Ooh! "What is the number of lost jobs in Canadian manufacturing over these past 28 months?"

Good job contestant one. Er, I mean, nicely cone. Let's move on then to category two, Things That Scare The Crap Out Of Us. The answer is...the impact of our rising loonie, the low cost of labour in China, and cheap imports from a whack of other countries.

Oh Alex, pick me! "What are the three main reasons Canadian manufacturing is in a potential death spiral?"

Very good, contestant two. Were truly getting clobbered by the falling U.S. greenback, which makes our dollar more costly in comparison. Now our goods are more expensive to foreign buyers. Which explains why exports are plunging like a Toronto thermometer. Add in the stuff brought in from low labour cost countries (where union organizers are routinely arrested or shot). And top it off with the lure of offshoring, where home grown companies like Roots abandon local workers for those who cost 90% less elsewhere.

Alright, alright. My apologies to Alex Trebek (yet another example of a Canadian export). But the statistics are real enough. Canadian manufacturing makes up 21% of our total economy. It employs 2.2 million peoplearound one in every eight workers. Not exactly something we can let slip away.

Yet weve been doing exactly that for years.

Up till now, weve mustered a hodgepodge of half-hearted, disorganized efforts to save this vital sector. Pretending that China, Brazil, India and others were a collective flash in the paninstead of being the massive competitors theyve steadily, predictably (and deliberately) morphed into.

But all that could change if Canadian Manufacturers and Exporters (CME), an Ottawa-based industry group headed by the Honourable Perrin Beatty, former member of parliament and past CEO of the Canadian Broadcasting Corporation, has its way. His folks met with businesses, labour organizations and government staff across Canada in 2004. The result is their much anticipated report, scheduled for release this coming February 7th: Manufacturing 20/20: A Call to Action.

It starts with a look at issues faced by many Canadian manufacturers. On top of those already cited, theres an over-supply of basic labour but a growing shortage of highly skilled, technically savvy production workers. According to Jeff Brownlee, VP Communications at CME, The manufacturing industry as a whole has an image problem. Young workers especially tend to see it as a modern day chain gang. The 20/20 study calls this view the four Ds of production: Dirty, Degrading, Declining and Depressing. Which is far from the high tech, relatively high paying truth of the new producers. Jobs in this sector pay on average 25% more than in other areas, and workers get a lot of free training, adds Brownlee.

Of course, what do perceptions matter if there are no jobs available anyway? Which brings us to some possible solutions. For this we go to Dr. Jayson Myers, SVP and Chief Economist at CME. In Meyers view, the real answer lies in coordinating the efforts of all key stakeholders: government at every level; business associations and advocacy groups; local economic development agencies; workers; community colleges and research centres; lenders and investors; and of course the manufacturers themselves. Here are some of the key recommendations he supports:

§ Sharing information -- Providing firms with info on best practices in countering threats to growth and profitability, such as specializing in areas of competitive advantage (say, a patent on a way of producing something, or filling a niche that others are overlooking), moving up the supply chain from being just a basic manufacturer (like Magna has done by being an integrator), or offshoring and outsourcing when necessary (though this could well cause even more unemployment here at home).

§ Lobbying Pushing for legislative changes that promote domestic manufacturing, for instance reducing capital cost depreciation times for equipment purchases and plant construction, and providing better tax incentives for research, investing in new equipment and worker training.

§ Broadening export markets reducing our reliance on domestic and U.S. sales, while creating trade pacts with countries that need what we can export most efficiently (Canadas already negotiating more than 40 such arrangements beyond NAFTA).

§ Harmonizing efforts creating more ways for colleges to work with business when creating course outlines; ensuring immigration policies help fill only those jobs Canadians arent able or willing to; and making our border with the U.S. easier to move through (unlikely given the Bush paranoia).

§ Investing in infrastructure Ensuring our foundations are sound and accessible, by keeping roadways in good repair; broadening transportation arteries; bringing broadband access to smaller communities so industries relying on knowledge transfer can thrive; and securing access to affordable, stable supplies of energy (including oil, natural gas and electricity).

In the future, predicts Brownlee, production itself will be less important than customized solutions. He points to Peerless Clothing, a Canadian firm that imports textiles and parts of suitsbut which has automated its design process, a la Levis jeans, to produce tailored clothes that can be ready in a day.

Which takes us, naturally, to Final Jeopardy. Ready for the answer? Business as usual. And the winning question is: What had we better stop doing ASAP to stop the hemorrhaging of jobs in manufacturing? Because today the real money to be made is not in basic manufacturing, according to CME. Its migrating to specialized functions like design, engineering, quality assurance, control of patents and intellectual property, financing, maintenance, after-market service and marketing. Lets just hope we can make the shift before its game over.

Mark Swartz, MBA, M.Ed., is a speaker, career coach and author. He can be reached via e-mail.

The above article may contain material not included in the edited version.

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Š Mark Swartz, 2003, 2007. Republished with permission. All Rights Reserved. No part of this article may be reproduced or republished or redistributed without the prior written consent of the copyright holder. See Reprint Policy for details. Not-For-Profits exempted.

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