Ford has something big planned for Canada. But to make it happen, the company needs the government’s assistance, says Dianne Craig, CEO of Ford of Canada. The company is reportedly considering a $1.2-billion expansion of its Oakville plant—contingent on government subsidizing one-third of the cost. The Big Three automakers contend it still costs too much to build vehicles in Canada, despite wage and pension concessions made by the Canadian Auto Workers union last fall. In response to the carmakers’ concerns, the federal government recently ponied up $250 million by extending the recession-era Automotive Innovation Fund. The money was welcomed by the industry as necessary, but not necessarily sufficient.
Four years ago, the financial crisis and ensuing collapse of the auto industry meant the only consideration for most companies was self-preservation. Unlike its Detroit counterparts, Ford averted bankruptcy and survived the recession without being bailed out by taxpayers, by virtue of a timely $23.5-billion loan and a last-ditch restructuring.
Ford now leads Canadian auto sales, having displaced General Motors from its near-permanent perch atop the rankings. Craig, who became CEO in November 2011, spoke to Canadian Business staff writer Tim Shufelt about Ford’s brush with death, its path to predominance and the future of vehicle manufacturing in Canada.
Canadian Business: As the industry began to crumble in 2008, when did you realize that Ford faced more than just a downturn, that this was an existential crisis?
Dianne Craig: This was very different. I started in 1986, and the first real downturn was in 1992 to 1994. That was nothing. The U.S. industry was around 14 million vehicles, and we thought that was catastrophic. In 2009, it dropped below 10 million. We let go of 67,000 employees in North America. We closed 17 plants. A lot of my good friends lost their jobs at Ford. It would have been all for naught if we hadn’t got through it.
CB: How close did the company come to bankruptcy?
DC: It was very close. Even when we took out the loan, we didn’t anticipate the industry dropping that far. But we stuck to it, and we were very pleased we didn’t have to take precious taxpayer money. And even through the depths of the recession, we never stopped investing in our products. Whether that meant selling the furniture and sitting on the floor, it was all about making sure we kept investing in the product.
CB: Is there still a perception that Ford is just a truck company?
DC: I think we’ve changed that perception. You can’t be the market leader and be perceived as just a truck company. In the past, we were. We were a truck company and a Mustang company. That’s changed over the last five years. We have a lineup of cars that we didn’t have four years ago: the Fiesta, a new Focus, a new Fusion, which is drop-dead gorgeous, and of course we still have the Mustang. There were segments we didn’t play in and now we’re a player.
CB: Did the crisis, in a way, give Ford an advantage over the other Detroit automakers?
DC: We were certainly better positioned to weather the storm. And no one has estimated what impact the bankruptcies had on the other companies in terms of their brand image. We have so many customers, even today, that tell our dealers they’re really grateful Ford did it on their own. We’re really proud of that.
CB: Ford has claimed the Canadian sales crown for the first time in decades.
DC: For three years in a row.
CB: Right. Do you see that happening without the financial crisis?
DC: It all comes back to working the plan.
CB: Do you see the industry opening new plants in the near future?
DC: When we went through the restructuring, it was about optimizing the capacity we had. We don’t see, at this point, adding any other plants in Canada. But we have a very stable footprint with the plants we have in Windsor and Oakville.
CB: What can you tell me about the Oakville project?
DC: I’ll just say that we have the opportunity to create a global platform here in Oakville that will ship all around the world. We already ship today to Brazil, we ship to China. But there could be an opportunity to ship to Europe. It would be one of five we have around the world. To have it in Canada could be really exciting.
CB: Before the market recovered, the company said the project couldn’t go ahead without government support. Is that still the case?
DC: There are a number of ingredients that go into it, whether it’s the labour agreement, whether it’s working with governments. They’re all key ingredients.
CB: Without the project, is there a risk the Oakville plant could close?
DC: There are all the ingredients that have to go into it, then we make a business decision. So that’s what we’re going to do.
CB: How do Ford’s labour costs in Canada compare to other jurisdictions?
DC: Certainly the Canadian Auto Workers union (CAW) negotiations reduced the gap significantly. We felt very good about the negotiations. We got a very good competitive agreement. It narrows the gap. Is it down below the U.S.? No, but does it allow us to compete in Canada despite a high dollar? Yes. Over the next four to five years as new workers come in at a lower wage, we’ll continue to reduce that gap. But the most important point is that the labour agreement gives us the opportunity to continue to manufacture in Canada. Also, the prime minister came to Oakville to announce the Automotive Innovation Fund. That’s critical, because there is investment all around the world attracting that business to their countries, the U.S. included. The announcement of that fund was really important. It’s really important to work with labour and government, both Ontario and federal, to make sure we attract that investment in Canada and keep it here.
CB: Is Canada one of the most expensive places in the world for Ford to build vehicles?
DC: I’ll say this: we believe we can be competitive in Canada. The CAW agreement was critical. Without it, it could have been a different story. We would not be having a conversation about the potential of Oakville.
CB: Do you still need much more in government subsidies for this industry to be competitive in Canada?
DC: All I would say is that it’s a very encouraging step in the right direction. South of the border, U.S. and state governments are contributing upwards of 50% of the investment to attract manufacturing. In South America, in Brazil, they’re looking at up to 50% of the investment, because they know to have a vibrant economy, manufacturing is critical. Especially with the spinoff of jobs. The prime minister understands that. They’ve been great partners. In 2005, in Oakville, they were partners in terms of investing in flexible manufacturing. We wouldn’t even be having the conversation about the global platform if we didn’t make that investment. Essex, thanks to the Ontario government and federal government, was the only plant we reopened. The commitment was for 400 jobs; today it’s 750.
CB: Is it only through subsidies that Canada can compete with those lower-cost jurisdictions?
DC: It’s a key ingredient. There are a lot of pieces that go into it, but in the absence of that, it becomes very problematic.