TORONTO — The closure of competitors’ plants in Canada can have “cascading effects” on Ford Motor Co.’s operations in the region, said Joe Hinrichs, Ford president of global operations.
Speaking at the Automotive News Canada Congress in Toronto, Hinrichs said the company has fielded requests about whether Ford could use the excess capacity that would be freed up after General Motors closes its Oshawa, Ont., assembly factory at the end of 2019. He did not signal whether Ford was interested in doing so, although he said plant closures can alter how labour and government interact with the automaker.
“The relationship that government and union partners have with all the companies changes a little bit because there’s that element of trust, the element of if you lose something, you fight even harder not to lose something else,” Hinrichs said. “So there are cascading effects, I would say.”
GM’s plan to end production in Oshawa at year’s end has renewed concerns about the health of Canadian auto manufacturing. According to the Ontario government, Canadian production levels have dropped by about 25 per cent since 2000. The Detroit Three, once the backbone of auto manufacturing in the country, would combine to have just four assembly plants nationwide should Oshawa close.
Hinrichs, who was head of Ford of Canada in 2005, said it is important for Ford to work with the federal and Ontario governments to ensure its Oakville, Ont., assembly plants remains competitive regionally and globally.
“It’s a very competitive world when it comes to fighting for investment,” he said. “We have lots of good conversations and have a great relationship with the government up here, and they’ve been very supportive of the work we do.”
Canada’s manufacturing competitiveness was a major topic of conversation at the Canada Congress. High electricity rates in Ontario were among the concerns raised by Canadian heads at Hyundai, Jaguar Land Rover and Nissan, which do not have assembly plants in Canada.
Hinrichs, speaking with Automotive News Canada following his Congress talk, said power costs are one of several major factors Ford looks at when assessing the competitiveness of its plants worldwide.
“We use a lot of power. It’s a big deal to us,” he said. “We make it clear that when we make decisions about manufacturing competitiveness, it’s inclusive of all those things. We look at the whole picture, and we think it’s in the government’s interest — we work with them — to find ways to be competitive in all those elements where they can influence.”
Despite challenges in the manufacturing space, Hinrichs described the Canadian new-vehicle market as being “pretty healthy.”
“The industry has had a good run, and there’s no reason it can’t continue,” Hinrichs said, saying Ford would be satisfied with a 2019 market that dips to 1.9 million units sold, a historically high figure. Canadian new-vehicle sales topped two million units in 2017 and 2018.
Hinrichs described the global restructuring at Ford as “more dramatic and deeper” than changes that took place during the 2008-09 financial crisis. He said the company was about 40 per cent to 50 per cent of the way through assessing its operations.
“We’ve said that most of the financial benefits will come in the 2021-23 time period, and we started on this in late 2017,” Hinrichs said. “It takes a while to redesign everything.”
Ford CEO Jim Hackett has said the company was undergoing a “fitness” regimen to strengthen its financial position. The carmaker plans to cut most of its passenger car offerings out of its North American lineup and downsize its salaried workforce.
Ford recently announced a partnership with Volkswagen on the development of electric and autonomous vehicles. But the automaker is open to more partnerships with car companies, said Hinrichs.
“There’s so many capital demands on this business today that you really can’t exclude discussions with other people because most companies just aren’t going to have enough capital to go around all the initiatives you want to do and manage the risk associated with that,” he said.