Get ready to rumble.
Canadian and U.S. auto parts suppliers that expect to win more business from lower-cost jurisdictions under the higher content rules of the United States-Mexico-Canada Agreement, which went into force this month, and the pandemic-induced push to rebuild domestic manufacturing had better gear up for a fight.
China, the globe’s industrial heavyweight champion, isn’t about to sit still while production leaves its shores, said Laurie Harbour, CEO of Harbour Results, a Michigan-based consultancy that helps boost the performance of companies, including small and medium-size suppliers in Canada and the United States.
“The Chinese have a very robust manufacturing strategy,” Harbour says. “They have lots of GDP growth, and they’ve resumed lots of manufacturing in just the last four months. They will come back with the same amount of vengeance that they came to us with 20 years ago.”
Made In China 2025, launched in 2015, is the Chinese government’s 10-year plan designed to make the country a self sufficient global competitor in technology and advanced manufacturing.
“Growth in plastics, stamping and mold-making are critical parts of their strategy,” Harbour said. Chinese companies, many of which are state-owned, are going to “price competitively to win more work, and they’re going to compete just as much if not more than they were before because they want to rebuild economic growth.”
That means Canadian suppliers must develop a winning strategy, especially as they emerge from the pandemic. Investment in new technologies is key.
“If you didn’t automate before,” Harbour said, “then you need to take this pandemic seriously and develop a longer term strategy to automate.
“Don’t go back to the same way of running your business. You need to do something better and different because that’s what the best of the best have done, and that’s why they’re surviving through this [pandemic] better than others.”
Companies that were “more data-driven reacted quicker and were able to run their shops with fewer people because they were automated,” Harbour said. “So, if you’re a mold shop with fully automated CNC machines, you were able to have a skeleton crew, making sure those machines were running. You didn’t need a person at every machine.”
Suppliers on this side of the border already have two key advantages in their corner: a favourable U.S.-Canada exchange rate and a business culture conducive to innovation, Harbour said.
Canadian tool and mold-making shops often outperform their U.S. counterparts, she says.
“They definitely have made more investments in automation and technology and have driven throughput tremendously.”
Companies that are having the toughest recovery started 2020 heavily in debt and ill-equipped to face the economic lockdown, she said.
Still, opportunity beckons. And those suppliers training for the big fight will be ready to step into the ring.
