Economy about to knock Manitoba down to size

Opinion

Hey there, time traveller!
This article was published 26/06/2009 (5564 days ago), so information in it may no longer be current.

Whether or not you have a vested interest in Boeing Co., the announcement this week of further delays in the launch of the 787 Dreamliner is bad news.

Word of the fifth delay in the development of the 787 puts the program two years behind schedule and adds to the uncertainty that the four previous delays have produced.

Australian airline Qantas Airways Ltd. promptly cancelled 15 orders, which could mean about $3 billion off Boeing’s top line.
In Winnipeg, the delays have had an effect.

The 787 program gave Boeing’s Winnipeg operation the opportunity to stage a renaissance out of the post-9/11 aerospace doldrums.

It won contracts to design and manufacture a number of parts for the 787 — making it a significant Tier 2 supplier.

In the process, it has turned itself into the largest industrial composite parts manufacturer in the country.

But the 787 delays have caused the company to impose a four-day work week on about 300 non-unionized staff in the city and has thrown production-rate projections out the window.

The 787 scenario is an interesting cautionary tale when it comes to the future resiliency of the Manitoba economy that has performed so well through the current global recession.

A couple of reports issued this week by the Conference Board of Canada and another by the Bank of Montreal are reminders of the challenges ahead.

Reading between the lines of those reports gives pause to think that the province’s recent moment in the economic sun probably will not last.

For starters, the Conference Board’s report on Western Canada: Productivity, Competitiveness and Potential shows that each of the four western provinces trails a number of comparable regions on key competitiveness drivers.

For instance, the province gets a “D” grade when it comes to real GDP growth and GDP per-capita growth.

The main message from the Conference Board report is that all the western provinces are going to have to improve productivity and address labour shortages to maintain their strong competitive standing over the long term.

Another Conference Board report on Canada’s aerospace product manufacturing industry says the next 12 months will be critical to the long-term success of that industry.

The industry boasts a two-year long order book, but commercial aviation demand is slumping.

The report tends to focus on the business and regional jet industry that revolves around the Canadian OEM (original equipment manufacturer) Bombardier, but it is also relevant to Manitoba’s aerospace industry.

This province represents about six per cent of the sector’s national output and although it is well diversified — commercial and military parts, engines and airframe maintenance, composites and metal parts manufacturing — heavy reliance on large customer orders could make it vulnerable in the long term.

The Bank of Montreal’s most recent provincial outlook, issued this week, is another reminder that when the country emerges from the economic downturn, Manitoba’s rank among the top provincial performers will likely end.

For instance, in 2008 its 2.4 per cent growth rate was second-best. BMO’s latest forecast for the province calls for negative growth of 1.4 per cent this year, which would be the fourth strongest performance in the country.

But next year, when most economists are expecting the national economy to grow, it is forecasting 1.6 per cent growth in Manitoba — bettering only the micro economies of Nova Scotia and P.E.I.

Labour shortages and productivity issues are challenges that are not distinct to Manitoba. Economic growth potential has always been an issue.

This is probably the right time for the Chamber of Commerce and the business community to make a concerted effort with the chamber’s Selling Winnipeg to the World effort.

martin.cash@freepress.mb.ca