How Canadian suppliers could benefit from GM-Honda partnership

The tentative  alliance between General Motors and Honda to co-develop vehicles built on shared platforms in North America could be a major boon for Canada’s parts suppliers, particularly those that adopt a similar collaborative approach, say industry executives.

Partnerships are already well established among companies stretching from Windsor-Essex to Toronto and Oshawa, where General Motors has a major research presence, said Mike Bilton, former chairman of the Canadian Association of Mold Makers (CAMM).

“Those little nerve centres of automotive tech, we are all talking, and there are a lot of great things that come out of that type of collaboration,” said Bilton, who is also technical sales manager at Windsor Mold Group in Windsor, Ont.

The strategic agreement would be far reaching, including sharing platforms in core market segments such as pickup trucks and crossovers, internal-combustion and electric drivetrains, driver features and connectivity. The two will also share purchasing.

It builds upon an April pact that called for the automakers to jointly develop two new Honda electric vehicles based on GM’s EV platform and battery technology. It also signals a shared intention to speed development of next-generation vehicles while keeping capital costs down.

SKY’S THE LIMIT

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association (APMA), said companies should seek partnerships to develop technologies for the vehicles of the future.

“For the suppliers who can collaborate in technology that doesn’t have present volumes, like connected, autonomous technology and alternative powertrains, to create economies of scale for their R&D, if they can get through the issue of how you share intellectual property, there is no end in sight.”

The alliance also has potential to generate more business for Canada’s supply chain, said Rob Wildeboer, executive chairman of Toronto based global supplier Martinrea International Inc.

“This is a sign that they are going to outsource more.” Wildeboer said that Japan-based automakers have typically been slower to outsource production of key components to suppliers than have other automakers.

“It is more likely to put stuff out to the supply base where they have expertise.”

Ontario is well situated geographically. Honda’s key global plant for the Civic compact sedan is in Alliston, and GM operates a major high-tech vehicle hub centred in Oshawa, about 100 kilometres away.

“The physical proximity behind the two make it probably the easiest place to collaborate in North America in this agreement,” said Volpe. “It isn’t just a sales office here and a sales office there. We are doing serious R&D in the areas of focus of the [GM-Honda agreement].”

Volpe predicted the alliance would expand the GM-Honda presence in the province. “It is the only place in North America where you have a globally relevant automotive cluster overlaid with a globally relevant IT cluster.”

He estimated that the two auto giants make direct contributions in excess of $10 billion a year to the Canadian economy.

The deal represents a chance for a foot in the door for suppliers with one or the other automaker, said Bilton, who estimated that 50 to 75 per cent of Ontario Tier One suppliers do work for General Motors, while up to 25 per cent supply Honda.

The automakers’ strengths complement each another, which also bodes well for suppliers, said Bilton.

Honda puts practicality, common sense and serviceability in everything they do. On the other side, Honda can learn from the latest in tech space. GM is really leading the race in tech.”

Suppliers looking to upgrade their operations can tap into Ontario’s three-year, $10-million Automotive Modernization program, which is now in its second flight of lending, Bilton said.

The GM-Honda agreement was also likely spurred by the United StatesMexico-Canada Agreement, which gives preference to vehicle and parts production on the continent, said Volpe.

The agreement between Canada and the European Union could provide an export opportunity for Honda’s Alliston plant, Volpe said.

Honda is looking forward to taking advantage of the tariff-free quotas from their Alliston plant, and so this might also have a window across the Atlantic.

“I think Honda of all the Ontariobased production lines has product geared best for Europe and they have expressed as much publicly. Being the designated lead global plant on Civic means that there might be some auxiliary benefit from whatever (GM-Honda) arrangement.”

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