stc factpack automotive- canada

1

THE AUTOMOTIVE AND CONSTRUCTION EQUIPMENT INDUSTRY

CANADA

Fact Pack

Swedish Trade Council in Canada

2006

2

Overview Canadian Manufacturing Industry

Canadian Automotive Industry

Canadian Construction Equipment Industry

Recommendations

References

Appendices

CONTENT

Notes:1. The exchange rate in this report is: 1CA$ = SEK 6.5669 (as of June 1st, 2006)2. See Appendix 1 for definition of automotive terms used in this report.

3

THE AUTOMOTIVE INDUSTRY ACCOUNTS FOR 18.6% OF TOTAL MANUFACTURING SHIPMENTS IN CANADA

Total shipments of the Canadian manufacturing industry are more than SEK 4,015 billion (2005)

The average wage for a manufacturing industry worker in Canada is SEK 135.34/hour (2005)

There are approximately 97,860 companies* within the manufacturing industry in Canada (2005)

40,000 firms are directly tied to the automotive industry (manufacturing, sales, distribution, repair)

Manufacturing employs 1.9 million workers (2003) Automotive manufacturing – assembly and parts –directly employs 231,800 thousand workers (2005)

Canada’s 5 largest manufacturing industries (2005)Shipments value, SEK billions

The Automotive Industry is Canada’s largest manufacturing sector

Sources: Statistics Canada; Desrosiers Automotive Consultants

*Includes 37,275 owner-operated (non employers)and indeterminate

304.36

314.23

359.90

749.57

0 200 400 600 800

449.79

Primary Metals

Chemical

Petroleum/Coal Products

Agri-Food

Automotive(Assembly & Parts)

SEK billion

4



Passenger cars and commercial vehicles

Commercial vehicles

Suppliers


Recommendations

References

Appendices

CONTENT

5

THE CANADIAN PRODUCTION OF LIGHT AND HEAVY VEHICLES TOTALS SEK 458 BILLION

0

100

200

300

400

500

600

2001 2002 2003 2004 2005

Value of Shipments Total Exports Total Imports

33%

4%

5%

58%

Auto parts and

componentsSEK 240.5

billion

Motor Vehicle Body and Trailer

SEK 26.8 billionLight Vehicle

(Passenger Cars, Light Trucks) SEK418.5 billion

SEK billion

Canadian Automotive Industry Shipments

Canada exports about 76% of total automotive production, primarily to the U.S.

Heavy Vehicle(Heavy Trucks, Buses)

SEK 39.6 billion

Automotive Production by Sector in Canada (2005)

Sources: Desrosiers Automotive Consultants; Industry Canada; KPMG’s Guide to International Business Costs, 2006 edition

6

2.7 MILLION VEHICLES WERE PRODUCED IN CANADA IN 2005

VEHICLE MANUFACTURERSVEHICLE MANUFACTURERS

(Weight < 6.35 t)Key manufacturers

GMDaimler-ChryslerFordToyotaHondaCAMI Automotive

LIGHT TRUCKS*(1,267,353 vehicles)LIGHT TRUCKS*

(1,267,353 vehicles)

Key Bus manufacturersCanadian Bluebird CoachEntreprise Michel CorbeilMotor Coach IndustriesOrion Bus IndustriesPrévost Car IncorporatedNovabus Corporation New Flyer IndustriesA. Girardin Inc.

BUSES(Estimated 20,000** vehicles)

BUSES(Estimated 20,000** vehicles)

HEAVY TRUCKS(64,812 vehicles)

HEAVY TRUCKS(64,812 vehicles)

(Weight > 6.35 t)Key Heavy Truck mfrs.

Canadian KenworthInternational Truck & Engine CorporationSterling TrucksHino Motor Ltd

COMMERCIAL VEHICLES (1,332,165 vehicles)COMMERCIAL VEHICLES (1,332,165 vehicles) PASSENGER CARS(1,356,198 vehicles)

PASSENGER CARS(1,356,198 vehicles)

Key manufacturersGM Daimler-Chrysler FordToyota Honda CAMI Automotive

Sources: R&I; Estimate of bus vehicles based on manufacturer websites and telephone interviews

*Minivans, SUVs and pick-up trucks are categorized ‘light trucks’ in Canada although

they are mainly for non-commercial use.

**In Canada bus production is included with heavy trucks

7




Commercial vehicles

Suppliers


Recommendations

References

Appendices

CONTENT

8

TOTAL PASSENGER CAR PRODUCTION IN CANADA IS STABLE- Decline of North American Big Three against the rise of foreign OEM’s

Market share loss of North American Big Three (GM, Ford, Daimler-Chrysler) matched by gain of foreign OEMs

Foreign OEMs (Toyota, Honda) surpassed the Big Three sales of light vehicles (cars and light trucks) in Canada in 2003Big Three are undertaking major restructuring to combat shrinking market share

Government stepping up automotive investment promotion, especially to Japan and Europe

SEK 6 billion in federal and provincial government aid from 2004-2006Capital investments in Ontario at an all-time highRecently announced expansions by major auto makers and parts suppliers (see Appendix 3)

0

300,000

600,000

900,000

1,200,000

1,500,000

2001 2002 2003 2004 2005

Passenger Car Production in Canada Development the last 5 years

Vehicles

Sources: R&I; Desrosiers Automotive Consultants

9*Market share = % of vehicles sold in 2005 (does not add up to 100% due to share of market for other imported vehicles)

100%(Incl. with GM; Suzuki is separate)

Partly GM Worldwide Purchasing / Partly CAMI plant,

Ingersoll, Ontario

Passenger cars and light trucks

2,300CAMI Automotive(GM-Suzuki)

9.8%

11.1%

13.4%

13.7%

28.7%

Market Share*

Partly North American HQ, Ohio (U.S.A.) / Partly Honda

plant, Alliston, Ontario

Toyota Motor Manufacturing Inc., Cambridge, Ontario

Corporate HQ, Dearborn, Michigan

Corporate HQ, Auburn Hills, Michigan (U.S.A)

Partly GM Worldwide Purchasing / Partly Canadian

HQ, Oshawa, Ontario

Purchase decisions

100%

100%

100%

100%

100%

Foreign Ownership


4,900Honda

Passenger cars4,500Toyota


13,000 Ford



Business

11,000DaimlerChrysler

20,000 GM

EmployeesManufacturer

FOREIGN HEADQUARTERS MAKE PURCHASE DECISIONS OF ‘BIG 3’, WHILE JAPANESE AUTO MAKERS DELEGATE TO LOCAL PLANTS

Pass

enge

r Car

s

10

ONTARIO IS CANADA’S AUTOMOTIVE POWERHOUSE AND HOME TO ALL LIGHT VEHICLE ASSEMBLY PLANTS

66,783214,353

Lexus RX330Corolla, Matrix

Plant under construction (completion 2008)

Cambridge #1 Cambridge #2

Woodstock

Toyota

314,032251,161

312,482

Impala, Monte Carlo, Allure/LaCrosse,

Grand Prix Silverado, GMC Sierra

Oshawa #1Oshawa #2

Oshawa (Light Truck)

GM

165,256Torrent, Equinox,Suzuki XL-7

Ingersoll #2CAMI(GM-Suzuki joint venture)

Civic, Acura ELAcura MDX, Pilot,

Ridgeline

Freestar and MontereyNew Flex Mfg. Plant (completion 2006)

Crown Victoria, Grand Marquis

300M, Magnum, ChargerGrand Caravan, Town &

Country, Pacifica

Models and focus

192,853202,705

Alliston #1Alliston #2

Honda

118,112

150,450

Oakville

St. Thomas

Ford

291,888350,368

BramptonWindsor

DaimlerChrysler

Unit production

volume(2005)

PlantManufacturer

Source: Automobil Produktion

Ontario is North America’s top producer of light vehicles.

Ontario accounts for 97% of Canada’s total automotive production (2005) and has the highest concentration of the country’s population (see Appendix 2).

Canada ranks 8th in the world for light motor vehicle production (2003).

11

SOUTHWESTERN ONTARIO LIGHT VEHICLE* ASSEMBLY PLANTS

*Light Vehicle = Passenger Cars, Light Trucks

3

6

7

2

4

1

8

5

CAMI Automotive

DaimlerChrysler Brampton

DaimlerChrysler Windsor

Ford Oakville

Ford St. Thomas

GM Oshawa Car 1-2; Oshawa Truck

Honda Alliston 1-2

Toyota Cambridge 1-2

1

2

3

4

5

6

7

8

Light Vehicle Plants

Toronto

Michiga

n Stat

e(USA)

12

Buyer’s market

Buyer’s market

R&D Outsourcing

R&D Outsourcing

Outsourcing of high-value design and engineering by OEMs is on the riseGrowing collaboration between automakers and suppliers on parts and vehicle designSynchronized planning and execution (OEM Tier 1 Tier 2)Integrated R&D with OEM using concurrent engineering

Automotive OEMs are facing an increasingly consumer-driven marketFragmented vehicle market means firms must be able to react rapidly to changes in demandOEM’s are investing in flexible assembly plants that allow for quick change-over in production by building a number of models on a single platform

OEMs FOCUS ON IMPROVING PRODUCTION EFFICIENCY & SUPPLY CHAIN INTEGRATION

Competition between OEMs for market share is keeping profitability under pressureThe Big Three are struggling remain competitive against foreign OEMs that are rapidly gaining market share in North AmericaOEMs are putting the squeeze on their suppliers in an effort to reduce costs, as raising prices is out of the question

Fierce competition

Fierce competition

Trends within the Canadian passenger car industry

13




Commercial vehicles

Suppliers


Recommendations

References

Appendices

CONTENT

14

GROWING DEMAND HAS RESULTED IN STEADY CLIMB OF HEAVY TRUCK PRODUCTION

1,050,000

1,100,000

1,150,000

1,200,000

1,250,000

1,300,000

1,350,000

1,400,000

2001 2002 2003 2004 2005Light Trucks Heavy Trucks (incl. Buses)

Commercial Vehicle Production in Canada Development the last 5 years

Vehicles High levels of freight movement and a strong economy are driving increased demand

In terms of value, 60% of Canada/U.S. trade is moved by truck (2005)Over 37,000 trucks cross the Canada/U.S. border each day

Hino Motors Canada recently became the first Japanese truck maker to locate an assembly plant in Canada (June 2006)

Canadian and U.S. governments passed regulations in 2002 to virtually eliminate heavy truck emissions of particulate matter by 2007, and nitrous oxides by 2010

NOTE: Light trucks data includes an estimated 70% non-commercial vehicles including mini-vans, SUVs, and pick-up trucks. Reported under commercial vehicles for the purposes of this report.

Sources: R&I; Canadian Trucking Alliance

15

100%Woodstock plant, OntarioLight and Heavy trucks

45*Hino Motors Ltd. (Division of Toyota)

Business Unit HQ, Redford, Michigan (U.S.A.)

Paccar Corporate HQ, Belleview, Washington (U.S.A.)

Corporate HQ, Cantera, Ohio (U.S.A.)

Purchase decisions

100%

100%

100%

Foreign Ownership

Heavy trucks1,100Sterling Trucks (owned by Freightliner, a division of DaimlerChrysler)

Heavy trucks758Canadian Kenworth (Division of Paccar of Canada Ltd.)

Heavy trucks

Business

1,500International Truck and Engine Corporation (Owned by Navistar)


Com

mer

cial v

ehicl

es –

Heav

y Tru

cks

PURCHASE DECISIONS OF SOME LARGER FIRMS MADE BY FOREIGN HEADQUARTERS, BUT MANY OTHERS MAKE DECISIONS LOCALLY

*Present number of employees, plant is to be completed 2006.

16

100%St. Eustache plant, Quebec / Growing coordination with Volvo Bus Group

Purchasing, Göteborg, Sweden

Urban transit buses550Novabus (division of Prévost, a subsidiary of Volvo Bus Corporation)

100%Sainte Claire, Quebec, Canada Highway (coach) buses

1,435Prévost Car Inc.(sub. of Volvo Bus Corp.)

100%Mississauga plant, Ontario / Some through central purchasing of HQ,

Greensboro, North Carolina (U.S.A.)

Urban transit buses550Orion Bus Corporation (sub. of DaimlerChrysler)

0%HQ, Drummondville, QuebecMini school buses 200A.Girardin Minibus Inc

HQ, Winnipeg, Manitoba

Winnipeg, Manitoba

St Lin-Laurentides, Quebec

Corporate HQ Fort Valley, Georgia (U.S.A.) / Brantford plant, Ontario

Purchase decisions

100%

100%

0%

100%

Foreign Ownership

School buses3,000 Canadian Bluebird Coach Ltd.

School buses300 Entreprise Michel Corbeil

Urban transit buses

Highway (coach) buses

Business

2100New Flyer Industries Ltd.

2,000 Motor Coach Industries


Com

mer

cial v

ehicl

es -

Buse

sBOTH FOREIGN- & DOMESTIC-OWNED CANADIAN BUS MANUFACTURERS MAKE KEY PURCHASE DECISIONS LOCALLY

17

MOST HEAVY TRUCK MANUFACTURERS ARE LOCATED IN SOUTHWESTERN ONTARIO AND QUEBEC

2,000ºClass 4-7 trucks

Woodstock, Ontario

Hino Motors Ltd. (division of Toyota)

24,000**A-line, L-line, Acterra

St. Thomas, Ontario

Sterling Trucks (owned by Freightliner, a division of DaimlerChrysler)

14,200*Class 5-8 trucks

Ste. Therese, Quebec

Canadian Kenworth (Division of PACCAR of Canada Ltd.)

40,000Class 7-8 trucks

Chatham, Ontario

International Truck and Engine Corporation (owned by Navistar)

Models and focus

Unit production

volume (2005)

PlantManufacturer

*STC Estimate (based on production of 71 trucks/day; 200 days/year)**STC Estimate (based on production capacity of 120 trucks/day; 200 days/year)ºPlant under construction for completion in 2006International Truck and Engine

Canadian Kenworth

Sterling Trucks

Hino Motors

Trailmobile

Manac

Sources: 2006 APMA Directory, Company websites and contacts

18

BUS MANUFACTURING IS FRAGMENTED INTO SCHOOL BUSES, URBAN TRANSIT BUSES AND COACH BUSES

Private information

Urban transit buses

St. Eustache, Quebec

Novabus (division of Prévost, a subsidiary of Volvo Bus Corporation)

1,000Urban transit buses

Mississauga, Ontario Orion Bus Corporation (sub. of DaimlerChrysler)

600Highway (coach buses)

Ste. Claire, QuebecPrévost Car Inc.(subsidiary by Volvo Bus Corporation)

Private information

Mini school buses

Drummondville, Quebec

A. Girardin Minibus Inc.

Urban transit buses

Highway (coach buses)

School buses

School buses

Models and focus

1,500 capacity*

Winnipeg, ManitobaNew Flyer Industries Ltd.

1,200 Winnipeg, ManitobaMotor Coach Industries (MCI) International Inc

2,500St Lin-Laurentides, Quebec

Entreprise Michel Corbeil

12,000Brantford, OntarioCanadian Bluebird Coach Ltd.

Unit production

volume(2005)

PlantManufacturer

Girardin Minibus

Motor Coach IndustriesCanadian Bluebird

New Flyer Industries

Michel Corbeil

Novabus

Orion

Prévost

Sources: 2006 APMA Directory, Company websites and contacts*Unit capacity does not reflect actual production numbers, which were not available.

19

Pollution RegulationPollution

Regulation

DemandGrowth

DemandGrowth

Increasing production of commercial vehicles the result of demand growth (2001-2005)Commercial vehicle production growth rate has been much higher than for passenger vehicles*Cyclical nature of truck market demand is expected to lead to some decline in 2007

New generation of smog-free heavy trucks will begin introduction to the market in 2007 Increased costs and payload penalties will be associated with the new equipmentNegative impact on truck sales in 2007 expected to arise from a related “pre-buy” mentality

CONSOLIDATION OF THE COMMERCIAL VEHICLE INDUSTRY AS LARGE GLOBAL PLAYERS ACQUIRE DOMESTIC PLAYERS

Global manufacturers have entered the North American bus market through acquisition of several domestic bus manufacturers

Volvo AB brought Novabus and Prevost under the same ownershipDaimler-Chrysler acquired Orion Bus Industries along with other U.S. bus manufacturers

Globalization / ConsolidationGlobalization / Consolidation

Trends within the Canadian commercial vehicle industry

*Production of medium/heavy trucks grew 32.5% in 2004 and 26.3% in 2005, compared with -0.3% in 2004 and 1.6% in 2005 for passenger cars. (Souce: Ward’s AutoInfoBank)

20




Commercial vehicles

Suppliers


Recommendations

References

Appendices

CONTENT

21

THERE ARE OVER 900 AUTOMOTIVE SUPPLIERS IN CANADA- Magna International is the world’s 9th largest auto parts supplier

There are 900+ auto parts suppliers in Canada (T1 and T2)Ontario-based Magna International is one of the top 10 largest automotive suppliers in the world There is a very high concentration of automotive suppliers in Southwestern OntarioMany of the companies have less than 500 employees, including subsidiaries of foreign-based companiesCanada is a world leader in:

Injection and blow moldingHydroforming Ferrous and non-ferrous castingPowder metal coating and facbricationSystems and component integrationStamping

Geographical concentration of automotive suppliersCanadian automotive suppliers

Automotive suppliers are highly concentrated in Southwestern

Ontario, where all of Canada’s vehicle manufacturers are located!

Sources: Ontario government; Statistics Can; Industry Canada

Concentration:

High

Medium

Low

22

MAGNA INTERNATIONAL IS CANADA’S LARGEST AUTO PARTS SUPPLIER

Cables, sensors, semi conductors, control units

Magna InternationalSiemens VDO AutomotiveAffinia Brake PartsSolectron InvotronicsOmron Dualtec Automotive Electronics Inc.

Power train, exhaust systems, engines

Magna InternationalLinamar Corp.Dana CanadaSiemens VDO AutomotiveWescast Industries Arvin Meritor CanadaTenneco Automotive

Cockpit, seats, dash-board, air conditioning

Magna InternationalABC GroupSpectra Premium Industries Woodbridge GroupLear CanadaDenso Mfg. Canada

T1 SUPPLIERST1 SUPPLIERS

Electrical systemsElectrical systems Interior equipmentInterior equipment PropulsionPropulsion BodyBody Running gearRunning gear

Body, roof, glass, doors, lighting etc.

Magna International Linamar Corp.ABC GroupFlex-N-GateDana CanadaThyssenKrupp Spectra Premium IndustriesWoodbridge Group

Suspension, brakes, axles, steering, tires

Magna InternationalLinamar Corp.TRW CanadaThyssenKrupp Arvin Meritor CanadaTenneco AutomotiveAffinia Brake Parts

23

HQ, Mississauga, OntarioSeating foam and other interior foam parts1,000Woodbridge Group

Cambridge, OntarioSteering and suspension components; emissions control1,000Tenneco Automotive

HQ, Windsor, OntarioMetal stampings, tubular assemblies, weldments and systems1,200ThyssenKrupp Fabco

HQ, Troy, MichiganChassis component assemblies, bumper and light truck frames1,900ThyssenKrupp Budd Canada

St. Catharines, OntarioSteering, suspension components2,355TRW Canada

4 plants in Southern Ontario (decisions made locally)

Electronic/electrical controls, manifolds, fuel modules1,900Siemens VDO Automotive

St. Catharines, Ontario / Corporate HQ, Farmington Hills, Michigan (U.S.)

Chassis components3,000Dana Canada

HQ, Toronto, OntarioPlastics, blow and injection molded for interior / exterior systems4,000ABC group

13 mfg. locations in Ontario (decisions made locally)

Body moulding for exterior systems3,482Flex-N-Gate

HQ, Boucherville, Quebec

HQ, Brantford, Ontario

HQ, Guelph, Ontario

HQ, Aurora, Ontario

Location

Fuel tanks, radiators and air conditioners1,115Spectra Premium Industries

Exhaust manifolds, powertrain components1,900Wescast Industries Inc.

Machined components and modules for engines, transmissions and chassis

8,087*Linamar Corporation

Stamping, interior/exterior systems, trim, electrical/ electronic systems and parts, powertrain components

Business22,000Magna International


MOST MAJOR T1 SUPPLIERS MAKE PURCHASE DECISIONS IN ONTARIO

T1 S

uppl

iers

* An additional 3,000 new jobs over the next 5 years was recently announced on May 12, 2006.

24

Oakville, OntarioSwitch/electrical control units (switch assemblies for power seats/windows, instrument panels, moon roof limit switches,

other micro-switch based assemblies)

400Omron Dualtec Automotive Electronics Inc.

Scarborough, OntarioMotion controls, electronic control modules, instrument clustersand displays, actuators, telematics modules, driver interface

switches

750Solectron Invotronics

Kitchener, OntarioSeating and interior trim700Lear Canada Ltd.

Guelph, OntarioAir conditioners300Denso Manufacturing Canada, Inc.

Tilbury, Ontario

Mississauga, Ontario

Location

Brake system parts375Arvin Meritor Canada

Electrical equipment components including connectors, ignition systems, wiring components, and brake parts

Business750Affinia Canada Corp.


SOME OF THE KEY GLOBAL T1 SUPPLIERS HAVE SMALL- TO MEDIUM-SIZED MANUFACTURING OPERATIONS IN CANADA

T1 S

uppl

iers

25

T1 SUPPLIERS ARE STRATEGICALLY LOCATED TO PROVIDE JUST-IN-TIME DELIVERY TO MAJOR ASSEMBLERS IN CANADA & THE U.S.

Southwestern Ontario Flex-N-Gate

Lear

Linamar

DanaWescast

Siemens

Spectra

TRWWoodbridge

ABC

Magna

Southern Ontario is at the doorstep of Michigan State, the

2nd largest producer of light vehicles in North America!

ThyssenKruppBudd

ThyssenKrupp FabcoAffinia

Brake Parts

Solectron

TennecoAutomotive

OmronDualtec

Denso

Arvin Meritor

26

SOME OF THE LARGER T2 SUPPLIERS ARE FOREIGN-OWNED SUBSIDIARIES IN CANADA

Cables, bus systems, embedded systems

Magna InternationalATS Automation Tooling Sytems Inc.Dupont Canada3M Canada Company Tyco Electronics Canada Ltd.

Power train, exhaust systems, engines

Dupont Canada Martinrea InternationalStackpole Ltd.Valiant Corp.Schaeffler Canada Maxtech Manufacturing

Cockpit, seats, dash-board, air conditioning

ATS Automation Tooling Systems Inc.Valiant Corp.Spectra Premium Industries Van-Rob Guelph ToolBend All Automotive

T2 SUPPLIERST2 SUPPLIERS

Electrical systemsElectrical systems Interior equipmentInterior equipment PropulsionPropulsion BodyBody Running gearRunning gear

Body, roof, glass, doors, lighting etc.

Dupont CanadaWaterville TGAGS Automotive SystemsThyssenKrupp FabcoSpectra Premium IndustriesTechform Products

Suspension, brakes, axles, steering, tires

ATS Automation Tooling Sytems Inc.Martinrea InternationalTRW Canada Schaeffler Canada ThyssenKrupp Fabco

NOTE: In Canada, T1 and T2 terms refer to products/components rather than companies, as many of the key T1 suppliers are also T2 players.

27

Mississauga, OntarioPowder metal parts for engines, transmissions 1,500Stackpole Ltd.

St. Catharines, OntarioSteering, suspension components2,355TRW Canada

Markham, OntarioElectrical/Electronic connectors, switches, circuit breakers330Tyco Electronics Canada

Aurora, OntarioStampings, welded and mechanical assemblies850Van-Rob Stampings Inc.

HQ, Waterville, QuebecBody sealing systems (rubber weather stripping)1,800Waterville TG

HQ, Cambridge, OntarioElectrical/Electronic systems and components (starters, alternators, instrument clusters, swithces, fuses and circuit breakers)

4,100ATS Automation Tooling Systems Inc.

Stratford, OntarioDeep groove ball bearings (transmission, wheels, axles)854Schaeffler Canada Inc.

HQ, Vaughan, OntarioFluid Handling Systems, hydroforming parts, metal fabrication, stamping3,000Martinrea International

Cdn. HQ, London, OntarioElectrical and Electronic connectors and cables2,0503M Canada Company

Waterloo, OntarioMetal products (screws, brake parts)660Maxtech Manufacturing

HQ, Windsor, OntarioHyrdoforming and Tool & Mold components for interior/exterior 1,400Valiant Corporation

HQ, Toronto, OntarioMetal stampings, metal painting, control parts1,750 AGS Automotive Systems

Cdn. HQ, Mississauga, OntarioElectronic products, fuel cell parts, liners, plastics, paint and coatings3,300Dupont Canada

HQ, Penetanguishene, Ontario

HQ, Ayr, Ontario

Guelph, Ontario

Location

Rods (door lock, torque) 700Techform Products

Hose assemblies, wire products

Metal stampings

Business

700 Bend All Automotive

750 Guelph Tool


PURCHASE DECISIONS OF KEY T2 SUPPLIERS ARE MADE LOCALLY

T2 S

uppl

iers

28

Process of integration in the automotive parts industry apparent throughout North AmericaA few larger, more diversified companies are acquiring the smaller players and offering a broader range of products (ie Magna, Linamar)Number of firms in the North American automotive supply chain has declined from 30,000 to 8,000 over the past 15 years

Growing Delegation of

Tasks

Growing Delegation of

Tasks

ConsolidationConsolidation

AUTOMOTIVE SUPPLIERS ARE TAKING ON HIGHER LEVELS OF RESPONSIBILITY IN R&D AND DESIGN

Trends within the Canadian Automotive supplier industry (T1 and T2)

Production has been shifting toward where the sales are madeForeign suppliers are relocating to Canada*, with 100+ Japanese and European parts suppliers in Canada and growingTraditional local suppliers find it difficult to compete with non-unionized foreign suppliers that have new facilities, low legacy costs, new technologies, and young well trained workers

Global “Localization”

Global “Localization”

*See Appendix 4 for overview of Canada’s attractive business environment.

Increasing delegation of responsibilities (R&D, design, assembly) from OEMs to suppliersEmergence of “Tier 0.5” suppliers (Magna) who assemble Tier 1-level products, essentially assuming responsibilities that were once the domain of the OEMEach tier looks to its suppliers to assume new responsibilities

29




Manufacturers

Suppliers

Recommendations

References

Appendices

CONTENT

30

CANADIAN CONSTRUCTION EQUIPMENT PRODUCTION TOTALED SEK 11.6 BILLION IN 2003

Construction Equipment Shipments in Canada

Source: Statistics Canada (data on Construction Equipment Manufacturing Shipments not available for 2004 and 2005 as of yet)

SEK billion

Imports satisfy most of Canada’s demand for construction equipment.

Canadian market is highly fragmented, with few manufacturing plants across Canada.

Mainly small- to medium-sized companiesMost of larger manufacturers are foreign-owned

The United States is the largest exporter of construction equipment to Canada (2005).

U.S. accounts for 62% of Canada’s total imports, followed by Japan (13.8%) and Sweden (4.6%).0

5101520253035

2001 2002 2003 2004 2005

Construction Equipment Manufacturing ShipmentsConstruction Equipment ExportsConstruction Equipment Imports

31

HEAVY CONSTRUCTION EQUIPMENT IS MAINLY IMPORTED* –DOMESTIC MANUFACTURING IS LIMITED TO SMALLER FIRMS**

CONSTRUCTION EQUIPMENTCONSTRUCTION EQUIPMENT

ROAD(Est. 1600 vehicles)

ROAD(Est. 1600 vehicles)

Key manufacturers:Volvo Motor GradersLondon Machinery Inc.

Graders, asphalt pavers, asphalt mixers

MINING(Est. 520 vehicles)

MINING(Est. 520 vehicles)

Key manufacturers:Mining Technologies Int’lLovat Inc.SandvikBoart Longyear Inc. Breaker Technology

Wheel loaders, drills, haulers

Key manufacturers:Thomas EquipmentKomatsu International Canada Inc.

EARTH MOVING(Est. 5,700 vehicles)EARTH MOVING

(Est. 5,700 vehicles)Excavators, wheel loaders, backhoe loaders, Skid steer loaders, haulers

LIFTING(Est. 1100 vehicles)

LIFTING(Est. 1100 vehicles)

Key manufacturers:Skyjack Inc. Weldco-Beales Mfg.Liftking IndustriesKaverit Steel and Crane

Mobile cranes, forklifts

*Major manufacturers, such as Caterpillar and John Deere, operate their own dealerships in Canada and import all products.

**Each sub-sector has several small and locally-based players with under 100 employees.

32

MOST CONSTRUCTION EQUIPMENT PLANTS PRODUCE RELATIVELY LOW VOLUMES & MAKE PURCHASE DECISIONS LOCALLY

Private information**

300

Not available

60

100-150

Private information

1,500

250

4,000

Not availablePrivate information*

1,500

Private information

Production vol.

Corporate HQ, Oshkosh, Wisconsin (U.S.) / Cdn. HQ, London, Ontario

HQ, Edmonton, Alberta

HQ, Thornbury, Ontario

HQ, Woodbridge, Ontario

Burlington plant, Ontario

HQ, Etobicoke, Ontario

Partly HQ, Japan / Partly Candiac plant, Quebec

Canadian HQ, North Bay, Ontario

Centreville plant, New Brunswick

HQ, Sudbury, Ontario

HQ, Edmonton, AlbertaGoderich plant, Ontario

HQ, Guelph, Ontario

Purchase decisions

Concrete Mixers

Cranes

Loaders, breakers, mining equipment

Forklifts

Loaders

Tunnel boring machines

Small- and medium-sized wheel loaders

Drilling equipment

Mini skid steer loaders

Drills, loadersTruck-mounted cranes

Motor Graders

Scissor lifts

Models and focus

120

125

130

150

200

250

300

400

400

480

500800

900

Employees

North Bay, OntarioBoart Longyear Inc.

Sudbury, OntarioMining Technologies InternationalEdmonton, AlbertaWeldco-Beales Manufacturing Inc.

Guelph, OntarioSkyjack Inc. (division of Linamar)

Thornbury, OntarioBreaker Technology Ltd.

Woodbridge, OntarioLiftking Industries Inc.

Burlington, OntarioSandvik Mining and Construction Canada Inc.

Etobicoke, OntarioLovat Inc.

Goderich, OntarioVolvo Motor Graders Limited

London, OntarioLondon Machinery Inc. (sub. of OshKosh Truck Corp.)

Edmonton, AlbertaKaverit Steel and Crane

Candiac, QuebecKomatsu International Canada Inc.

Centreville, New Brunswick

Thomas Equipment

PlantManufacturer

*SEK657 million sales revenue (2005); **SEK355 million sales revenue (2005)

33

MANY OF THE LARGER MANUFACTURERS OF CONSTRUCTION EQUIPMENT IN CANADA ARE LOCATED IN SOUTHERN ONTARIO

Komatsu

Volvo Motor Graders

Thomas Equipment

Lovat Inc.London Machinery Inc.

Mining Technologies Int’l

Sandvik

Breaker Technology

Boart Longyear

Liftking Industries

Skyjack Inc.

Kaverit Steel & Crane

Weldco-Beales

34


Canadian Automotive industry


Manufacturers

Suppliers

Recommendations

References

Appendices

CONTENT

35

CONSTRUCTION EQUIPMENT MANUFACTURERS IN CANADA RELY ON IMPORTS AND/OR SMALL, LOCALLY-BASED SUPPLIERS

Cables, sensors, semi conductors, control units

Undercarriage and body

Gerdau Ameristeel Manitoba Metal

Power train, engines, exhaust systems, axles

SUPPLIERSSUPPLIERS

Electrical systemsElectrical systems Propulsion and running gear

Propulsion and running gear Steel constructionSteel construction HydraulicsHydraulics

All kind of hydraulic cylinders

Bosch Rexworth Canada Corp.Hyco CanadaPullmaster Winch Corp.

AccessoriesAccessories

All kind of hydraulic cylinders

Cascade Canada Ltd.

Due to a lack of publicly available data / industry associations / company listings for construction equipment vehicle manufacturers or their suppliers in Canada, it was not possible to provide more information for the purposes of this report. However, Canada has

a number of manufacturers of attachments and accessories for the construction equipment vehicle market, which are listed in Appendix 5.

36

Guelph, OntarioForklift accessory parts (hydraulic valves, stop drop valves, clamps)

200Cascade Canada Ltd.

Hydraulic planetary winches and drives for mining and earthmoving vehicles

Hydraulic cylinders and valves for cranes, material handling equipment and road vehicles

Hydraulic power units and manifolds for construction equipment

Steel components manufacturer for earthmoving and road vehicles

Business

Surrey, British Columbia

50Pullmaster Winch Corporation

St. Wenceslas, Quebec

120Hyco Canada

Welland, Ontario240Bosch Rexworth Canada Corporation

Selkirk, Manitoba500Gerdau Ameristeel Manitoba Metal

Purchasing decisions


SMALL-SIZED CONSTRUCTION EQUIPMENT SUPPLIERS MAKE PURCHASE DECISIONS LOCALLY

Supp

liers

37

SUPPLIERS OF CONSTRUCTION EQUIPMENT ARE WIDELY DISPERSED IN CANADA

Hyco Canada

Pullmaster Winch

Gerdau AmeristeelManitoba

Bosch RexworthCanadaCascade Canada

38

Growing Canadian demand for construction equipment is increasingly met by importsAmerican manufacturers dominate imports of construction equipment to CanadaThe number of major construction equipment manufacturing facilities in Canada is decliningSweden has ranked as the 3rd largest exporter of heavy equipment into Canada since 2002 with 4.6% share in 2005 (USA had 61.6% and Japan 13.8% share of imports in 2005).

Demand growth

Demand growth

Market fragmentation

Market fragmentation

Import-basedImport-based

Construction equipment is a highly fragmented market with a diverse customer baseLarger global manufacturers like John Deere and Caterpillar dominate the Canadian market, operating their own dealerships in Canada that import all productsCanadian manufacturers are small and tend to be specialized

Canadian construction equipment market experienced rising demand from 2003-2005Strengthening of Canadian economyRenewed growth in the industrial, commercial and institutional (ICI) construction sector, especially in the oil and gas sectors (many new large-scale projects)

THE CONSTRUCTION EQUIPMENT SECTOR IS DOMINATED BY IMPORTS- Increasing share of imports are coming from Sweden

Trends within the Canadian Construction Equipment industry

39


Canadian Automotive industry


Manufacturers

Suppliers

Recommendations

References

Appendices

CONTENT

40

RECOMMENDATIONS FOR DOING BUSINESS WITH THE CANADIAN AUTOMOTIVE INDUSTRY

3.3.

2.2.

1.1.

Country specific

3.3.

2.2.

1.1.

Industry specific

Consider Canada due to its similarities in geography, climate and business environment to that of Sweden

Invest in Canada, where the overall cost of doing business is the lowest among G7 Countries*

Benefit from geographic proximity to USA and a well-integrated market within North America. Use Canada as a gateway to the larger U.S. market.

Establish a diverse customer base beyond “Big Three” and target growing foreign auto assemblers & suppliers in Southern Ontario

Focus on opportunities in high-value design and engineering, as automakers increase outsourcing to suppliers

Utilize competitive advantages as a new foreign entrant over less efficient domestic automotive players that have higher legacy costs, unionized work force, older facilities and technology, etc.

*Competitive Alternatives: KPMG’s Guide to International Business Costs, 2006 edition.

41




Manufacturers

Suppliers

Recommendations

References

Appendices

CONTENT

42

HOW CAN STC IN CANADA SUPPORT COMPANIES TO DO BUSINESS IN CANADA

To investigate market dynamics, players, potential and competitiveness for Swedish firms

Customer AquisitionCustomer Aquisition

Distribution search

Distribution search

Market CheckMarket Check

Country specific

Pre Aquisition analysis

Pre Aquisition analysis

Supplier search

Supplier search

Company establishment

Company establishment

LegalLegal

To assist with identification of potential companies for acquisition in a confidential manner (without disclosing the identity of the Swedish client at initial stage) and to help with background checks and legal matters

To assist with identification of potential suppliers based on a profile defined by Swedish clients

To assist with incorporation of a company, immigration and management transfer, site selection, staffing, opening bank accounts and to provide referral to business service providers

To provide referral to reputable law firms or experienced lawyers with expertise on the subject matter, when needed. Among examples are assistance with contracts/agreements, trademarks, patents, and incorporation.

To scan the market for potential candidates and to narrow down the search into a few interesting and intereteddistributors / partners for a face to face meeting with Swedish firms

To assist with business development and sales before, during and after the market entry & establishment

43

CANADA IS AN ATTRACTIVE MARKET AND STC HAS HELPED MANY SWEDISH COMPANIES TO ENTER OR ESTABLISH

WHY CANADA?Ontario is an automotive powerhouse and at the door step “Big Three” and also home to other Asian car makersSound economy and politically stable Excellent infrastructure Among most competitive countries to do business in G7 with 5.5% cost advantage over USA*Talented and skilled workforce with the lowest labor cost among G7 countries*No significant trade barrier for majority of products/servicesStill within reach by phone during business hours to communicate with clients/partnersNo significant cultural barrier compared to many other countriesThe largest U.S. trading partner with more than $1billion trade / day!

*Competitive Alternatives: KPMG’s Guide to International Business Costs, 2006 edition.

44




Manufacturers

Suppliers

Recommendations

References

Appendices

CONTENT

45

APPENDIX 1: DEFINITIONS

Shipments (value of) Summation of value of shipments produced by establishment, receipts of custom and repair revenue.

Light truck Vehicle weighing less than 14,000 lbs (or 6.35 tons)

Medium-duty truck Vehicle weighing from 14,001 to 26,000 lbs (or 6.35 to 11.79 tons)

Heavy-duty truck Vehicle weighing from 26,001 to 33,001 lbs (or 11.79 to 14.97 tons). Also included off-highway trucks.

Truck class: In Canada, truck manufacturers also use a class system to designate trucks of various gross vehicle weight ratings:

Class 1 and 2 vehicles: Less than 10,000 lbs. (or 4.54 tons)Class 3, 4, and 5 vehicles: 10,001 to 19,500 lbs. (or 4.54 to 8.85 tons)Class 6 vehicles: 19,501 to 26,000 lbs. (or 8.85 to 11.79 tons)Class 7 vehicles: 26,001 to 33,000 lbs. (or 11.79 tons to 14.97 tons)Class 8 vehicles are 33,001 lbs. (or 14.97 tons) or more.

Sources: http://strategis.ic.gc.ca/epic/internet/inauto-auto.nsf/en/h_am00614e.html#T andhttp://www.tc.gc.ca/pol/en/report/TruckActivity/Chapter3.htm

46

APPENDIX 1: DEFINITIONS (continued)

Tier 1 SupplierManufacturer to the vehicle assemblers who are responsible for delivery of the finished assembly, product development and continued technology renewal.

Tier 2 SupplierProducer of parts providing value-added to minor sub-assembly.

Tier 3 SupplierSupplier of engineered materials and special services, such as rolls of sheet steel, bars and heat treating, surface treatments.

NOTE: In Canada, T1 and T2 tend to define products/components rather than companies, with many of the key suppliers considered both T1 and T2.

Source: http://strategis.ic.gc.ca/epic/internet/inauto-auto.nsf/en/h_am00614e.html#T

47

Area: 9,984,670 km2

High population concentration along Canada’s southern

border with the U.S., especially in Southern Ontario & Quebec

APPENDIX 2: CANADA’S POPULATION DENSITY (2001)

48

APPENDIX 3: NEW INVESTMENTS IN CANADA’S AUTOMOTIVE ASSEMBLY SECTOR

Recent string of major investments contributes to favourable outlook of Canada’s automotive sectorOver SEK 46 billion in new auto investments in Ontario announced since 2004 Canada is consistently receiving 20% of new North American assembly investmentsGovernment is highly proactive in investment promotion to automotive manufacturers, with SEK 6.6 billion in government aid since 2004

Ontario auto investments

(2004-July 2006)

SEK 99 millionSEK 1.0 billionHonda

Not availableSEK 427 millionToyota Boshoku (parts supplier)

SEK 6.7 billionSEK 46.9 billionTotal

SEK 39 millionSEK 657 millionNemak

SEK 427 millionSEK 1.8 billionNavistar

SEK 806 millionSEK 5.0 billionDaimlerChrysler

SEK 820 millionSEK 7.2 billionToyota

SEK 292 millionSEK 7.2 billionLinamar

SEK 1.3 billionSEK 7.2 billionFord

SEK 2.9 billionSEK 16.4 billionGeneral Motors

Government aidProject valueCompany

Source: Federal and Ontario governments

49

APPENDIX 4: CANADA’S BUSINESS ENVIRONMENT

Canada ranks second in the G7 as a low-cost investment location for the automotive sector.Compared to the U.S., lower construction costs (-8%), lower office lease costs (-15%), lower transportation costs (-28%), and lower energy costs.

Canada has an attractive business environment for foreign investmentBudget surplus and low inflationLowest interest and depreciation costs in the G7

Canada offers the lowest labour and benefit costs in the G7, with a nearly 12% advantage over the U.S.Wages generally lower than most U.S. states

Canada is well-integrated into the U.S. transportation system

Source: Competitive Alternatives: KPMG’s Guide to International Business Costs, 2006 edition

“Canada’s OE parts sector has always found it easyto work with overseas-based parts suppliers.”

Dennis Desrosiers, Desrosiers Automotive Consultants Inc.

50

Langley, British ColumbiaRockbreaker equipment accessories200Thiessen Equipment Ltd. (subsidiary of Atlas Copco)

Thornbury, OntarioAttachment for underground vehicles130Breaker Technology, Inc.

Mirabel, QuebecLoader, excavator and forklift attachments50Garier Inc.

Duncan, British ColumbiaAttachments for earthmoving vehicles and cranes80Pro Mac Manufacturing

Edmonton, Alberta Attachments for earthmoving, lifting, and road vehicles

300Weldco-Beales Manufacturing

Surrey, British ColumbiaBuckets, couplers, blades, and forks for earthmoving and road vehicles

360CWS-IMAC

Mississauga, OntarioLoader and excavator attachments35Nye Manufacturing

Waterloo, Ontario

Hartland, New Brunswick

Burlington plant, Ontario

Etobicoke, Ontario

Edmonton, Alberta

Purchase decisions

Blades for earthmoving and road vehicles75Valley Blades Ltd.

Attachments for earthmoving and road vehicles75Craig Manufacturing

Parts for underground loaders

Parts for underground vehicles

Blades and other parts for earthmoving vehicles

Business

200Sandvik Mining & Construction Canada Inc.

250Lovat Inc.

380Black Cat Blades Ltd.


APPENDIX 5 (1/2): MANUFACTURERS OF CONSTRUCTION EQUIPMENT ATTACHMENTS

Construction equipment attachment manufacturers tend to be small, locally-based players in Canada

51

APPENDIX 5 (2/2): MAKERS OF CONSTRUCTION EQUIPMENT ATTACHMENTS ARE LOCATED THROUGHOUT CANADA

Black Cat Blades

CWS-IMAC

Nye Mfg.

Weldco-Beales

Craig

Pro-Mac

Valley BladesSandvik

Garier

Lovat Inc.

Breaker Technology

Thiessen Equipment

stc factpack automotive- canada

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