Welland is one of those old, central Canadian cities of tree-lined streets and pretty brick homes that was once a picture of prosperity and contentment - thanks in large part to the bustling factories that provided lifetime employment, paid good wages and benefits and formed the foundation of the local economy.
These days, the city of 50,000, which is in the Niagara Peninsula and is celebrating its 150th anniversary, appears dispirited and run down (to judge from its central business district) and that's because a significant part of its economic base has disintegrated in recent years.
And two weeks ago, on the eve of the federal election CALL, the city suffered another disheartening blow. Deere & Co. of Moline, Ill. announced that it is closing its Welland plant after 97 years in business and moving the production of Gator utility vehicles and tractor attachments to other facilities located in Wisconsin and Mexico, costing 800 people their jobs.
Welland isn't the only Ontario community going through this ordeal. It's happening in numerous once-thriving cities and towns from Cornwall in the east to Windsor in the West. Since the start of this decade, the country's manufacturing sector has shed some 300,000 jobs. Its share of gross domestic product has slipped from 18.4 per cent in 2000 to 15.2 per cent last year.
However, the pain has not been evenly distributed, according to some insightful new research from the Ottawa-based Conference Board of Canada. Economist Michael Burt, associate director of the board's industrial analysis group, notes that output and employment in nine of 21 sectors, including food processing, fabricated metal products and machinery, have increased since 2000. Aerospace and telecommunications companies have also enjoyed healthy growth over the same timeframe.
The losses, says Burt, tend to be concentrated in such sectors as textiles, apparel, toys and furniture. "These industries are typically labour intensive," he says. "Labour accounts for a large share of their production costs. That makes it attractive to relocate that output to Mexico, China, Vietnam or other low-cost countries."
Union leaders and their members have denounced such moves and pessimistic pundits have mused about the death of Canadian manufacturing. Burt believes that such fears are misplaced. He thinks industry in this country is going through a painful, but necessary, transition toward value-added production.
"We're not going to make T-shirts in Canada, but we may make seatbelts for cars," he says. "Canadian companies are not going to produce the stuff that sells in Ikea. They're going to make high-end rugs. The same with furniture. That's where our competitive advantage lies."
The future, Burt contends, rests less in the final assembly of low-value goods than in the manufacture of specialized components that fit into larger products and systems, like engines and landing gear for aircraft, or pumps and compressors for the energy industry.
He also sees manufacturers deriving significant revenue in the future by providing ancillary services that accompany their goods, be they engineering support, supply-chain management or marketing and design expertise. A good example is Research In Motion, the Kitchener company that developed and now manufactures the hand-held communications device known as the BlackBerry. According to Burt, RIM derives a large chunk of its revenue from service contracts.
But manufacturers face two significant hurdles if they are to make the transition to this new way of doing business. First, they are going to need better-trained, more highly skilled workers. Second, they must recruit more young people and more women.
Currently, men make up about three quarters of the workforce in Canadian factories and manufacturers are facing imminent shortages because many of their employees are approaching retirement age.
Only 9.6 per cent of the workers in manufacturing were under the age of 25 last year, compared with 11.5 per cent in 2000 and 13.5 per cent in 1990. By comparison, about 15.5 PER CENT of the entire workforce was less than 25 years old in 2000 and that figure remained constant in 2007.
Burt isn't sure why this is so, but thinks that all the bad press may be deterring young people from seeking employment in manufacturing. And that may be the case.
After all, if you're starting your working life in Welland or Cornwall or Windsor and factories are closing their doors left, right and centre, it's rather difficult to see a future for yourself in manufacturing.
(D'Arcy Jenish can be reached at jenish@businessedge.ca)
