Thank you, Mr. Chair.
Thank you, Jerry.
Good afternoon everyone. I appreciate the opportunity to share, from Ford of Canada's point of view, some of the challenges we're having with manufacturing in Canada.
To give a background on Ford Motor Company, globally we're an industry leader with 199,000 employees and 67 plants worldwide. We sell to more than 200 international markets around the world.
We were founded in 1903, so we have a very long history. Canada was the first international expansion for the Ford Motor Company. This happened a year later, in 1904. We have a very long and proud history as well. We have been a part of Canada's economic fabric for 112 years, providing high-quality jobs that build and sustain Canada's middle class.
Ford of Canada employs over 8,200 men and women. We have an assembly plant in Oakville. We have two engine plants in Windsor. We have two R and D centres. We have two parts distribution centres. We have sales offices across Canada. We also have Ford Credit Canada, which is our financing entity.
Ford makes purchases of over $5 billion annually from parts suppliers located across Canada, to support both our Canadian and our global operations. We have a network of 425 dealers that are located across communities, representing 19,000 employees.
Throughout our history in Canada, Ford has made significant investments to innovate and upgrade our vehicle and engine production to ensure that our Canadian operations are globally competitive and thriving. These investments in our manufacturing operations have also included substantial investments in research and development, and innovation in Canada.
Since 2000, Ford has invested over $12 billion in our Canadian operations, including a $500-million investment in 2008 to reopen our Essex engine plant, which was the only Ford plant in North America that reopened during the crisis. There were 21 assembly plants in North America that closed during the crisis, and Essex was the only one that reopened. The St. Thomas assembly plant closed in Canada. Jerry knows as well as we do how painful and how tough that plant closing was.
The good news is that Ford is currently completing a $700-million investment in Oakville to produce the Ford Edge and the Lincoln MKX. This is an innovative global platform for export markets. Today we are building the Ford Edge with right-hand drive and a diesel engine for export to Europe. This just started in December. We're quite excited about it.
Trade and the ability to export or import vehicles is fundamental to Ford's business. Today, on a global basis, Ford exports over 40% of the vehicles it produces worldwide. Even more important to Ford of Canada, 100% of engines built in Canada and 90% of our vehicles built in Canada are exported to 100 countries around the world. While the U.S. remains an important market for Canadian-produced vehicles, we have demonstrated that we can build products for markets around the world.
For example, in 2014, Ford exported to China 21,000 Edges which were built in Oakville. This represented an export value of over $600 million. Today, exports of the Lincoln MKX built in Oakville for China represent 30% of the MKX production in Oakville.
Ongoing investments to continually innovate Canadian assembly plants are critical to maintaining the competitiveness of the Canadian auto sector. Investments in new advanced technologies, processes, and innovation in the auto sector occur primarily during the investments to the present facilities that need to be upgraded. However, securing new investments for Canada has become extremely difficult, due to the fact that Canada has become a high-cost jurisdiction for manufacturing, especially given the realities of the global competition for auto investments.
Countries around the world aggressively compete to win and maintain automotive production mandates because governments recognize the importance of economic spinoffs that are driven by automotive production.
For example, a study by the Center for Automotive Research recently concluded that each job in automotive assembly plants will create anywhere from seven to nine spinoff jobs for the supply base. Our sector is highly independent on the supply base as well, so that's also very important
However, recently—I mentioned those investments, which we're really quite excited about—Canada has been unable to attract new auto investments at the same pace as other countries. According to a recent news article, in 2014, a total of $18 billion in new auto investments were announced for North America. Of this amount, $10 billion was announced for the U.S., $7 billion was announced for Mexico, and $1 billion was announced for Canada, of which Ford of Canada was a part. Clearly, we are missing out on an important opportunity.
Recent data from Statistics Canada indicates that for 2014, manufacturing was the second largest contributor to Canada's GDP at 11%—which Jerry mentioned—only behind real estate.
These trends are very concerning.
In order to maintain a vibrant and competitive global manufacturing sector, Canada needs a strategic plan that, first and foremost, recognizes manufacturing as a fundamental cornerstone of a healthy economy and that identifies policies to maintain and potentially grow Canada's manufacturing sector.
To be successful, all government policy at the federal and provincial levels should be evaluated through a lens that considers its impact on the cost of manufacturing in Canada, as well as the benefit to manufacturing in Canada. To achieve this, it is important that all stakeholders work together to develop the best possible case for Canada. Productivity will be critically important to achieving a globally competitive business case to invest in Canada as a high-cost jurisdiction.
For Ford, this means working with our partners at Unifor—we have a great relationship with Jerry—to achieve a labour agreement that delivers globally competitive operating costs, high levels of productivity and throughput, and flexible operating patterns that allow our Canadian plants to maximize capacity utilization.
Government also has a role to play. As mentioned, governments around the world aggressively pursue automotive investments because of the important economic spinoff benefits and because of the ability of the auto sector and manufacturing in general to create and sustain middle-class jobs. It is vitally important that Canada's strategic approach to attracting and securing ongoing automotive investments keep pace with competing jurisdictions around the world in order to be successful.
From Ford's perspective, we would like to provide just two very specific recommendations that we believe are important when developing a successful manufacturing strategy for Canada's auto sector.
First, we appreciate the extension of the federal automotive innovation fund. The AIF has been important in Ford's ability to secure recent investments in Canada. However, the structure of the AIF needs to be changed in order to make the AIF more effective and competitive with other jurisdictions.
For example, currently the AIF provides repayable contributions, or loans, which are taxed as revenue in the year in which the loans are received. This substantially reduces the value and the effectiveness of the AIF, which again is not competitive with other jurisdictions.
Second, trade policy matters. At Ford, we have demonstrated that Canada can successfully produce vehicles for export to countries around the world. However, a key component to the success of an export strategy is the willingness of the export market to allow Canadian imports. Ford has been selling vehicles in global markets for over 100 years. Based on our experience, not all countries are willing to open their markets to automotive imports. Japan and South Korea remain the two most closed vehicle markets in the world among auto-producing nations. This is a trend that stands out within the highly integrated global auto sector.
Ford supports free trade around the world because we see trade as it is, a business transaction that should provide for comparative advantages, enabling a business case to invest in Canada. Trade allows companies like Ford to leverage their manufacturing scale. However, in order to deliver real benefits to the Canadian economy and successfully support Canadian manufacturing, trade agreements should enhance export opportunities and level the playing field for Canadian manufacturers and workers.
Most recently, with the TPP and the South Korean free trade agreement, we were very disappointed with the outcomes of both.
The TPP specifically falls short on two very important points. Despite the highly integrated nature of the Canadian and U.S. auto sectors, Canada accepted an accelerated tariff phase-out of five years, five times faster than the auto tariff phase-out that was agreed to in the U.S., 25 years for cars and 30 years for trucks. Both of the U.S. tariffs are back-loaded. It is very uncompetitive with the U.S.
Also, the TPP failed to include strong and enforceable currency disciplines to address currency manipulation. We know there are governments that manipulate their currency, including the Japanese government. That is why we have been extremely strong in making sure we have currency disciplines in the TPP.
The bottom line is that the automotive terms in the TPP will not increase Canadian auto exports in any meaningful manner. Instead, the TPP puts the automotive manufacturing footprint, which already faces competitive challenges, at further risk.
We look forward to continuing to play a vital role in terms of anticipating whatever influence we can have on the outcome of the TPP.
In summary, manufacturing is critically important to Canada's economy, but we believe Canada is at an important inflection point when it comes to manufacturing. The year 2016 is going to be a critical year for manufacturing in Canada. We're going to work with our Unifor partners to make sure we get a competitive labour agreement, but we also look forward to working with all of you, our government colleagues, to achieve a manufacturing strategy that ensures that Canada's auto sector can and will continue to be a strong competitive cornerstone to Canada's economic success.
Thank you for your kind attention.