Sectoral Profile Transportation equipment manufacturing NAICS 336 Quebec 2015-2017 The industry in Quebec is dominated by the aerospace product manufacturing segment, which accounts for over 55% of jobs and more than two thirds of the value of shipments Around four out of five positions are located in the Greater Montreal area The strength of commercial aviation is related to the behaviour of consumers and the state of the economy while that of business aviation is dependent on businesses well-being Quebec s transportation equipment manufacturing industry employs over 63,000 workers, who work for about 500 businesses in the Greater Montreal area, particularly in Montérégie, on the Island of Montreal and in Laurentides. Most jobs in the industry (63%) are in the aerospace product sub-sector, which is also responsible for two thirds of the industry s shipments. The remaining jobs are in the following sub-sectors: motor vehicle body and trailer manufacturing; motor vehicle parts manufacturing; railroad rolling stock manufacturing; ship and boat building; and recreational vehicle manufacturing. The industry in Quebec boasts over 50% of all of Canada s jobs in the aerospace segment, while Ontario accounts for over 90% of Canada s jobs in motor vehicle manufacturing and motor vehicle parts manufacturing. Transportation equipment manufacturers are linked to businesses from other industries, many of which are their suppliers. They include fabricated metal product manufacturers, communications equipment manufacturers, machine shops, plastics and rubber products manufacturers, and electrical appliance and component manufacturers. All of these partners also have to respond to the needs of, and keep pace with, businesses engaged in transporting passengers and/or goods. The last recession resulted in many orders being cancelled or postponed, particularly in the aerospace and motor vehicle segments, causing manufacturers and their subcontractors to lay off large numbers of workers. While the recovery is a gradual one on account of the persistent uncertainty surrounding the global economy, there is evidence of it in the upturn of the various economic indicators since 2010. As the chart shows, GDP, employment and sales have all started to grow again. Although jobs have surpassed the peak reached in 2008, it has decreased slightly over the past year. Some companies, including Bombardier, have conducted significant layoffs in 2014, due to delays in the development of some programs.
Transportation equipment manufacturing Quebec 2015-2017 Page 2 140 Changes in GDP, Employment and Sales* 120 100 80 60 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GDP Employment Manufacturing sales Data are expressed as indices with 2007 = 100 Sources: Statistics Canada, GDP CANSIM 379-0030, Employment LFS, Sales CANSIM 304-0015 After suffering a setback in 2009, strongly linked to the slowdown in the aerospace industry, GDP gradually got back on its feet and grew by to $ 6.3 billion in 2014, the strongest annual growth since 2008, of which 70% comes from aerospace products. Given the limited size of the Canadian market, Quebec s transportation equipment manufacturers must look to export markets for growth. The globalization of trade has also had an effect on the destination of the industry s output from Quebec. Although the United States is still the primary destination of Quebec s exports, their share went from over 80% in 2002 to around 66% in 2012. The 2007 2009 American financial crisis resulted in significant changes to the destination of exports from Canada and Quebec. Faced with a drop in demand from the United States, their main trading partner, Quebec manufacturers developed new markets for their products. The arrival of new partners from the European Union, 1 mainly France, Germany, the Netherlands and the United Kingdom, meant that exports of transportation equipment got back on track between 2009 and 2013. Even though shipments remain below pre-recession levels, the industry is still the manufacturing sector s largest exporter. In 2014, capital investments reached a significant level of $ 673 million (slightly less than the peak of $ 743 million reached in 2013). This was mainly due to the construction of new plants and the upgrading of existing facilities in the aerospace, motor vehicle parts and railroad equipment subsectors and in the marine sector. Aerospace product and parts manufacturing The aerospace industry plays a significant role in the province s economy. On its own, the Montréal CMA accounts for over 67% of the jobs in this industry. Moreover, the region is one of the world`s largest aerospace centres, ranking alongside Seattle in the United States and Toulouse in France. Almost 70% of all research and development (R&D) in Canada 2 takes place in the Montréal CMA, where major private and institutional investors work in tandem with each other (large businesses, universities and other research centres). The industry leads the way in Quebec in terms of R&D in manufacturing and is the province s major exporter. 1 2 Ministère de l Économie, de l Innovation et des Exportations (MEIE), Le Calepin Le commerce extérieur du Québec, July 2014. Aéro Montréal, Innovation Capacity.
Transportation equipment manufacturing Quebec 2015-2017 Page 3 Multinationals dominate the aerospace industry s marketplace and have a tendency to move to or set up their plants in countries with low labour costs. Globalization and the size of these companies mean that it is difficult for SMEs to break into this industry. In Quebec there are contractors and a number of equipment manufacturers. This benefits a network of skilled small and medium-sized subcontractors and suppliers that successfully integrate into the supply chain and meet the specific requirements of the major players. The aerospace industry is a cyclical line of business. During the last recession, Quebec manufacturers and their subcontractors were forced to lay off many workers because airlines cancelled a number of orders for aircraft. Since 2012, manufacturers order books have been filling up steadily and a number of deliveries are scheduled before the end of the forecast period. This should create employment. Delays in the development of Bombardier Aerospace s CSeries have resulted in greater than expected expenditures. The company therefore had to cut 1,700 jobs in 2014 at the Montreal and Mirabel plants, including staff linked to other aircrafts, in order to cut costs and support the CSeries program. Bombardier Aerospace also transferred many jobs to Mexico. In 2015, Bombardier announced the elimination of 1,000 positions in its other Montreal plant where are assembled business jets due to a decline in demand for this type of equipment. When production of the CSeries begins, hiring will start again, possibly towards the beginning of 2016. The improving financial situation of businesses in the United States is expected to bolster demand for business jets and should benefit Bombardier Aerospace. Meanwhile, demand for military aircraft could slow down because of government budget cuts. The helicopter sector will be somewhat stable given that demand from the gas exploration sector is more limited. In 2015, Bell Helicopter announced about 1,100 layoffs, including 300 at its Mirabel plant, because of a decrease in the production of military helicopters and a slower recovery in the commercial helicopter market. Meanwhile, other companies will benefit from the Canadian Coast Guard contract obtained last year since nearly half of the components will be manufactured in Quebec, including the engines, which are to be manufactured by Pratt Whitney in Mirabel. Rolling stock and motor vehicle parts manufacturing Increasing sales of replacement parts for motor vehicles and a rise in new motor vehicle sales will encourage hiring. Although major manufacturers are closing their plants in Canada, they are producing more vehicles in their American, Mexican, Asian and European plants. This augurs well for Quebec s parts manufacturers-- exporters. As regards bus and truck manufacturing, there is a possibility that employment will grow slightly on account of the contracts awarded to major manufacturers. Railroad equipment manufacturing In 2010, the Société de transport de Montréal (STM) signed a contract with the Bombardier-Alstom consortium to purchase 468 cars for the Montreal metro at an estimated cost of $1.2 billion. Delivery of the cars is set to start in summer 2015 and to be completed at the end of 2018. The contracts Bombardier Transportation entered into with foreign railroad firms will benefit this sub-sector including subcontractors from Quebec that manufacture equipment parts. Western Europe is the largest market for railroad equipment, followed by the Asia-Pacific and North American regions. 3 Moreover, the Asia-Pacific region has the best growth prospects. Despite increased use of public transit, budget cuts by governments (major clients) could limit future invest- 3 Profil de l industrie des équipements ferroviaires au Québec, Ministère du Développement économique, de l Innovation et de l Exportation, 2010.
Transportation equipment manufacturing Quebec 2015-2017 Page 4 ment in new vehicles. Overall the railroad rolling stock manufacturing segment for the transportation of passengers and goods should grow slightly during the forecast period. Marine equipment manufacturing Since being taken over by Inocea in 2012, the Davie shipyard in Lévis, which had been closed in 2010, has seen its order book expand, while its workforce grew from 40 to 850 in 2014. More hiring is expected when activity begins to heat up. With a number of shipbuilding projects on hold, the impact looks like being considerable and the future appears promising. Upcoming contracts with the Government of Canada to upgrade and replace ships for the Department of National Defence and the Coast Guard will also create opportunities for the province s businesses that manufacture transportation equipment for shipyards. The implementation of the maritime strategy should also bring significant benefits for the industry. Overall, in the next three, there are good growth prospects in passenger and goods transportation. The aerospace industry will make a major contribution to the industry s positive progress, with assistance from the following segments: railroad equipment, marine transport and road transport (buses and trucks). This being the case, it is anticipated that jobs in transportation equipment manufacturing in Quebec will grow at an average annual rate of 1.1% until 2017, creating around 2,200 positions. This growth rate will be substantially larger than what is expected in the manufacturing sector as a whole (0.3%). Growth rates will be higher in some economic regions, including Laurentides, Lanaudière and the Montréal CMA, which will benefit from the robustness of the aerospace industry. In Chaudière-Appalaches, the industry will get a boost from the Davie shipyard s fresh start. In other regions, a small number of jobs often results in a high growth rate, as is the case in Mauricie.
Transportation equipment manufacturing Quebec 2015-2017 Page 5 Sectoral Dynamics for the Regions with Outlooks 2015 2016 2017 In Quebec In the Economic Regions AAGR Anticipated Dynamics over the Period 2015-2017 1.1 % gain of approx. 2 225 positions Laurentides 4.0 % Lanaudière 1.9 % Montréal CMA 1.6 % Mauricie 1.2 % QUÉBEC 1.1 % Chaudière-Appalaches 1.1 % Saguenay Lac-Saint-Jean 1.0 % Capitale-Nationale 1.0 % Montérégie 1.0 % Centre-du-Québec 0.9 % Estrie 0.9 % Bas-Saint-Laurent 0.0 % Gaspésie Les-Îles 0.0 % Outaouais 0.0 % Abitibi-Témiscamingue 0.0 % Côte-Nord / Nord-du-Québec n/a: not applicable Source: 2015 2017 Sectoral Outlook annual exercise Labour Market Analysis Directorate, Service Canada Quebec Region, April 2015 The following occupations in the transportation equipment manufacturing industry are likely to be affected by job market dynamics (according to the Occupations/Industries matrix): 9481 Aircraft Assemblers and Aircraft Assembly Inspectors 7231 Machinists and Machining and Tooling Inspectors 7265 Welders and Related Machine Operators 2146 Aerospace Engineers 9482 Motor Vehicle Assemblers, Inspectors and Testers 7315 Aircraft Mechanics and Aircraft Inspectors 2132 Mechanical Engineers 2232 Mechanical Engineering Technologists and Technicians 9226 Supervisors, Other Mechanical and Metal Products Manufacturing 2244 Aircraft Instrument, Electrical and Avionics Mechanics, Technicians and Inspectors 9486 Mechanical Assemblers and Inspectors 7316 Machine Fitters. n/a
Transportation equipment manufacturing Quebec 2015-2017 Page 6 SIZE AND DISTRIBUTION OF AND CHANGES IN EMPLOYMENT IN THE INDUSTRY IN QUEBEC Regions Employment 2002 2004 Average Employment 2012 2014 Average Change in Employment 2002/04 2012/14 Employment In thousands Quebec share Regional share Employment In thousands Quebec share Regional share In thousands As a % All of Quebec 55.2 100.0% 1.5% 63.6 100.0% 1.6% 8.4 15.2% Resource Regions 1.7 3.1% 0.5% x x x x x Abitibi-Témiscamingue x x x x x x x x Bas-Saint-Laurent x x x x x x x x Côte-Nord / Nord-du-Québec x x x x x x x x Gaspésie Îles-de-la-Madeleine x x x x x x x x Saguenay Lac-Saint-Jean x x x x x x x x Intermediate Regions 10.6 19.3% 1.9% 10.0 15.7% 1.7% -0.6-6.0% Centre-du-Québec 1.8 3.3% 1.7% 2.5 3.9% 2.2% 0.6 34.5% Chaudière-Appalaches 4.2 7.6% 2.1% 3.5 5.6% 1.6% -0.7-15.9% Estrie 4.0 7.2% 2. 3.5 5.6% 2.3% -0.5-11.7% Mauricie x x x x x x x x Greater Montréal area 41.5 75.2% 1.9% 50.8 79. 2.0% 9.2 22.2% Lanaudière 4.2 7.5% 2.1% 3.4 5.3% 1.4% -0.8-18.4% Laurentides 8.9 16.1% 3.6% 10.5 16.5% 3.5% 1.6 18.0% Laval 3.9 7.1% 2.2% 4.7 7.4% 2.1% 0.8 20.5% Montérégie 13.3 24.1% 1.9% 15.9 24.9% 2.1% 2.5 19.0% Montréal 11.2 20.3% 1.3% 16.3 25.6% 1.7% 5.1 45.1% Capitals x x x x x x x x Capitale-Nationale x x x x x x x x Outaouais x x x x x x x x Saguenay CMA x x x x x x x x Québec CMA 1.9 3.4% 0.5% 2.0 3.1% 0.5% 0.1 5.4% Sherbrooke CMA 2.5 4.5% 2.7% 1.9 3.0% 1.9% -0.6-24.0% Trois-Rivières CMA x x x x x x x x Montréal CMA 35.3 64.0% 2.0% 42.2 66.4% 2.1% 6.9 19.5% Gatineau CMA* x x x x x x x x CMAs 40.2 72. 1.6% 46.6 73.2% 1.6% 6.4 15.9% Non-CMAs 15.0 27.2% 1.4% 17.0 26. 1.4% 2.0 13.3% *: Quebec sector of the Ottawa-Gatineau CMA x: confidential data, fewer than 1,500 people employed in this region Source: Service Canada, Quebec Region Historical estimates based on Statistics Canada s Labour Force Survey
Transportation equipment manufacturing Quebec 2015-2017 Page 7 SOME CHARACTERISTICS OF THE INDUSTRY IN QUÉBEC Establishment distribution by Region Employment distribution by Region 62% 7% 23% Resource Regions Intermediate Region Greater Montréal area 80% 16% 2% Resources 2% Regions Intermediate Regions Greater Montréal Area Capitals Capitals Source: Statistics Canada, Establishment Counts by Economic Region, industry, and Employee Size Ranges, December 2014 Size of establishment Source: Statistics Canada, Labour Force Survey; based on average employment in 2012-2014 Employment by industry subsectors 500 + employees 200-499 employees 100-199 employees 50-99 employees 20-49 employees 10-19 employees 5-9 employees 1-4 employees 4% 4% 6% 15% 13% 17% 31% Aerospace products Motor vehicle parts Motor vehicle body and trailer 9% 63% 0% 10% 20% 30% 40% Source: Statistics Canada, Establishment Counts by Economic Region, industry, and Employee Size Ranges, December 2014 Self-employed jobs compared to Total employment 0% 10% 20% 30% 40% 50% 60% 70% Source: Statistics Canada, Survey of Employment, Payrolls and Hours; based on average employment in 2012-2014 Share of total employment and industry in Canada 10% 6% 6% Aerospace product, parts Ontario Québec 4% 2% 0% All Industries Goods production 2% MFG 1% Transport. eqpt Motor vehicle, parts Ontario Québec 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: Statistics Canada, CANSIM 383-0031 Labour statistics, based on average employment in 2011-2013 Source: Statistics Canada, Survey of Employment, Payrolls and Hours; based on average employment in 2012-2014
Transportation equipment manufacturing Quebec 2015-2017 Page 8 40% 35% 30% 25% 20% 15% 10% 5% 0% Employed Labour Force Aged 15 Years and Over 5% 15-24 21% 25-34 27% 35-44 Transportation equipment mfg 34% 45-54 13% 55-64 All Industries Source: Statistics Canada, 2011 National Household Survey, special tabulation for ESDC 1% 65 + Employment distribution by skill type National Occupational Classification 0. Management 1. Business, finance and administration 16% 2. Natural and applied sciences and related 23% 3. Health 0% 4. Education, law and social, community and government services 1% 5. Art, culture, recreation and sport 1% 6. Sales and service 3% 7. Trades, transport and equipment operators 24% 8. Natural resources, agriculture and related production 0% 9. Manufacturing and utilities 25% Source: Statistics Canada, 2011 National Household Survey, special tabulation for ESDC FOR MORE INFORMATION Employment and Skills Development Canada Labour Market Information: Information on job, skills and local labour market trends is important for making career decisions. In addition, information on wages, labour supply, labour demand and other factors helps employers recruit, train and retain workers and make business and investment decisions. North American Industry Classification System (NAICS) Canada 2012: Transportation equipment manufacturing NAICS 336 Note: In preparing this document, the authors have taken care to provide clients with labour market information that is timely and accurate at the time of publication. Since labour market conditions are dynamic, some of the information presented here may have changed since this document was published. Users are encouraged to also refer to other sources for additional information on the local economy and labour market. Information contained in this document does not necessarily reflect official policies of Employment and Social Development Canada. Prepared by: Labour Market Analysis Directorate, Service Canada, Quebec For further information, please contact the Labour Market Analysis Directorate, at: NC-LMI-IMT-GD@hrsdc-rhdcc.gc.ca Her Majesty the Queen in Right of Canada as represented by Employment and Social Development Canada, 2015, all rights reserved