Innovation Sub-Committee:
Interim Report and Anticipated Recommendations

December 18, 2002

R.H. Paul and A.J. Power - Co-Chairs

Introduction

This document presents a brief discussion of the innovation scene in Canada's automotive industry and puts forward a model for how Canada can protect and enhance its current position.

Preamble

1. Innovation comes from rapidly bringing new products to market and implementing productivity gains and NOT from merely doing research and creating new knowledge as has often been the case in Canada and with Canadian research support programs. Canadian research efforts need to focus on solving real industrial problems as stated by industry and improving productivity and process efficiency, rather than on pursuing curiosity-driven research goals.
   
   Creating new products and making gains in productivity will enable Canada's industrial community to justify and make significant research investments in partnership with the public sector and it will greatly enhance the education and training of young Canadian researchers as they work with industry on real problems.



2. High quality human resources are key to creating new products and productivity gains. Human resources are needed at all levels including knowledge creators (i.e. research personnel), technology receptors (i.e. design engineers), production staff (including financial and technical management people) and skilled trades workers (industrial electricians and mechanics, millwrights and tool and die makers).
   
   Canada's education system needs to focus on creating the needed human resources at all levels and it needs to be given the tools and resources to do this. The curriculum development should be carried out in close consultation with industry to ensure that curriculum is relevant and conveys the right knowledge and skills.
   
   In addition, the government needs to work with industry to ensure that the factors are in-place that will help Canada to retain these highly qualified personnel. These factors include a large number of challenging and interesting careers and a competitive tax and compensation climate that encourages our best young people to stay here.



3. The demand for innovation in the global auto industry, is driven from a need to respond to:

• very rapid changes in all aspects of automotive sector activity including design, finance, materials, and production techniques,
• elimination of the auto pact,
• rapid redeployment of capital,
• aggressive, competitive government incentives in the US,
• significant over-capacity in assembly plants

These factors force assembly plants, and their servicing supply-chain, to be located where the business climate (financial/people/technology/location) is most advantageous.

Innovation is the mechanism to respond to these pressures and change the rules of the game to favour Canada.


4. Foreign ownership of all automakers exposes Canada to decision makers who live elsewhere. This increases the global perspective, as well as the risk of foreign nationalistic policies driving investment in research and commercialization to be in foreign centres.
   
   Research moves easily around the world and innovations may migrate seamlessly from plant to plant around the world as well; regardless, the Canadian focus needs to be on securing the innovations for initial commercialization with a climate that promotes larger production investment.



5. The Canadian Automotive Innovation model for the industry must move to a private-public partnership model wherein academic and government research programs are driven by industry goals and dedicated public resources are partnered with industry resources to both leverage private investment and lower the risk to industry of being innovative.
   
   The Innovation Subcommittee feels that this type of partnership model will help Canadian researchers and industry work together to develop the new knowledge and solutions as well as the highly qualified personnel to pressing industrial problems in Canada's automotive sector to enhance our competitiveness.

Process

Recognizing that the innovation climate is a very dynamic system with a perspective that varies by company or stakeholder, the Innovation Subcommittee has solicited reports from the OEM, parts suppliers, and materials sectors. From these inputs we have developed an extensive list of short and long-term actions that address the major issues identified above. With the short time period provided, these actions are currently being organized and prioritized.

Anticipated Recommendations

1. Requirement to make a clear and definitive innovation strategy that focuses on increased industrial productivity and a climate for bringing new ideas to the production floor as rapidly as possible.



2. Develop a model of private-public partnerships for research programs. This model must have industry-led programs and industry-driven goals.



3. Develop automotive-specific programs for funding of innovation in Canada with a focus on early commercialization and production rather than curiosity-driven research and the creation of new knowledge.



4. Address the fundamental skills gaps within the education system for people who can create innovation and receive new innovations and produce products with them.