Introduction: Public Policy and Canada’s Automotive Industry

The automotive industry has been a cornerstone of Canadian manufacturing for generations. Over the past 50 years, governments have supported the industry with a variety of industrial policy tools. These tools include the 1965 Canada–US Automotive Products Trade Agreement (better known as the Auto Pact), duty remission schemes beginning in the 1970s, and Voluntary Export Restraints in the 1980s. More recently, policy-makers have focused on providing financial incentives for investment, innovation, and research and development (R&D) as a means to support automotive manufacturing in Canada.

This special issue of Canadian Public Policy/Analyse de politiques explores the role of public policy in supporting the automotive manufacturing industry in Canada. The articles in this issue build on research in a previous special issue of this journal edited by Anastakis and Van Biesebroeck (2010) that explored a range of issues related to the automotive industry, including government investment incentives (Van Biesebroeck 2010) and the policy tools used by the Canadian government to attract investment in the 1970s and 1980s (Mordue 2010). They also explore several other themes and issues of consequence, including the restructuring of the Canadian automotive industry supply chain, the potential impact of new trade agreements, the role of public policy in supporting innovation in the automotive parts industry, and the collapse of the automotive industry in Australia.

The research in this special issue appears at a time of relative stability for the Canadian automotive industry. The plant closures and layoffs so common during the economic crisis of the late 2000s have abated. Vehicle production, employment, and contributions to gross domestic product have stabilized to a great degree, and each of the five original equipment manufacturers (OEMs) that operate in Canada made one or more substantial investments in their existing manufacturing facilities since 2010. Moreover, several OEM vehicle assembly and powertrain manufacturing facilities owned by GM, Ford, and Fiat-Chrysler that faced an uncertain future received production mandates and investment commitments as a result of collective bargaining agreements concluded with Unifor in fall 2016. Included in most of these announcements were commitments by the Government of Ontario, and in some cases the Government of Canada, to support these investments with financial incentives.

Not surprisingly, incenting capital expenditures to solidify the footprint of the Canadian automotive industry has emerged as a top priority for policy-makers. Despite the aforementioned investments by OEMs, concerns exist regarding overall levels of capital spending. This is especially so considering that Canada has received virtually no greenfield OEM investment since the recession of 2008–2009, whereas OEMs have made substantial investments in new assembly and parts-making facilities in Mexico and the United States (see Keenan 2015). Over the same time, Mexico surpassed Canada in terms of vehicle production and is poised to produce at least twice as many vehicles as Canada by 2020. Industry stakeholders have expressed their concern over low levels of capital spending relative both to previous periods of global industry growth and to current levels of spending in competing jurisdictions. More specifically, they are concerned that low levels of capital spending will erode any advantages in productivity or quality that Canada has developed over time (CAPC 2013).

However, the Canadian automotive industry, which is located primarily in southern Ontario, remains integrated with that of the US Great Lakes states. Taken together, these subnational jurisdictions constitute the largest automotive-producing region in the world. A recent Memorandum of Understanding between Ontario and Michigan commits to further efforts at integration by exploring ways to leverage the automotive capabilities that exist in both jurisdictions for their mutual benefit (Ontario, Office of the Premier 2016). Moreover, GM, with support from the Governments of Ontario and Canada, has committed to a major expansion of its Canadian engineering and software R&D facilities to develop autonomous vehicle technologies (GM 2016). These initiatives are encouraging. Nonetheless, it remains to be seen whether these investments are the harbinger of further investments and production commitments from OEMs, traditional automotive parts-makers, or suppliers of emerging automotive technologies and whether they signal Canada’s emergence as a leader in...