Recession-battered industries say they need government help to recover

OTTAWA — With the economy beginning to recover, two of Canada’s most recession-ravaged industries are putting on display this week the results of soul-searching reviews meant to prepare them for the post-slump world.

OTTAWA — With the economy beginning to recover, two of Canada’s most recession-ravaged industries are putting on display this week the results of soul-searching reviews meant to prepare them for the post-slump world.

On Monday, the Forest Products Association of Canada is unveiling the findings of a year-long study intended to set it on course to emerge from the worst few years in its history.

And on Tuesday, the Canadian Manufacturers and Exporters group will hold a day long-summit in Ottawa, including appearances from the federal finance and industry ministers, to brainstorm on how the industry can adapt to future competition.

High on the agenda for both groups is persuading Ottawa it is in the best interest of the economy for the government to put up the seed money the industries need to modernize and adopt greener technology.

A Harris Decima Research poll commissioned by the CME, to be released Tuesday, suggests there is still a lot of faith in manufacturing’s future among Canadians.

Among the poll’s findings is that a majority of Canadians believe the economy “needs a strong manufacturing sector” and that Canadians prefer to buy home-made products if given a choice.

CME president Jayson Myers said companies know the federal government has limited fiscal manoeuvring room given that Ottawa is at the front end of a long string of annual deficits that will pile on about $170 billion in additional debt to the country’s finances.

In interviews and public appearances, Prime Minister Stephen Harper and Finance Minister Jim Flaherty have stressed that their $46-billion stimulus package expires in the spring of 2011 and that they don’t intend to significantly enrich it or extend it in the coming March 4 budget.

But the manufacturing and forestry industries believe Ottawa will need to play a role if they are to succeed in re-positioning them to take advantage of upcoming new green technologies and developing markets.

The forest industry is further ahead in outlining specific requests of Ottawa, which association chief executive Avrim Lazar will unveil Monday morning at a news conference in Ottawa. The manufacturers have mapped out the broad outlines of how the industry needs to change, but the specifics of its requests, whether through inducements or tax credits, is still being developed.

“It’s not the case that they (government) don’t have any money anymore, it just means they have to make choices in an informed way,” said Myers.

“We need to have a world-class manufacturing sector. People don’t realize it drives a lot of high-paying jobs in the services sector, like technology, advertising, marketing, trucking, warehousing, distribution — without manufacturing those jobs wouldn’t be there.”

One of the myths about the factory sector, said Myers, is that it is becoming smaller. While that is true as a percentage of the economy, in total output manufacturers had their best year in 2008, before the recession hit industry and exporters hard.

The industrial sector was hit hard last year by the restructuring of the North American auto sector, which led to plant closures and thousands of job cuts in Canada at the so-called Detroit Three carmakers — General Motors, Ford and Chrysler.

The forestry sector, which includes the pulp and paper and lumber industries, was hit hard by the slump in the U.S. housing market and changes in newspapers and magazines, caused by the recession and the migration of ad revenues to the Internet.

According to Statistics Canada, manufacturing shed 190,000 jobs in the past year, an astounding two thirds of total job losses for the entire economy.

The industries have already gone hat in hand to Ottawa and come away with generous bailouts. Last year, the forestry sector was beneficiary of a $1-billion rescue package, while the auto sector, particularly General Motors and Chrysler, have come away with more than 10 times that amount in loans and other support.

According to a recent Conference Board analysis, Canada’s wood products industry is slated for a modest rebound this year thanks to an expected revival of house construction in the U.S., and cost-cutting measures put in place during the recession.

But it will take several years before the sector returns to full heath after three disastrous years of losses, mill closings and layoffs.

The outlook is similar for Canada’s auto sector, thanks to an expectation that sales must come back from rock bottom levels and restructuring, including concessions from unions, that have reduced costs.

One of the key challenges for both industries is coping with a higher dollar, which makes exports more expensive in foreign markets, especially the key American market, the destination for most of Canada’s manufacturing exports.

Myers says Canadian manufacturing is generally emerging from the recession more efficient, but also a somewhat of a wounded animal.

As important, said Myers, many companies have lost their product mandates, a lot of capacity due to consolidation, access to global supply chains, and many have lost their traditional customers.

“Our point is we need an industrial strategy that focuses on value-creation, economic growth and productivity and in order to do that we need to ensure companies are investing in product development, innovation and new technologies, as well skills development,” he said.

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