Deloitte

June 18, 2008 09:00 ET

Deloitte: Canadian Manufacturers Say Impact of NAFTA is Positive

Yet companies struggle to compete globally as high cost of production remains industry's Achilles heel

TORONTO, ONTARIO--(Marketwire - June 18, 2008) - The majority of Canadian manufacturers responding to a new Deloitte survey paint a positive picture of their experiences with the North American Free Trade Agreement (NAFTA). Yet they struggle to remain competitive globally as the lack of competitiveness of production activity in Canada remains the industry's Achilles heel.

The survey, titled "Made in North America," targeted top-tier executives of North American manufacturing companies representing a wide range of industries, and was designed to gauge how they are competing in a global economy.

The majority of Canadian respondents credit NAFTA for allowing them to access new and larger markets, and for improving their overall business performance. Although only one-third of Canadian companies believe they are currently competitive on a global scale, many more recognize the need for transformation through plans to expand a variety of operations in the global value chain, including sales and service, research and development (R&D), and sourcing. Many believe that North America will become even more competitive by 2012 in: sales and marketing (45%), information technology (41%), customer service (37%), R&D/engineering (36%) and finance/accounting (34%). On the other hand, more than 60% of respondents hold the opposite view of production competitiveness, singling it out as the weakest link in the North American value chain.

"In the face of recent and highly-publicized challenges here in Canada, the level of optimism about NAFTA and future competitiveness comes as both a surprise and a paradox," says Luc Martin, Deloitte partner and Canadian manufacturing industry leader. "A near-parity currency environment, rising energy and commodity costs, turbulence in capital markets, as well as closures of major manufacturing facilities, are creating very tough times for Canadian companies," he adds.

The manufacturing industry faces a clear and continuing erosion of its production activity In fact, as only 24% of respondents say that they plan to expand production in Canada, they are now seeing the industry evolve into a new model - one which does not necessarily include actual production facilities located within our borders. In order to adapt to this new reality and remain competitive, they must adopt a proactive global mindset, and strategies that include reducing high labour costs through automation and innovation, provide value-added differentiation of their products and services, and attract and retain a globally mobile workforce through talent management and workforce planning.

"This survey demonstrates that manufacturers in North America share common challenges as well as the urgent need for us to work together to find common solutions," says Jayson Myers, president of Canadian Manufacturers & Exporters. "In order to be successful on the global stage and to compete and win against the rest of the world, our main priority is to strengthen the North American market even further."

According to Canadian respondents, the biggest barriers to competitiveness in North America are labour costs (84%), the exchange rate (80%), raw material prices (68%) and availability of skilled labour (63%). Labour policy and lack of harmonized border regulations round out the next biggest challenges to competitiveness for Canadian companies. Not surprisingly, these were the issues most frequently cited by respondents as areas that governments should address as matters of public policy.

About the Survey

Deloitte, Deloitte Canada and Deloitte Mexico, with the cooperation of the National Association of Manufacturers (NAM), The Manufacturing Institute, and Canadian Manufacturers & Exporters (CME), surveyed 321 executives of leading North American manufacturing enterprises across product sectors to obtain their perspectives on their current and expected future competitiveness. The survey responses have been summarized and represent the opinions of the executive management of these firms. No supplementary research has been added.

For more information and to download the complete survey results please go to www.deloitte.com/ca/madeinnorthamerica.

About Deloitte

Deloitte, one of Canada's leading professional services firms, provides tax, audit, consulting, and financial advisory services through more than 7,600 people in 56 offices. Deloitte operates in Quebec as Samson Belair/Deloitte & Touche s.e.n.c.r.l. the firm is dedicated to helping clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its Member Firms.

Contact Information