Up Hill Battle For New Auto Investment Adviser

Newly appointed auto industry adviser, Ray Tanguay has pledged to help Ontario’s  struggling  auto sector regain its investment luster for new auto manufacturing plants.

Tanguay, 65, who retired March 31 after a 23-year career steering Toyota’s operations in Canada, will head a subcommittee of “seasoned auto industry executives of major auto companies” in Ontario.

Industry insiders say Tanguay needs to first focus on preserving the current level of auto production in the province.

“We should be making sure that the five automakers here, stay here and expand here,” said Don Walker, CEO of Magna International and chair of the Canadian Automotive Partnership Council (CAPC), the industry lobby group which pressed for the establishment of an auto czar and federal-provincial investment board.

Tanguay’s appointment was confirmed at a press conference in Toronto that included Walker as well as Ontario Economic Development Minister Brad Duguid and federal Industry Minister James Moore.

He will have a direct pipeline to both Moore and Duguid as he identifies potential investment opportunities and hammers out recommendations on changes needed to sell Ontario to auto companies, said Duguid.

As pioneering member of CAPC, Tanguay has long called on the two levels of government to up their game in the competition for automotive investment, which has largely flowed to lower-cost jurisdictions, such as the southern U.S. and Mexico.

“We are not getting the same level of investment as we did in the past,” he said. “We want to figure out what we need to do to put Ontario and Canada back on the map.

“We have to try to develop a proactive strategy on attracting auto investment to Canada. That’s my new job.”

Tanguay was recruited because of his private sector experience and stature within the global industry, said Duguid. “For generations, Ontario has had the good fortune of having a strong auto industry. The reality is we’re facing increasingly fierce global competition. There’s no denying that low-cost, low-standard jurisdictions are getting the lion’s share of commitments.”

Ontario has to get better at identifying potential investments before final decisions are made by auto companies, he added. “One critical area we have to improve on is increasing the level of intelligence so that we can anticipate upcoming mandates ahead of time.”

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said government negotiating teams lack industry insider knowledge. “What they’re missing is advanced intelligence on what private companies are thinking before they’re ready for an investment so you need a private sector player because as a matter of course, they hear the rumours much earlier.”

But Canada has become a more expensive place to build vehicles, and that means Tanguay will have to focus on preventing further loss of auto production, said Michelle Krebs, senior analyst with Autotrader.com. “Canada is losing those high-paying auto jobs. It’s not the place the auto industry wants to do business in the way it used to be, so protecting what Canada has is the important thing.

“I would be very surprised to see new plants and new investment coming to Canada.”

Walker said Tanguay will assess Ontario’s competitive position compared to other jurisdictions. “A lot depends on currency exchange, labour costs, benefits and worker flexibility. You have to have a level playing field and how it lines up with everybody else.”

Canada’s efforts to secure new investment were set back when Ford Motor Co. chose Mexico over Windsor for a new, small-engine program and Jaguar Land Rover Ltd. decided against Windsor for a new assembly plant.

But Moore said strengths such as corporate tax rates that are lower than those in the United States, efforts to expand the number of free trade agreements and the twinning of the Windsor-Detroit border crossing work in Canada’s favour. “We have a great case to make in Canada.”

Jeff Watson, Conservative MP for Essex, said auto companies are avoiding Ontario because of  obstacles, such as rising energy costs and plans to establish a provincial pension plan.

“Policies like the Ontario Pension Plan will have a cumulative effect on costs,” he said. “It’s like a death by a thousand cuts.”

Toyota’s decision to move Corolla production to Mexico underscores cost pressures automakers face in Ontario, said Watson. “Corolla leaving was a signal that we’re left with higher-margin, smaller-volume vehicles. We have to be able to compete for small-margin, high-volume vehicle and engine platforms.”

Tanguay said his appointment comes at a time when the industry has rebounded from the 2008-09 financial crisis.

“The industry is back on its feet and investments are being made,” he said. “Everybody wants those jobs. I’ve worked with Mexico, Kentucky and Tennessee. I know some of their approaches they are using and I’m hoping I can share some of those best practices.”