GM Canada Vice President Addresses Oshawa Chamber of Commerce

2015-07-30

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Good morning and let me say thank you to Oshawa Chamber CEO Bob Malcolmson for inviting me here this morning.

As Bob mentioned, it is my honour to be taking on the role of Chair of the Canadian Chamber of Commerce in October, so I think it’s fitting that I make my first remarks right here in our home Chamber in Oshawa where we have been proud members for so many years.

I would like to share some perspectives on the state of Canada’s auto sector and General Motors outlook here in Oshawa.

This remains a much discussed topic that affects businesses, families and I would say even our sense of economic confidence in Ontario and Durham Region.

Let me start by offering three general observations:

First, while the past decade has offered up extraordinary challenges for GM Canada and the entire Canadian auto sector, I would argue that Canada’s auto industry came through those challenges remarkably well.

Particular credit should go to the Ontario and federal governments. Literally, GM would not be here without them.

Second, while some today persist in painting auto’s future as one of “doom and gloom”, we at GM Canada see a lot to be positive and optimistic about, including right here in Canada and in Oshawa.

And third, the auto sector is quickly moving to the cutting edge of a disruptive, exciting age of technology, innovation, change and opportunity and that is also important and exciting for us in Oshawa.

I would also say the work we’re doing at our Oshawa Engineering Centre is very important for Canada.

So let’s start with a quick 10-year recap of the auto sector in North America by focusing on vehicle production stats – because that has traditionally been the driver of auto jobs and prosperity.

Over the past ten years, total North American production rose from 15.8 million units in 2004 to 17 million in 2014. In the middle of that ten year stretch we have the great economic crisis of 2008 and 2009.

2008 was also the year when sales dipped but also Mexico surpassed Canada in overall production, and it has not looked back since.

There are many reasons for that shift in auto production and they do NOT all have to do with lower wage rates – although that is a significant difference.

There is no question that there has been a shift southward in auto production, but let’s also take note of where the production shift came from.

Between 2004 and 2014, Mexico’s share of North American production grew from 9.4% to 18.8%. That included new investments from Europeans like Volkswagen, Audi and BMW as well as Japanese and Korean OEMs. The US lost 6.5 points of North American share from 73.6 to 67.1 and arguably Canada held more steady losing 2.8 points of share to 14.1 %. This is actually remarkable when you consider that from 2007 to 2014 the Canadian dollar rose to abnormally high levels that made Canada one of the most expensive places anywhere to make a vehicle.

So, why did Canada fair better overall in holding up its share of production?

Much of the resilience of Canadian auto production had to do with the leadership of the Canadian and Ontario Governments in 2009 in supporting GM and Chrysler’s restructuring and in return we signed up to retain a strong production base in Canada.

GM has fulfilled all of the promises it made in 2009 and then some – in fact we expect to exceed our Canadian production promises that run to the end of 2016 by close to 1 million vehicles.

This next chart shows how that production shift played out within Canada. Over the past several years, Canadian based production has continued to be led by GM Canada, Fiat Chrysler and Toyota.

Honda has been a step lower on production volumes and Ford is now the smallest volume producer of the 5 in Canada.

So that is where we stand today and I think it is worth noting that we owe an incredible debt of gratitude to the federal and Ontario governments for helping to get us here.

In addition to their leadership in 2009, we have seen a number of very important positive policy wins.

In 2002 the Canadian Auto sector set out a united Canadian Auto Strategy through the Canadian Automotive Partnership Council. That strategy called for the development of competitive auto incentive funds (that brought us the Beacon project and the General Motors Automotive Centre of Excellence or ACE at Durham College, complete with its climactic wind tunnel).

Our Federal government also addressed the harmonization of key Canadian and US safety and fuel economy regulation which was a huge significance for our business in Canada.

We’ve also achieved critical logistics improvements at the US Canadian border, the Gordie Howe Bridge at Detroit – Windsor.

Ontario’s Jobs and Prosperity Fund continues to make investments across the sector.

And in the most recent federal budget, new supports for Canadian auto suppliers through the Automotive Supplier Innovation Program helps ensure suppliers continue to lead in innovation.

These are huge wins for Canada’s auto sector, they help keep us competitive and they should be acknowledged.

The auto sector, including OEMs, suppliers, unions and academics joined in calling for these changes and frankly, our governments delivered.

If I had to offer up a score card on how Canada’s auto sector faced up against the economic crisis and how government supported our sector, I’d have to say pretty well!

But, headlines continue to cast endless doubt on the future horizons for Canada’s auto sector.

Of course, here in Oshawa, we know that one of the six vehicles we produce at Oshawa Assembly, the current model Chevrolet Camaro, will come to its end of production at the end of November.

Our community in Oshawa, but no less the communities of Brampton (Fiat Chrysler), Woodstock (Toyota), Windsor (Ford) remain understandably nervous about what future new product mandates may be won to keep those plants, their workers and their suppliers working into the future.

I can’t speak for the other auto OEM, but I have to say that at GM Canada we feel a healthy amount of optimism about the prognosis for our future in Canada and in Oshawa.

Now, let me underline the word I just used to describe the process of new product mandates for assembly plants – they need to be won. Winning only comes after a great deal of analysis, study and collectively putting our very best foot forward.

As our president Steve Carlisle has set out in numerous meetings and a series of Community Updates since his appointment last December, we believe we have tremendous strengths in Canada, not the least the policy victories I just mentioned through CAPC.

Other than ‎serving our customers, winning new mandates and selling more vehicles are our top two priorities at GM Canada. We are working very closely with our key partners to put forward the most positive case for the future.

We are sometimes asked, what are the key criteria that are studied to determine new assembly investments? This is a complex process but I can oversimplify it into four areas of study:

The plant itself – including the cost effectiveness of its infrastructure, energy costs, logistics, flexibility and its track record for quality and productivity;
Our local workforce – not just labour costs but also the flexibility and structure of our agreements
Our suppliers – they need to be cost competitive, innovative, high quality and flexible
Government policy – not just incentives or advantages like our health care system, but also our read on possible future restrictions or risks from new policies that impact us.

So why do I say we are feeling positive? Part of that is simply our approach and attitude at GM Canada. We have no time for doom and gloom. We prefer a Can Do approach. But there are some specific positives I can point to as well.

First, at GM we like to build where we sell. And we especially like to build in places where we are growing sales. And that is what in now happening in Canada.

In our sales report for the month of June:

Chevrolet total sales increased by 13 per cent
Buick total sales increased by 29 per cent
GMC total sales increased by 18 per cent
Cadillac total sales increased by 13 per cent
GM is the fastest growing pickup sales company in Canada

The other reality, when you export almost all your production to the US, is that its beneficial to be able to hedge currency impacts against the cost of imports, like the vehicles we sell to Canadians in growing numbers.

There are also many external factors we simply don’t control. Economic growth is always a positive for auto sales and frankly so too are low gasoline prices. In recent years, the high Canadian dollar has been a strong impediment for Canadian manufacturers, but this has now swung the other way – perhaps over swung.

We don’t make investment decisions based on spot prices for oil, gasoline or the loonie. We look at an estimated foreign exchange over a longer horizon when we make investment decisions. That’s said, exchange and other economic factors look more positive over the coming years than they have been.
And then what about those investment factors for Oshawa Assembly?

Our Oshawa Assembly facility in fact has a lot going for it – a new paint plant and state of the art flexible manufacturing system, a close proximity supplier park and a stellar track record for quality and productivity to name but a few advantages.

Our Unifor partnership is also strong. We have worked through the Camaro changes in a positive and productive manner. As a result, we are confident we will manage this change without the need for layoffs.

We are able to do that because we have a high number of retirement eligible hourly workers that have elected to take negotiated retirement incentives. Clearly, our contract negotiations in 2016 will be very important for our future as well, but clear communications and trust give us a lot of confidence.

Our suppliers are another key part of the equation. We have been working very closely with outstanding companies like Magna, Martinrea and with the APMA to measure the cost competitiveness, quality and innovation of Canadian based suppliers. Again, we believe this can be is a net strength for Oshawa – supported again by the most recent federal budget.

Our governments have played a key positive role well beyond the restructuring of 2009 to make Canada a more attractive jurisdiction for auto investment.

New issues will always emerge – but whether those are initiatives like Cap Trade, electricity prices, Ontario pension policies, new trade agreements, I can say, as the executive responsible for public policy at GM, I have never felt more confident in our mutual focus on ensuring these or other policies do not harm investment opportunities in Oshawa.

In fact, I believe some will net out as positives for us that will help us develop competitive advantages for the future

Now I do not mean to sound Pollyannaish or downplay the challenges we face as we build our investment case for the future in Oshawa Assembly.

I am also conscious, wearing my Chamber of Commerce hat that economic and policy issues face various sectors of our economy in different ways.

But I do believe that factors are looking much more positive for GM and our sector in Canada.

In true Team Canada fashion; Steve Carlise and General Motors Canada along with all of our partners are committed to winning.

If it’s true that Canada’s auto sector has held its own over a difficult decade, and if it’s true that there is in fact a case for a more positive and optimistic outlook, then are we really ready for that future?

The auto sector is quickly moving to the cutting edge of a disruptive, exciting age of technology, innovation, change.

Put simply, I believe the automobile is the next big platform for innovation in mobile communications and “the internet of everything” – we call it “the connected car”.

What smartphones and tablets did to connect us in the past decade, the automobile will do for us in the next – and much more. Automotive will be the next key step in the Internet of things – machine to machine connection, vehicle to vehicle, road to vehicle and very connected drivers.

At GM, we expect that within the next five years, 75% of our customers will be wirelessly connected from their vehicle.

The arrival of the “connected car” is opening up very new and different ways of looking at the experience and expectations of our auto customers. It is also changing how we look at our business and how we can deliver for our customers.

One thing I know everyone here understands is that the pace of innovation is changing.

It took the world 74 years for the telephone to reach 50 million users.

The internet took 2 years to get there – social media 1 year. So what does this mean for the world?

I think it means that connected, automated driving is becoming a reality a lot faster than many people think.

Let me share just a few examples with you how GM is responding to this change.

Many of you may be familiar with our Onstar system. For almost 20 years we have been protecting and supporting our customers with a live voice at the push of the blue button – how often does that happen at your mobile phone company?

Today, we are also providing our customers with 4G LTE connectivity and wifi across virtually all of our new vehicles.

That means our vehicles are now mobile hot spots able to support up to 7 devices at a time for passengers streaming video, keeping connected on Instagram or listening to your Spotify music lists.

The connected car is also about making life simple.

On the road, customers want even better integration between phones and their vehicles.

And we need to do that in a safe manner.

So we recently joined together with Apple and Google to announce that Chevrolet will offer Android/Auto and Apple CarPlay compatibility in more models around the globe than any other automotive brand.

This is a smart, simple integration that will now bring our customers’ digital life into the car – their key information on their phones while driving.

Another example is the RemoteLink.

When this OnStar app first launched, it was the industry’s first smartphone application to give owners a remote connection to their vehicles and control of vehicle functions.

Today we have 1.6 million RemoteLink users globally with almost 106,000 registered users in Canada

Teen driver is an on-board app initiated and operated by the parent and it tracks distance driven, maximum speed travelled, over speed warnings issued, anti-lock brake events and more.

When activated, Teen Driver automatically mutes the radio until seat belts are fastened.

If you have a teenager you’ll appreciate why that works.

What does all this disruption, change, and innovation mean for Canada and for Oshawa?

The short answer is “opportunity”

Canada has been an auto producing jurisdiction for more than 100 years when Colonel Sam McLaughlin decided that only a Buick engine would do for the McLaughlin Carriage.

We have an innovative engaged supplier base and we have exceptional talent being produced in our academic institutions.

On April 27 we were extremely excited to announce that we have been awarded a new mandate for our GM Canada Engineering Centre in Oshawa and we are now in the process of hiring 100 of the best and brightest software engineers we can find.

We think there is further growth opportunity in our Engineering Centre and with our university and college partners in the future. New supply chains and ecosystems will emerge.

One day soon Oshawa could be an important new pivot point in the Ontario mobile tech corridor running between Waterloo and Ottawa.

The connected car is a great opportunity area for Canada to address its long-standing challenge of commercializing RD.

As a connected car leader, innovator and integrator, GM Canada plans to help seize this opportunity.
So let me sum up with these points:

Canada’s auto sector has held its own over a difficult decade

Factors are looking more positive for GM and our operations in Oshawa. All of our partners are committed to winning. We feel positive and optimistic.

The Connected Car is the next big platforms for innovation in the auto sector and its happening in Oshawa.

Canada has a unique set of experience and natural advantages in this space.

We are hiring, expanding, partnering – we want the best and the brightest for this next stage in auto innovation.

Thank you for your attention and we look forward to working with all our partners as we seize the day and skate to where the puck is going.

Thank you.