THIS is why Ontario manufacturing is not rebounding!

T

theman

Well-Known Member
Nov 19, 2009
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Thornhill, ON
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Guys,

See this link. The manufacturing coming back to the US is all skewed towards the southern part of the country. We no longer live in the world where automotive manufacturing is focused around the Great Lakes. Unfortunately, it's not great for Ontario. Sure ... Volvo is a small brand, but over the past 10, even 20 years, you'll notice that new automotive production has shifted to South Carolina, Alabama, Tennessee, Mississippi ... and in the case of Tesla, California. Any other new production is actually in Mexico.

http://www.reuters.com/article/2015/05/11/volvocars-usa-plant-idUSL5N0XX3MA20150511
 
Of course we continue to elect governments in Ontario that are determined to drive business away.
Welcome to the Canadian rust belt!
 
It's not the government, its our desire for good wages and cheap products. $75.00/hour and Walmart prices... enjoy it while it lasts. Wages in SC and TN and Mexico are lower than here, so that's where the manufacturing gravitates to.
 
I think it is quite a bit of both, Freight Broker and Polaris. Yes, we demand our high wages and all the health benefits, and perks etc. But our governments at every single level right from municipal to federal make it so difficult for small businesses to get a foot on the ground and grow into larger ones.
 
I do agree that the political climate is part of the reason this is happening. But it is also happening in Michigan, Ohio, Indiana, Pennsylvania, New York etc. The fact that even manufacturing in the US continues to shift south makes it that much harder for Ontario manufacturing to be viable. It's true that the Ontario Liberals and even the Federal Conservatives have not been throwing money at Canadian manufacturing ... because they don't believe that's where our future is.

It's not all doom and gloom ... we're not going down the toilet. BUT, our thinking from a logistics standpoint can never return to what it was say 8+ years ago.
 
Freight Broker is right. Add the fact that most northern states are financially broke doesn't inspire confidence to manufacturers that taxes will not increase, exponentially in some cases, because industry is typically where governments go for the bulk of their revenues.
Where I call home there isn't enough commercial and industrial tax base to buy a cup of coffee let alone support the town's infrastructure, and if the town jacks up the residential taxes too high, then houses start to go on the market and everyone gets out of Dodge, leaving the municipality with no tax base at all. Eventually everything collapses. Small town finance can be extrapolated across provincial and state finances, and pretty soon north of the Mason-Dixon Line will be a wasteland of federal government support ... until it goes broke as well !!!
 
Here is my opinion.

Most of the population in Canada and the US live either near the great lakes, or on the eastern/western seaboard. That being said, Ontario is a hub area that can serve a lot of the North American population. The problem exists with efficiencies in freight movement.

The economy can move freight faster and more cost effectively than it ever could before. Look at containers, rail and even trucking. A container from overseas a decade ago would cost a lot more and take a month to complete. Now they move the container in less than 7 days. Rail efficiencies have increased and trucks can now get a lot more done than they could in the 80's. The volume of movement now can create cost effective synergies. Now ships can move 3 times more containers, trains double stack containers and trucks have 53' trailers, some being doubled up between regions. The fact is, to move 100lbs of freight is cheaper now than it has ever been.

Now to add to that, most things we buy have decreased in size, and weight. Televisions are a mere inches deep instead of 36" and are weightless compared to their counterparts of the 80's. Computers now fit into a Kleenex box instead of the cases they used to fit into. Tablets are quickly replacing computers. Furniture comes in boxes to be put together at home.

These efficiencies equate to the fact that manufacturing of these products can move to the area where labour is the cheapest (China, Mexico etc) and the freight cost per unit will not increase past the point of the achieved labour savings.

To make a long story short. We (the transportation industry) is not charging enough or labour costs are too high to keep manufacturing regionalized. We need labour costs to come down and transportation costs to go up. What will it take? A $250/barrel oil will definitely make costs go up but that will also drive labour costs as employees will need more to handle inflation. Maybe a tax on ships coming to port? Highly unlikely as all governments are entering into free trade initiatives with more and more countries.

@Michael Ludwig is correct...it may all collapse........we'll see.
 
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Globalization is highly dependent on cheap transportation. Cheap wages in third world countries aren't enough, transportation costs need to be low too or else the savings in manufacturing are simply offset by the cost of transportation. Every so often I get shippers who want me to quote "competitively" so that they can be competitive themselves in distant markets. For example, I had a company that makes picnic tables in Ontario want a good rate so that they would be competitive with someone in Missouri. I told him he is beating a dead horse: his product is fairly low value, and the transportation cost is effectively a barrier to anyone who isn't local to the buyer. That guy should focus on selling within 300 miles of his location instead of trying to supply his tables to distant markets. Some products (like some fruit and jet engines) can't be sourced regionally... so long haul transport really is the only way to go. But manufacturing in general would be best off to focus on regional markets where ever possible... why go into a market where the cost of transportation is significant and makes you less competitive? Maybe there's some cache to selling to people in far away lands.. I don't know.
 
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