What that means is you either have to invest in your own manufacturing, which can be an expensive proposition, particularly if you're not already a low-cost producer, or what you can start to do is think of using somebody else's flexibility or agility in manufacturing.

Relatively few manufacturers have the luxury to choose a different product mix based on energy prices.

At the very least, I have to have very good visibility into my contract manufacturer in China as to any quality hiccups that might affect me. I need to get early warning of those, and potentially I may have to source locally to remain responsive to fluctuations in demand.

That may be the right time for you to say, 'OK I might need to move production to someone who is quite frankly better at manufacturing lower cost and make room for my next development drug to come through, and I'll move the product whose margins have now been eroded to a contract manufacturer.

Ford has been very patient and done quite well. It's turned around the manufacturing base and quality. There are very satisfied Jaguar buyers out there, there just aren't that many of them. Ford has tackled elements of profitability, that will help, and merged backroom stuff with Land Rover.

In Ontario, job losses in manufacturing have accelerated in recent months alongside announced layoffs in the key auto sector. However, Ontario's economy is well diversified and strength in the service sector, which accounts for more than 70% of overall employment and economic activity, should support vehicle sales of about 590,000 units in 2006 - in line with the average of the past two years.