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Nouvelles récentes de l'ACCV
"Investing for the Future."
Toronto, ON – 2004-04-28Remarks Alain Batty
President & CEO, Ford Motor Company of Canada, Limited
C.D. Howe Institute Policy Roundtable Luncheon
Good afternoon. Thank you Jack (Mintz, President and CEO of C.D. Howe Inst.) and all my hosts at the C. D. Howe Institute and to you, our distinguished guests. It is an honour to be here today at this Policy Roundtable luncheon to talk to you about the auto industry's growth and its sensitivity to the local economic and fiscal environment. I also want to look at the local factors and provincial, federal and policy choices that influence automotive investment choices.
As the 14th in a line of Ford of Canada presidents, stretching back to the founding of the automobile business in this country, the Ford legacy is very important to me – because we are many things, but above all we are a family company.
So I'm proud to be representing our company and our 16,000 employees across Canada here today. As you may know, Ford of Canada is nearing a point that few companies ever achieve – our 100th year in business. Ford's first step outside the U.S. was in Canada in August 1904, when Henry Ford, an American inventor and entrepreneur, and Gordon McGregor, a wagonmaker from what is now called Windsor, Ontario, created Ford of Canada and in doing so, established the Canadian automobile industry.
Today, that Canadian auto industry is a part of the fabric of Canada, the engine the makes the country run. And over those 100 years, we all have seen some incredible, revolutionary changes – changes that have re-invented our way of life.
Today, I want to tell you about other changes that you may not know – about external factors that influence our growth, our decision-making, and our future. I would like touch on four subjects – 1. What we as a company are doing today to be just as successful in the next century – 2. How (and why) we continue to do business and invest in Canada – 3. Why it is important to continue to maintain and grow this engine of economic prosperity – and lastly, 4. What Canada should do to retain and attract automotive investments in the future.
First, a little calibration – the Canadian automotive industry that Ford and McGregor established in that wagon shop in 1904 today represents 12 percent of Canada's manufacturing Gross Domestic Product, and employs one in seven Canadians, directly or indirectly – one in six in Ontario alone. Automotive products are Canada's Number One export, with over $88 billion-worth exported last year. Canada produces nearly 1.6 vehicles for every one sold, and Ford of Canada is proud to have a production to sales ratio of almost two to one.
Canada is the eighth-largest vehicle-producing nation and the automotive industry is responsible for providing generations of Canadians with one of the highest standards of living in the world. Ford's part of this story is all about innovation… about perseverance… and about passion. As with any story, however, there are milestones and there are mis-steps. My favourite example is the Ford Model T, often celebrated as one of the fabled technologies that changed the world. The Model T was not so much a car as it was a concept…a concept that the freedom and personal mobility provided by a family car could be accessible to virtually everyone. Before the Model T, on average, a person would, during his or her entire lifetime, not travel more than twenty miles from his birthplace. With the Model T, all that changed. Through technology and innovation, we took a simple hand-built machine that was once a plaything for the rich and made it affordable and easy to use.
Mass manufacturing made any colour possible, as long as it was black, and we placed the automobile into the hands of millions. In fact, at one point in the early 1920s, more than half of all the cars on the planet were Model T Fords. But success doesn't always breed more success, and while the Model T quickly led to the introduction of the moving assembly line, Ford built the same Model T for 19 years. Then, as now, you can't stand still and expect the competition to do nothing. And, as one would expect, our 50% global market share evaporated, almost overnight.
So, while we are a 100-year-old company with a rich and colourful heritage, we are also a 100-year-young company with our focus on the future. And we have learned well the lessons of the Model T, as we continue to work hard making ever more dependable and affordable cars and trucks.
However, that doesn't mean that we don't hit a rough patch from time to time, as we saw most recently for Ford in 2002. We've come a long way in the last two years. When we started we were in pretty bad shape. Tough market conditions made it feel like we were swimming upstream against a strong current and holding our position seemed tough enough, let alone moving ahead.
Two years ago, we went back to the basics of a product-led recovery. Now that the products are here, we are building on the basics and staying on plan. Despite the challenges, we've accomplished what we set out to do and more in the last two years. The bottom line is that we have consistently delivered on our financial commitments. We have exceeded earnings estimates in every quarter since our plan was announced. And we did it while launching all-new high-volume products like the Freestar minivan built in Oakville and the F-150, Canada's Truck of the Year and the best-selling vehicle in the country, car or truck. This was achieved because, as we all know, the first thing the customer looks for is product and the customer always comes first. This may seem like a simple idea, but it's a concept that we've forgotten all too often in the past.
Throughout our industry, we all recognize that we must meet our customers' expectations and implement our vision of future transportation here in Canada and everywhere around the world-- one that has minimal environmental impact -- and we must deliver on our vision.
If we challenge ourselves and achieve that vision, the winner in the end will not be a single company, but rather the entire industry. Ultimately, the winner will be the consumer who will be able to buy cleaner, and more environmentally compatible vehicles without sacrificing personal preference, safety or utility.
To that end, later this year, we'll be offering our Escape Hybrid SUV. It will be the kind of no-boundaries, no compromise vehicle our customers want, offering the same functionality and features, including safety features, as the regular model, and it will deliver outstanding fuel economy.
Why do we do it? The customers told us they were ready for a change. Ford has prospered in Canada in the last century because of our focus on the customer. That's the most critical relationship of all. The customer thinks for himself or herself and we can take nothing for granted – every contact with our company must confirm to the customer that she or he made the right choice…choosing our product.
If our history has taught us anything, it's that, if we always do what's right for the customer, the rest will follow. It's simple to say, but very demanding to put into practice. At Ford of Canada, I am the advocate for our customers – dealers, fleet or retail customers. I feel strongly that I cannot delegate that responsibility. And in case of doubt, I always take the side of the customers.
So as you can imagine, this industry shapes our way of life, and despite pessimistic predictions, is still more healthy today than at its inception 100 years ago. Why? Because the automobile represents freedom, and freedom is a universal value, one of the most treasured values of human kind.
If we want to leave this legacy for future generations, we need to addresses the challenges facing all of the industries today in our country, because the world has changed. And, logically, we should begin by making the most of what we have, because it took the last 100 years to build it. We now have an automotive industry, for example, that creates real jobs – high-paying, quality long-term jobs – and each direct automotive factory job brings with it an additional six jobs in the broader economy. This leverage points to the importance of bringing in new investments, fostering innovation, and attracting new production to Canada.
But as an industry we are under extreme financial pressure because of global excess capacity estimated at more than 20 million units worldwide and increased competition. All players in the industry are in the same race to become low cost producers, including the manufacturers, our suppliers, and their suppliers, too. And each of us must do it while improving quality, because consumers require it.
Similar pressure comes from factors we cannot control, such as currency fluctuations, where we attempt to create a natural hedge to movements in the Canadian dollar. With our labour costs accounted in Canadian dollars and increased levels of Canadian parts sourcing we are able largely to balance out our Canadian revenues on vehicle sales.
However, the appreciation of our currency makes it more difficult to make the business case to attract and hold automotive investment in Canada. A recent KPMG study shows that at 65 cents exchange and before government incentives, Canada is very competitive at attracting major automotive investments. At 75 cents and including the impact of incentives provided by Southern U.S. states, Canada is no longer as competitive, despite our other inherent advantages – even including healthcare.
Interest rates also impact our business. Interest rates are a very important factor for Canadian consumers considering purchasing or leasing vehicle, so it is no surprise that over the past few years the low interest rates and higher industry sales have gone hand in hand.
Even any instability in steel supply or electricity has a huge impact on our business. Access to a reliable and competitive electricity supply is of great importance to Ford of Canada. Even though we are not a major user in comparison to other industries like steel, electricity costs are an important direct component of our operational expenses, and indirectly through the cost of electricity embedded in the parts and materials we purchase.
So many of the old rules of our business have changed… Mass production used to mean, implicitly, high-volume sales. But customers today have decided that they now want products that are specialized or tailored to their own specific needs – not the needs of the mass market. This is why architecture, commonality, reusability, and flexible manufacturing are so important. Under the old rules, what we thought were attractive benefits for employees have turned into legacy costs, making us less competitive with newer manufacturers – Ford has 11,000 retirees in Canada. So every January we set aside $250 million for the year in pension and healthcare costs, proving once again, that no good deed goes unpunished.
For 100 years, we have taken pride in building our products where we sell them, with the associated favourable impact on the local economy. That's an incredible legacy that we are a part of, we are proud of and one that we all benefit from, one way or another. We have learned, however, that to remain successful – even to remain in business – we have to be open to change.
Canada and the automotive industry in 2004 stand at a critical crossroads in our evolution, with the opportunity to re-define ourselves and go forward according to the new rules, or walk away from 100 years of innovation and growth.
Sometimes to understand the importance of an industry, it helps to think about what it would be like if that industry weren't there. I have a hard time thinking about what the Canadian economy would look like without a vibrant auto sector. The automotive industry truly is the engine of the Canadian economy. However, today it seems like the engine needs a little routine attention to keep running well.
And that leads to some tough questions – "Why should Canada invest in the automotive business and how good is it for the country?" Or put another way "Does Canada need an automotive industry in its future?"
Of course, there are the tangible benefits of the auto sector, and they should not be easily dismissed – employment with high wages, capital investment both at the OEMs and spread through the supplier community. Add to that a stable tax base, research and development, innovation, education, health care and social welfare, to name just a few. But, what about the intangibles for a nation, a state or a region?
Here in Canada, we also have a truly "borderless" business in the North American auto world and that brings with it both rewards and risks. And no matter what we do, our customers expect that we will continue to deliver the best products we can make at some of the lowest vehicle prices in the industrialized world.
We have to meet that expectation and many, many more, while competing on a global playing field for the best talent, the best workers and new investment.
In light of all that, does Canada need an automotive industry? The market size certainly doesn't demand one – more cars are sold in California than in Canada, but California only has a single automotive assembly plant. There are eleven in Canada. (Ford –3, GM –3, DCX –2, CAMI, Honda and Toyota - 1 each). No, the desire for an automotive industry extends well beyond the practical aspects – it says something important about your state or province or country if you have it.
That's why Canada is in a competitive show-down with other countries and states every time an investment decision is on the table. Canada needs a vision for its future, if we want to retain our automotive industry.
In the mid-1960s Canada looked forward and saw a need for a growth strategy to maintain our society and standard of living for future generations. In 1965, men and women of vision defined the future for the Canadian auto industry with the Automotive Trade agreement – AutoPact – that set in motion an engine of growth that drove the Canadian economy for the next four decades. Canadian production grew from 670,000 home-market units to more than three million a year, most destined for export. Economies of scale allowed the Canadian auto industry to reduce costs and increase quality and the winners were, and have always been, consumers Canada-wide. But the World Trade Organization dismantled the AutoPact in 2001, creating an automotive policy vacuum in Canada.
Today, we need to define what the automotive industry in Canada will look like in the new millennium, and to that end we have established the Canadian Automotive Partnership Council (CAPC) to clarify that vision. By working in cooperation, government, business and labour are taking the steps necessary to ensure that Canada has an automotive future.
We don't need protectionism, as some have suggested, but Canada does need a policy and strategy that ensures that future dollars are invested wisely, in Canada. And we're seeing the first fruits of that vision in Ontario's commitment of $500 million that targets investment in the automotive industry. We are hopeful that Ottawa will step forward as well. We need a strategy that ensures Canada receives its fair share of future investment, whether in research and development or production. Canada needs a trade strategy to ensure access to foreign markets for Canadian produced cars and trucks, while encouraging that investment. Part of that strategy, too, has to ensure that Canada's infrastructure meets the growing needs of the future automotive sector. The best world-class products are useless waiting at a border crossing. Canada needs a strategy that budgets for and manages the human capital of the future, that makes sure we have employees trained for the jobs of tomorrow, and providing that high standard of living that makes Canada a great place to work, and live. We need to attract the best and the brightest minds to study at Canada's finest universities, to make the great discoveries here, and put them into practice here, in Canada.
And Canada needs a harmonization strategy with coordinated automotive regulations within North America, to ensure barriers to investment are removed. That also means products delivered here are world-class in safety and emissions standards and performance, and ensures the earliest introduction of the cleanest and safest automobiles into the Canadian market at the lowest cost. What can the auto industry offer in return? For our businesses to thrive in the next 100 years, we have to be willing to make those investments along with the government – to secure a strong future for the automotive industry here.
The modern way of life that we take for granted today was built over the last century by the engineers, machinists, the mouldmakers, tool-and-die makers and electricians in the Canadian auto industry. Our industry must ensure that we give Canadians the right skills and the right training for the opportunities of the future. Oh yes, once they are trained, we have to make sure we have jobs for them here in Canada.
If we want to see big results, we have to push – to stretch – not only for big projects in Canada from the OEMs, but also for our Canadian supply base, for a better link with training institutions, for better infrastructure and obviously research and development. It is working together that will ensure Canada and its auto industry is as strong and healthy in our second hundred years as we have been in our first century.
The future clearly presents many challenges for our industry and for Canada, and there are no easy answers to the uncertainties presented by the economy, increased competition and the need to deliver ever more sophisticated products. Our future starts now – Now is our opportunity to create a new world in ways our forefathers would never have dreamed, but our children and grandchildren will forever thank us for doing.
Our Chairman and CEO, Bill Ford often reminds us that we all got into this business because we love cars and trucks. I know I did. I think our future challenge will be making sure that the rest of the world continues the love affair that we all have for our products. That will enable more people around the world to enjoy the freedom and prosperity that individual mobility brings – and that's the best possible way to honour our past and secure our future.
The story of Ford in Canada is about products, performance, people, and passion. I believe that anything that reaches 100 years, whether it's a person or a company, represents an accomplishment. But what makes Ford unique is the vast array of significant contributions it has made to make our world a better place. That's why I feel good about Ford – its past, present and future. The company has been through both good and bad times, it has weathered storms that would have (and have) destroyed many other companies. It has proven time and again that it has the "right stuff" to be successful now and in the next century. Ultimately our goal at Ford is to have an even greater impact in our next 100 years than in the last 100, and leave a stronger business and a better world for future generations.
And I'm proud to work for, and to lead a company like Ford of Canada as we embark on our second century in business. I'm also proud of the people at Ford – our 16,000 employees, our 500 dealers and their 22,000 employees – and I can't think of a better group of talented and dedicated people. They work hard every day and stay true to the tradition of our predecessors. As I mentioned at the outset, we are an extended family that makes great automobiles… and we are on our way to becoming the best automotive company in the world. The recipe is easy -- Take care of our customers, take care of the fundamentals of our business structure, and take care of our people, and all those other things will follow.
I believe that it's very likely the best years of Ford of Canada are still ahead and this is why we are not "investing in the future" but "investing for the future" right here in Canada.
Thank you for your attention.
Renseignements:
Mark Nantais
Président
Association canadienne des constructeurs de véhicules
416.364.9333
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