North American Auto Manufacturing and
the Canada – US Border
Mathew Wilson
Canadian Vehicle Manufacturers’ Association
Transportation Borders Working Group
October 2010
Presentation Overview
•
Background on the CVMA and auto manufacturing industry globally
•
The competitive challenge of an integrated industry – why border efficiencies
matter in North American auto manufacturing
•
Progress to date in streamlining border operations
•
Border realities and major challenges that remain
2
CVMA Background
CVMA Members:
• Chrysler Canada Inc.
• Ford Motor Company of Canada, Limited
• General Motors of Canada Limited
• Navistar Canada Inc. (International Truck)
Key CVMA Member Canadian Statistics:
• 8 vehicle assembly plants and 5 major components assembly plants
• 50,000 Canadian employees in head/regional offices, engineering and R&D,
and manufacturing
• 65% of Canadian vehicle production
• 46% of Canadian sales
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Global Auto Industry
 Industry faced unprecedented market and public policy challenges
 All manufacturers were negatively impacted by debt and financial crisis as it
went global – not just a “Detroit problem”
 Vehicle sales dropped significantly in many major markets in 2008 and 2009
which impacted production and investment levels
 Global sales in 2010 have shown improvement – including Canada and
the US
 Canadian and US production has rebounded in 2010
 New investments and new products for CVMA member companies have been
critical to this rebound
 Drives production increases at all related suppliers and parts manufactures
 While things are improving, significant challenges remain
 Global over capacity because of sales decline
 Public policy – vehicle emissions, trade policy, etc.
4
Global Auto Industry
• Auto industry is highly competitive and globally integrated
• Most auto manufacturers have production facilities in multiple
jurisdictions
• Global reach allows manufacturers to build vehicles almost anywhere
and sell into almost any market
• Each plant must fight to win product mandates and ongoing investment
to maintain globally competitive
• All aspects of operations are examined to determine global cost
competitiveness
– Investment supports, taxation regime, regulatory policies, human
resources, transportation infrastructure, etc
• Without a competitive investment climate, investments will be made in
other facilities and production mandates will be moved
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Auto Manufacturers and the Border
• Most major auto producing regions are self-contained within single
jurisdictions with no internal borders
– Japan
– EU
– South Korea
• North America is different – auto production is integrated across
jurisdictions
• Integrated Canada/US industry results in greater focus on transportation
network and border issues
– $93 B in two way trade expected in 2010 – 19% of total two way trade
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Building Vehicles Together
$36.5 B vehicles
$11.9 B parts
$20.9 B vehicles
$24.0 B parts
Border Efficiency Matters
• Integrated industry means that
transportation network has
significant impact on industrial
competitiveness
• If any of the over 8,000 parts
needed for vehicle assembly that
arrive in a “just-in-time” do no
arrive, production stops
• A “down line” costs over $1.5
million per hour in lost revenue
• Efficient, reliable and consistent
parts supply for vehicle production
is critical to maintain competitive
operations
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Border Efficiency Matters
• A vehicle built in Canada or the US will cross the border roughly 6
times in various stages of production on the way to market:
1.
The raw aluminum to make a piston shipped from Michigan to Ontario to
be made into a piston casting
2.
In Ontario the part is pre-machined and then shipped for additional
machining in Michigan
3.
It crosses borders again to enter into Mexico, where the part is finished
4.
After machining, the machined piston travels from Mexico to Wisconsin
for marrying to the connecting rod and outfitted with piston rings before it
travels to a Michigan Engine Plant for final assembly
5.
The piston (inside the engine) now travels from Michigan to Ontario for
assembly into a vehicle
6.
The vehicle crosses the border again to meet its owner in the US
• Every border crossing requires compliance with all regulatory and
security requirements imposed by governments
– These compliance costs are in addition to cost of border delays
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International Comparison of Border
Compliance
Domestic vs. Import
Chevrolet Equinox
Vehicle
Hyundai Tucson
Ingersoll, Ontario
Vehicle Assembly
Location
South Korea
US and Mexico
Major components
assembly location
South Korea
7 at a time via truck
Export volume
Roughly 4,500 at a time
via ship
27,000
Border crossings to get
4,500 vehicles to market
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Vision for Border Efficiencies
• Electronic collection and storage
• Information shared between
governments and agencies
• Expanded pre-approval programs
increases information shared in advance
Information
Collection
Risk Assessment
Border
Crossing
•
•
•
•
Electronic information in advance
Identify high risk away from the border
Partner with industry on risk assessment (FAST)
Coordination between governments and agencies
• Dedicated lanes for pre-approved/low-risk
• Electronic Information processing only
• Maximize use of technology – security and facilitation
• Single window reporting for all government departments
• Focus resources on unknown/high-risk
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Goals and Success to Date
• Auto manufacturers have been a driving force behind efforts for new
programs and a rethinking of transportation and border networks
• Canada/US partnerships, have been critical to improving cooperation
and setting a path towards improved efficiencies
– Documented through Smart Border Declaration and Action Plan
• Governments agreed to facilitate trade through low-risk, pre-approval
programs
– Separates and streams traffic into high/low risk
– Processing designed to push data and information collection and
reporting away from the border
– Free And Secure Trade (FAST)
– NEXUS
• Governments also mandated that all trade data must be reported in
advance and electronically for easier at the border processing
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Realities – Thickening of the Border
• Border operations have not been streamlined to the extent hoped
• Other Government Departments
– Estimated 45+ government departments between Canada and the US have
importation requirements
– Over the past several years there has been an increased demand for more
import documentation at the border
– Data requests are not aligned across government and can vary by department
– More data at the border results in fewer good being eligible under FAST
– Government departments often do not recognize low-risk programs that are
rooted in customs programs and create unique and often duplicative programs
• CBSA PIP and Transport Canada Air Cargo Security
•
•
•
•
Difficulty in implementing electronic reporting and processing
Often “low-risk” loads face increased inspection rates
Decreased traffic volumes, but increased “dwell” times
Contingency plans developed, but unsure of effectiveness
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Infrastructure Realities
• Infrastructure that is built for different
realities in a different century
• Traffic volumes increasing with
economic recovery in 2010
– Trucks up 26% at Ambassador & 19% at
Blue Water
• Governments often focused on China
and other foreign trade partners
– Canada/US auto trade nearly doubles
Canada’s total trade with China
• Priority on Windsor/Detroit Gateway
– Handles majority of automotive trade
– 401 not connected to current crossings
– No dedicated lanes for low-risk programs
from Highway to Interstate
– Current bridge limited by only 4 lanes
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Summary and Key Considerations
• Auto manufacturing remains of major economic importance and is
highly integrated within North America
• Integration and competitive global forces require streamlined and
efficient border operations
– 27,000 customs transactions for domestic manufacturer vs. 1 for a
foreign manufacturer
– Has competitive implications – adds costs to manufacturing processes
and consumer prices
• Efforts are being made towards a more efficient border
• Industry is partnering with government, but more needs to be done
– There must be a coordinated government wide strategy and commitment
to streamline border operations
– Must be significant commitment and investment in new trade
infrastructure
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For Further Information
Mathew B. Wilson
Director, Consumer and Industry Affairs
Canadian Vehicle Manufacturers' Association
170 Attwell Drive
Suite 400
Toronto, ON M9W 5Z5
T 416.364.9333
F 416.367.3221
mwilson@cvma.ca
www.cvma.ca
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