Public funds target innovative features of new Ford flexible manufacturing facility

The federal and Ontario governments are each contributing $100 million to trigger an investment by Ford Motor Co of more than $1 billion at one of its Oakville facilities. The government will help to establish an R&D centre, develop a novel flexible manufacturing system and support skills training. The project will see the conversion of a recently closed truck plant into the Oakville Assembly Complex (OAC), a state-of-the-art flexible manufacturing facility that’s just one of seven flexible manufacturing plants within Ford’s global operations.

The project — dubbed Project Centennial — will also establish Ford’s first R&D centre in Canada. The Centre will initially focus on a project called Fumes to Fuels to develop a large stationary fuel cell system to convert emissions from the facility’s paint shop into a hydrogen-rich fuel that will generate electricity at the OAC.

“We will be creating the technologies for conversion,” says Ford Canada spokesperson Lauren Moore, adding that the project is based on a pilot project conducted at Ford’s Rouge R&D centre in Dearborn MI. “We’re planning to partner with public and private researchers in Canada.”

Federal funding to Project Centennial will likely flow through Technology Partnerships Canada (TPC) although terms and conditions of the agreement with Ford may necessitate modifications to TPC requiring Treasury Board approval. The $100 million in federal support is conditionally repayable and targets the pre-production aspects of the flexible manufacturing system, training in new production technologies and R&D in the area of environmental technologies.

“It’s very important that we address issues of competitiveness and innovation throughout the supply chain. There’s a very competitive global environment and a lot of countries want the assembly business,” says Ron Watkins, DG of Industry Canada’s aerospace and automotive branch. “Ford is interested in new investment opportunities and they’ve made it clear that they would look to government to be part of the solution.”

Watkins says the federal negotiating team worked on the aspects of the project that were important to government, especially the research centre and fuel cell technology. Ford currently has a fairly small R&D presence in Canada and the new R&D centre represents a breakthrough of sorts for the Canadian operations. Both General Motors and Daimler-Chrysler have established significant Canadian R&D operations in recent years and Watkins says he would like to see all the major automakers, including Toyota and Honda, increase their R&D presence here.

Flexible manufacturing systems can accommodate the assembly of several vehicle models simultaneously, allowing rapid changes to the mix, volume and options of products to better meet consumer demand. The OAC will be capable of assembling four different models based on two distinct platforms.

The provincial contribution of $100 million will draw from the recently created $500-million fund associated with the Ontario Automotive Investment Strategy (OAIS) and administered by the Ministry of Economic Development and Trade (MEDT). Ontario won’t divulge details of its agreement with Ford since negotiations are not yet complete. But an MEDT spokesperson says that under the OAIS program, companies file receipts with MEDT, which then reimburses a percentage of the costs.

The OAIS was created to stimulate automotive innovation, skills training, infrastructure, environmental efficiency and alternative energies, replacing a similar program introduced by the previous government. That package committed $625 million to support for the automotive sector through the Ontario R&D Challenge Fund and included $125 million for skills training (R$, March 7/03).

AUTOMOTIVE COUNCIL ISSUES RECOMMENDATIONS

The announcement of the multi-faceted Ford project caps a lengthy negotiation process and comes at a particularly critical time for the Canadian auto sector. That’s the consensus of a recently released report from the two-year-old Canadian Automotive Partnership Council (CAPC). Comprised of industry executives, senior government officials , academics and others, the CAPC says action on several fronts is urgently required to protect the Canadian auto sector. Canada ranks eighth globally in automotive assembly, producing 2.5 million vehicles annually (down from 3 million in 1999) and directly employing 150,000 people.

Entitled A Call for Action: A Canadian Auto Strategy, the CAPC report was issued the week before the group’s November 3 meeting in Ottawa — the first time the group has met in nearly one year. The report contends that new investment and innovation are essential to secure the sector’s future, which is facing increasing competition from several southern US states, Mexico, China and other developing nations.

“Make innovation a competitive cornerstone for Canada’s automotive industry by taking action now to strengthen industry process and product innovation capacity, Research and Development ... and by introducing improved auto-focused innovation incentives such as early commercialization tax credits,” states the report.

The report contains a long list of recommendations covering all aspects of the auto sector, including several that address innovation and competitiveness. They call for a “tighter alignment between Canada’s research institutions and the national auto industry” and advocate an amendment to the scientific research and experimental development (SR&ED) tax incentive program to make it a “more user friendly/accessible tool to drive innovation”.

“The Council has come to the view that we need to secure the future of assembly operations and have them become more competitive,” says Watkins. “Assembly-level investment is to the benefit of the whole industry. This is a strong theme of the Council.”

CAPC’s innovation working group is even more specific in its calls for government action. In a report to the CAPC’s November/03 meeting, the group called for the creation of several new government programs targeting advanced research, commercialization of advanced technology, product development and productivity improvement.

The working group also recommends “meaningful consumer incentives for purchasing environmentally advanced technology vehicles”; and, a doubling of federal support to $4 million for Natural Resources Canada’s Canadian Lightweight Materials Research Initiative (CLiMRI) initiative. The working group is currently working on developing a “Made in Canada model for public-private partnerships that addresses the specific needs of the industry.”

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