Unit 9: Canadian Manufacturing Sector

(Lindsay Porter and Alfred Hecht)

Manufacturing was responsible for the export of more goods than any other industrial sector in Canada. In 1998, manufacturing contributed 17.8% of Canada's GDP with a value of over $129 billion, spread over 26 sectors. Some of the products manufactured include cars, car parts, processed foods, gasoline and heating oil, lumber, plywood and computers. However, most of the goods are produced with a much smaller labour force than in previous years, and 40% of the country's manufacturing assets, output and employment are controlled from outside the country.

The heart of manufacturing in Canada is located in Ontario and Quebec; these two provinces account for 75% of all manufacturing output in Canada. The Golden Horseshoe region of Southern Ontario is Canada's most important industrial region. Most secondary manufacturing is concentrated in and around the large metropolitan centres in the area (e.g., Toronto, Hamilton). In 1995, Ontario led in number of shipments [1] in 15 out of 22 major industry groups including transportation, food products, chemical products and electrical and electronic products. Quebec led the country in the production of textiles, clothing, primary textiles and paper products while British Columbia manufactured the most wood products, most of which went to the US.

As of 1996 there were close to 2 million people employed in the manufacturing industry across Canada making up almost 15% of the national work force in Canada. The majority of manufacturing employees can be found in Ontario, followed by Quebec, British Columbia and Alberta. The Northwest Territories and the Yukon have the smallest number of people employed in manufacturing.

The automobile industry is very important to the Canadian economy. It is the backbone for many other manufacturing sectors in the country including steel, rubber, plastics, aluminum and glass. The industry had the largest export value in 1994 ($57 billion). Approximately 1/7 of all Canadian manufacturing [3] jobs depend on this industry, which employs close to 500,000 people across the country. Light duty vehicles (cars, vans, pick-up trucks) and heavy duty vehicles (large trucks, buses, military vehicles) are produced along with various parts, components and systems. Cars account for almost 1/4 of all Canadian merchandise exported and imported due to the 1965 Canadian - USA Auto Pact. The Auto Pact is an agreement signed between Canada and the United States to make it easier for cars and car parts to be exchanged across the border. It also ensures that a certain amount of US vehicle and parts manufacturing occurs in Canada.

Canada is the seventh largest producer of motor vehicles in the world behind the US, Japan, Germany, France, South Korea, and Spain, with 2 million vehicles produced annually. This accounts for 4.5% of the world's total automobile production and 16% of the North American (Canada, United States and Mexico) output. The three automobile manufacturers that account for 90% of the vehicle production in Canada, 41% of the value of parts produced and 50% of the industry's employment are General Motors [4], Ford [5] and Chrysler [6] -- 'the Big Three'. Other assemblers of light vehicles include Honda, CAMI, Toyota and Volvo. Of the Big Three, the Chrysler Canada Ltd. plant in Bramalea, Ontario is the most efficient in North America using only 2.54 workers per day to assemble a car; Toyota's Cambridge plant is the most efficient in Canada using only 2.35 workers per day. Although these companies are responsible for the bulk of automobile production in Canada, all are 100% foreign owned.

With the exception of two assembly plants in Quebec and one small plant in Halifax, Nova Scotia, all vehicle assembly [7] in Canada takes place in Ontario -- between Windsor and Ottawa. Ontario is responsible for more than 90% of the employment in vehicle assembly and more than 95% in parts manufacturing. The 14 light duty assembly plants in the country produce on average 2.4 million vehicles per year, employ 55,000 people and export 90% of their products. In 1996, the assemblers of light vehicles produced 16% of the North American total production. There are also 14 heavy duty vehicle manufacturing plants which produce close to 30,000 vehicles annually, employ 15,000 people and export 90% of their products. The majority of Canada's automobile exports go to the United States ($64.7 billion) followed by the European Union ($299 million), Mexico ($241 million), and then Japan ($172 million). Imports into Canada come mainly from the US ($49.2 billion), followed by Mexico ($3.3 billion), Japan ($2.9 billion), and then the EU ($1.5 billion).

The manufacturing of automobiles is only one of the many modern manufacturing industries in Canada. Another example is the Canadian Space Agency that contributes to the international space program and played a key role in the construction of the space station in orbit. The Canadian Space Agency and Spar Aerospace [8] designed and manufactured the Canadarm [9] that joins the space shuttle Atlantis with the Russian Space Station Mir. In addition, they also created a Mobile Servicing System that is responsible for the assembly and maintenance of the space station. The Canadian Space Agency has reduced the amount of time that astronauts and cosmonauts are required to work outside the shuttle while in orbit. The Mobile Service System (MSS) operations complex is located in St. Hubert, Quebec where infrastructure, resources, equipment and expertise for MSS space operations such as training, logistics, support, ground processing and sustaining engineering are provided. The MSS will also plan missions, monitor the health of the Canadarm and train astronauts and cosmonauts [10] for their flights in space.

Bombardier Inc. is a high tech manufacturing company in Canada and, unlike the Big Three, is mostly Canadian owned (88%). In 1995 it was number eighteen on a list of the top 500 manufacturing companies and was the top general manufacturer in Canada that same year. The company is based in Quebec and has production facilities in Canada, US, Mexico, UK, Finland, Germany, Czech Republic, Switzerland, Austria, Belgium and France. More than 92% of its revenues come from outside Canada. The majority of its employees are located in Canada (22,000) followed by Europe (18,000), US (9000) and Mexico (2000). Founded in 1942, the company first manufactured tracked vehicles for transportation over snow-covered terrain. In April of 1996, Bombardier Inc. was re-organized into five groups: aerospace, transportation, recreational products, services and capital.

Bombardier is a world leader in railcar design, manufacturing and distribution. It has 24 production facilities, 18 marketing and sales offices and service centres all over the world. The company has been responsible for manufacturing passenger rail vehicles and freight wagons, rapid transit cars for New York City and TALENT Diesel Multiple Unit. Bombardier has also manufactured the subway trains for the city of Toronto [11]. These trains are able to travel at speeds up to 88 km/hr and can carry 250 passengers per car. In addition to manufacturing subway trains, the company makes transportation for the urban market, suburban and regional and intercity markets as well as providing distinctive products and services. Other examples of their transportation products include Toronto's Go Transit system [12] and the shuttle train [13] for the England-France 'channel'.

Bombardier also designs, develops, builds, distributes and markets recreational vehicles such as Ski-Doo and Lynx snowmobiles, snow grooming equipment and multi purposed tracked vehicles, Sea-Doo water craft and sport boats, and Bombardier all terrain vehicles. It is the world's leading manufacturer of regional airline aircraft and is flown by 25 airline customers in 14 countries on 5 continents. Bombardier also manufactures business aircraft such as Global Express, Canada SE, Challenger 604, Continental, Learjet 60, 45 and 31A. Its amphibious aircraft, the manufacturing plant of which is headquartered in Montreal, produces CL-415 amphibious multi role aircraft [14] with 4 door water tank systems which can hold 6137 litres of water.

The Mitel Corporation based in Kanata, Ontario was ranked the nineth best telecommunications company and 230 best company overall in 1995. The company designs, manufactures and markets telecommunications products, has 74 offices world wide and employs more than 6 300 people. In addition to its headquarters in Kanata, the company has plants in Virginia, US, Guadalajara and Mexico City, Mexico, the UK and Asia, and is 43% foreign owned. Some of the company's specialties include telephones, WAN Internet working, wireless access, communication systems level integration, home gateway and optoelectronics markets. They also improve AIC's used in pacemakers, hearing aids and monitoring equipment. Mitel [15] manufactures many different products such as telephone systems, messaging solutions, call centres, convergence/voice LAN, remote access, Internet access, dialers, home office solution, public network systems and developer solutions.

One other high tech manufacturing company that can be found in Canada is IBM Canada [16], which like GM, Ford and Chrysler, is 100% foreign owned. As of 1998, IBM Canada had 17 222 employees, 3006 of which were involved in manufacturing and development. The company earned $4.8 billion in 1998, which was up $0.9 billion from 1996. Of the 143 facilities across Canada, there is only one manufacturing facility and that is in Bromont Quebec. This plant is one of North America's leading technology manufacturing plants and it tests or assembles more than 90% of the microchips manufactured by IBM in the US. Over 2000 people are employed here packaging IBM semiconductors. The IBM laboratory in Toronto develops database technology, application development, object technology, Internet applications and industry solutions. IBM is one of the world's largest software manufacturers producing business PC's, home/home office, notebooks and PC companions, servers, workstations, microelectronics, networking, accessories and peripherals, printing systems, software and storage (hard drives etc.).

Not all of the manufacturing companies in Canada are high tech. Steel, pulp and paper and aluminum manufacturing are all part of primary manufacturing where raw materials are processed into more valuable products. Canada has 17 plants which melt and pour steel and they can be found in  Alberta, Saskatchewan, Manitoba, Ontario, Quebec and Nova Scotia. Ontario produces the bulk (70%) of Canada's steel [17]. In 1997, there were $3.6 billion in exports of flat-rolled products, long products and specialty and alloy steels, most of which served North American markets. As steel is the most recycled material in the world, all new steel made in Canada contains some older steel and more than 65% of this is recycled in the end as well [18]. Steel is produced in two ways: in a blast furnace and in an electric furnace. In the blast furnace, iron ore, limestone and coke are melted to make molten iron, which is refined with scrap in an oxygen furnace to make liquid steel. Algoma, Dofasco and Stelco are three steel manufacturers in Canada who use this method. In an electric furnace operation, scrap or direct reduced iron is melted to produce steel. Algoma Steel [19] was founded in 1901, and is located in Sault St. Marie, Ontario, near Lake Superior. It uses blast furnaces to make its steel and is only 19% foreign owned. Dofasco [20] is one of North America's most progressive, fully integrated steel makers and was founded in 1995. Located in Hamilton, Ontario, all of its requirements for iron ore come from the Quebec Mining Company, Iron Ore Company of Canada and Wabush Mines. There is also a branch of Dofasco, Gallatin Steel, located in Gallatin County, Kentucky. In 1995 the company's raw steel production was 2 876 000 tons, 2 740 000 tons of which were produced in Canada comprising 17% of Canada's steel production. Canada's largest steel producer is Stelco Inc. [21]. Located in Hamilton, Ontario alongside Dofasco, this company produces, manufactures and sells steel. Stelco owns Hilton works in Hamilton Ontario, Lake Erie Steel Company in Nanticoke Ontario, Stelco McMaster L'tee in Contrecour Quebec and AltaSteel Ltd. in Edmonton, Alberta. In 1998,Stelco produced 5.3 million tons of steel and 4.6 million tons worth $3.2 billion were shipped to customers.

One other major metal manufacturing company in Canada is Alcan Aluminum [22], which is headquartered in Montreal and is 39% foreign owned. It has subsidiaries and related companies in 21 countries all over the world including the US, UK, Italy, Brazil, Australia, and Japan. The company is involved in alumina refining, power generation, aluminum smelting, manufacturing and recycling; the aluminum refining plants are located in Canada, Jamaica, Brazil, Guinea, UK, India, Japan and Australia. Aluminum is produced by mining bauxite and the alumina is extracted by a chemical process; an electrolytic process then reduces the alumina to aluminum [23]. In addition to being one of Canada's largest steel producers, Stelco is also one of the world's top aluminum producers. It owns and operates 13 primary aluminum smelters (four are located outside of Canada). In 1997, Canadian smelters produced 1,096,000 tonnes of primary aluminum, while subsidiaries in other countries produced 355,000 tonnes [24].

In addition to manufacturing metals, Canada also manufactures pulp and paper products. The world has always looked at Canada for its high quality paper and wood products and in 1997, Canada was second in the world in terms of total wood pulp production. The country has made a pulp contribution to the merchandise trade balance equal to one third of its $28.3 billion surplus. Wood pulp is manufactured by separating the wood fibres that are held together by lignin through mechanical tearing or by chemically dissolving them. When the wood pulp is mechanically torn apart, 85-95% of the original wood products are used for paper products (i.e., newsprint). When the wood pulp is chemically dissolved only 40-55% of the original material remains in the final product. In 1995, Canada produced 11 million tons of mechanically processed wood and 8.2 million tons of chemically processed wood [25]. Other than pulp, there are many other products manufactured by the Canadian Pulp and Paper Association. These include different types of papers such as printing and writing papers, kraft papers, special papers (greaseproof & glassine), sanitary papers (kleenex, toilet paper etc.) and paperboard (box board and container board). Canada is also the world's largest newsprint producer and exporter, shipping newsprint to every corner of the world. Newsprint comprises the largest segment of Canada's paper and paper board industry and in 1996 it satisfied 26% of the world's newsprint demand. In 1996, market pulp was the largest exported product [26] followed by newsprint, printing and writing papers and paperboard. In 1997, the US received 50% of Canada's paper products followed by Asia, Europe and Latin America.