Tuning into the BIG Picture

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The Voice of the Automotive Original Equipment
Suppliers in Canada
Automotive Parts Manufacturers Association
Tuning into the BIG Picture For Eastern
Ontario Automotive Summit Belleville,
Ontario October 19, 2006
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Who are we?

• APMA is Canadas national association
  representing OEM producers of parts, equipment,
  tools, supplies and services for the worldwide
  automotive industry.
• APMA members and their subsidiaries account for
  90 of the over 36 (CDN) billion production of
  automotive parts in Canada. (2005)

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Mission Statement
To engage in activities that promote the
interests of automotive original equipment
suppliers in Canada that enhance the economic
welfare of our members and be the Voice of the
Canadian automotive supply industry
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How APMA operates

• APMA has an 18 person Board of Directors to
  provide industry focus and direction and to
  oversee operations of the association as well as
  standing committees to allow members to exchange
  information and deal with issues affecting their
  sector
• Marketing and Strategic Initiatives Committee
• Human Resource Development Committee
• Energy, Environment and Health Safety Committee
• Innovation and Technology Committee
• Other Ad hoc Committees as needed
• APMA has 7 full time staff members to administer
  the association

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(top 10 issues condense down to 3 main topics)
Top Auto Industry Issues

• 1. Making Vehicles Safer
• Better electronics/user interfaces, better
  driver and occupant education, better traffic
  management systems, stronger and easier to
  process structural materials.
• 2. Improving Fuel Economy Reducing
  Environmental Impact
• Lightweight materials, reducing non-renewable
  resource usage, hybrid powertrains (need better
  batteries), better transmissions (CVTs),
  reducing emissions (need better catalysts).
• 3. Re-thinking Old Methods
• Improving supplier relationships, making
  assembly more efficient and safer, controlling
  cost to improve profitability (lower cost
  materials logistics as well as design and test
  methods improvements).

Source Automotive News - April 11, 2005
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Explosion of New Products
Industry Model Count 2003-05 359 2006-08 385 2009
-11 371
Automakers and suppliers need flexibility to
assembly moremodels and parts for different
platforms in the same plant
Source CSM Worldwide
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The Challenge of Compression
Shorter Life Cycles
Compression Compromise
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North America
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N.A. Market Share Shift
19.7
19.5
19.2
20.5
19.3
19.8
19.6
2008 Data Source CSM Worldwide
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Consolidation of Supply Base
Number of Automotive Suppliers
Based on OESA Projections
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Canada
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Canadas Automotive Sector

• Worlds 8th largest producer of motor vehicles (
  2.6 million units). Ontario produces more
  vehicles than anywhere else in North America.
• Six OEMs 12 active assembly plants (1 more in
  2007) a number of engine and drivetrain part
  plants and support facilities. Over 7 billion
  has been committed to Canada in past two years.
• 3 OEM engineering RD centres including
  DaimlerChrysler Canada, General Motors Canada
  International Truck Engine-Navistar.
• Hundreds of suppliers of parts at all tier levels
  including Magna, Siemens-VDO, Dofasco, Alcan,
  Dupont, Wescast Ind., Woodbridge,
  Solectron-Invotronics, NEMAK Aluminum, Ballard
  Power Systems, General Hydrogen, Stuart Energy
  Systems, Hydrogenics, Schukra, QSS, Ventra Group,
  AutoLIV Canada, Ventra, Delphi, Lear Canada.
• Over 500,000 Canadians work in the auto industry
  - 1/7 jobs and 1/6 in Ontario. Workers here are
  highly skilled!
• The auto sector generates 12-13 of Canadas
  manufacturing gross domestic product and is the
  largest source of foreign exchange.

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Canadian Vehicle Production VS. Canadian
Automotive Parts Shipments
Canadian Automotive Parts Shipments (CDN )
Canadian Vehicle Production (units)
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Total Employment
Motor Vehicle Assembly Manufacturing vs. Motor
Vehicles Parts Manufacturing
Statistics Canada
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Canadian Assembly Plant Locations
Alliston
Oshawa
Brampton
Oakville
Cambridge
Ingersoll
St. Thomas
Windsor
Woodstock (opening 2008)
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Canadian Assembly Plants

• Vehicles Key to the North American Market

Solely Ontario Sourced New Vehicle Launch
Suzuki XL-7
Lincoln MKX (2007) Ford Edge (2007) Fairlane
(2008)
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Automotive Parts Manufacturers are mainly located
in Ontario and Quebec
Ontario
Source Ontario Ministry of Economic Development
and Trade
Quebec
Source Québec Ministry of Economic Development,
Innovation and Export Trade
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Canada has world-class auto assembly and parts
manufacturing operations.
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The Nature of the North American Automotive
Industry Trade Flow

• 60.0 B cars and trucks
• 20.3 B parts, engines
• Total 80.3 B

• 23.1 B cars and trucks
• 33.2 B parts, engines
• Total 56.3 B

Source Statistics Canada
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Issues Facing the Automotive Original Equipment
Supply Industry in Canada

• Developing a diversified customer base
• Securing a fair share of automotive investment in
  Canada
• Globalization
• Seamless passage at the Canada United States
  borders
• Maintaining competitiveness through innovation

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1. Developing a diversified customer base

• Market shares continue to change. Suppliers,
  must aim to have their customer make up mirror
  that of the new vehicle market shares and be able
  to quickly respond to
• Rapid model/vehicle changes
• Lower volumes per platform but more platforms to
  supply
• Rapid market demand changes vehicle segment
  fluctuations
• Global competitive variables-F/X, input costs
  (raw material, labour, etc.), foreign competition
  for your business
• How does APMA help? Events from 2004 to date

• Trade Missions
• Toyota Engineering Centre (Michigan)
• Honda, Toyota, Nissan, Tokyo Motor Show (Japan)
• Shanghai GM, Volkswagen, Tier I companies (China)
• Nissan Technical Centre (Michigan)
• Audi, Volkswagen, Hyundai/Kia (Central Europe)
• Honda Of America (Ohio)
• BMW North America (South Carolina) (3 times)
• China (Shanghai, Beijing, Hong Kong)
• One-on-One Mission Tokyo Motor Show (Japan)
• Many incoming missions

• APMA Events and Publications
• APMAs Annual Conference Exhibition) for
  education and networking
• Publications to help you stay current

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2. Securing a fair share of Automotive
Investment in Canada

• Investments by foreign governments helped other
  jurisdictions. We had no new Assembly plants in
  Canada for last 19 out of 20.
• Our governments investments re-leveled the
  playing field and we have since had good hits
  with virtually all vehicle manufacturers in
  Canada.

• Results
• Ford flexible manufacturing - 1 Billion
• GMs Beacon project - 2.5 Billion-Camaro 740
  million
• International Truck plant
• Toyota plant 7 Woodstock for RAV4 - 800
  million
• DaimlerChrysler expansions
• Hino (Toyota subsidiary) new truck plant in
  Woodstock
• Over 7 Billion committed resulting from
  Governments 1 Billion investment

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3. Globalization

• Not a new concept for our sector, the AutoPact
  of 1965 was the start.
• FTA (late 80s)
• NAFTA (mid 90s) big change. High labour
  content (i.e. wiring harnesses, windshield wiper
  assemblies) went to Mexico. Benefits of NAFTA
  are not yet fully realized by the auto industry
  (non-tariff barriers, harmonization of
  regulations, border crossing logistics, etc.)
• Need to find what our core competencies are and
  develop from there

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3. Globalization

• Asian manufacturing costs are lower pressure
  for Asian pricing in North America
• More goods will come from Asia and Central
  Europe-Mexico may be most at risk!
• To be economic and travel 10,000 kilometers, auto
  parts
• Cannot be on JIT process
• Must travel well (ie. Difficult to damage)
• Must stack well (high value per container) No
  value in shipping air
• China is hot now for goods, but India will be
  close behind.
• Look to China, India, and Central Europe
  countries for more competition

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4. Seamless passage at the border

• Under NAFTA, goods are to flow freely between
  countries, but at the border we know this isnt
  always the case.

• Encourage use of advanced paperless customs and
  security systems for the pre-clearance for low
  risk goods

• Implement Intelligent Technology Systems (ITS) to
  help control border congestion

• Can we learn from the European Union, which
  provides
• uninterrupted travel (commercial) between 25
  countries?

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5. Maintaining competitiveness through
innovation, research and commercialization

• AUTO21 Federal Centres of Excellence across the
  country
• 39 Universities participate
• NRC Aluminum Technology Centre in Chicoutimi
• Centre for Automotive Research and Education and
  Automotive Engineering Program at the University
  of Windsor
• Centre for Automotive Parts Expertise at Georgian
  College (CAPE)
• University of Windsor/International Truck Diesel
  Emissions and Manufacturing Process Improvement

Highly qualified skilled trades are essential to
a successful auto industry. Advanced research
and commercialization of its outputs is equally
important. These are our Competitive Advantages!
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In summary, the future includes

• Manufacturers rebalancing and diversifying their
  customer base ideal is customer base should
  mirror customer market share
• Rapid response Changes/demands will come in many
  forms
• Low cost country components will be part of the
  supply chain use it to your advantage
• Canada must continue to improve trade
  infrastructure with US our biggest customer for
  the foreseeable future
• Canada must continue to remain globally
  competitive through enhanced R D, fostering
  innovation and attracting new investment
• Embracing globalization-not running from it. It
  provides great opportunities for those willing to
  reach for it!
• and
• Investments in human resources aka The Human
  Element

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The Voice of the Automotive Original Equipment
Suppliers in Canada
Gerry Fedchun gfedchun_at_apma.ca [phone]
Fax [phone]