Canada’s auto industry could disappear within 15 years
bootlegga @ Thu Apr 16, 2015 10:26 pm
$1:
Canada’s share of North American production of cars and light trucks has fallen to 14.1 per cent in 2014 from more than 17 per cent in 2009. Mexico’s share stands about with 18.9 per cent of production.
Canadian light vehicle production rose slightly last year to 2.382 million units, according to auto analyst Dennis DesRosiers. Meanwhile, Mexico saw its light vehicle production rise to 3.2 million vehicles in 2014.
Global automakers invested $7 billion in Mexico last year, according to the Ann Arbor, Mich.-based Center for Automotive Research, compared to $750 million for Canada.
Labour costs in Mexico average about $7 an hour, including benefits.
Canada’s auto industry may be headed down the same road as Australia’s and cease to exist between 2030 and 2040, says auto analyst Dennis DesRosiers.
“We may not lose it all,” DesRosiers said Tuesday. “But on every cyclical downturn, we’ve lost capacity. We won’t close all at once. That’s why I’m putting in a long time frame.”
Once home to six carmakers, Australia is expected to lose its remaining manufacturers – Toyota, Ford and Holden – a General Motors subsidiary – within three years. After the government turned down a request for a $275 million subsidy, Holden announced last year it would shutter its operations by 2017. Soon afterward, Toyota Motor Corp. said it too would shut down its plants by 2017. The automakers cited the high value of the Australian currency as the key reason for their decision.
DesRosiers said Canada could meet a similar fate as long as it continues to lose out on new capacity investments to such jurisdictions as Mexico and the U.S. south.
“In the longer term we’re heading toward Australia,” he said. “Every vehicle produced in Canada, every plant is vulnerable.”
While existing automakers – GM, Ford, Fiat Chrysler, Toyota and Honda – have recently announced investments in their Canadian plants, none will add new vehicle production, said DesRosiers. Even Fiat Chrysler’s $2-billion investment in the next-generation minivan and retooling of the Windsor Assembly Plant does not guarantee a long-term future for the facility, he warned.
“They could easily have spent twice that much on Windsor and Brampton, but Chrysler is spending enough money to keep the minivan plant viable and competitive without putting in world class production technology. ‘We have to put some money into the plant, but do we really want to put in the ultimate investment?’ The answer is ‘no.’”
DesRosiers said a host of factors – labour costs, government regulations, tax structure, delays in building a third border crossing, lack of port infrastructure as well as lower costs and richer government incentives in other jurisdictions – are contributing to the industry’s ongoing decline.
When it comes to greenfield investments, Canada is no longer competitive, and the gap with other jurisdictions keeps growing, he said.
“The U.S. southern states have done almost everything in terms of government incentives, while governments here have grown more cautious.”
Both Ontario and Ottawa have a track record of providing financial assistance for auto investments. During the 2008-09 financial crisis, the two levels of government gave Chrysler and GM billions in loans in exchange for guarantees to maintain their manufacturing footprints. However, those guarantees will expire after 2016. That has led to growing concern for the future of the industry, in particular, GM’s Oshawa plant, which is set to lose production of the Chevy Camaro muscle car later this year and one of two plants sometime next year.
Last year, Ford chose Mexico over Windsor for a new, multibillion-dollar, small-engine program, despite negotiations involving the company, senior levels of government and Unifor.
DesRosiers’ analysis validates the need for a comprehensive, national auto strategy, said Matt Marchand, executive director of the Windsor-Essex Regional Chamber of Commerce.
The chamber, Unifor and the auto industry have been pushing for a federal-provincial investment board that would be headed by an auto czar — a model similar to Michigan’s Automotive Office. “We have been pushing for an auto strategy because we all know of the lack of reinvestment in Ontario over the last 15 years,” said Marchand. “The current trends are not favourable. Other jurisdictions have been very, very aggressive.”
Marchand pointed to the increase last month in the Windsor area’s unemployment rate as a reflection of the role the auto industry plays in the local economy. The jobless rate soared from 9.6 per cent in February to 11.1 per cent in March, a jump attributed to the three-month shutdown of the Windsor Assembly Plant, which has caused the temporary layoffs of thousands of autoworkers.
While Australia serves as a cautionary tale for Canada, it isn’t necessarily a harbinger of things to come, said Jim Stanford, chief economist at Unifor.
“There are key differences,” said Stanford. “Our industry is three times as big as Australia’s industry. Our proximity to the U.S. gives us a huge geographic advantage so that 85 per cent of our output goes to the world’s biggest car market. And, our plants are highly productive with capacity utilization rates close to 100 per cent.”
As well, the lower Canadian dollar makes labour costs on this side of the border cheaper, he added.
However, Stanford agreed with the need for a national auto strategy. “Our union has been arguing about this for about 15 years,” he said. “Countries that have auto strategies, even those with higher costs, such as Germany and Japan, have governments that are determined to keep their share of this sector. If our governments are determined, they can make it happen. But if our government walks away like Australia did, we will go into a long decline.”
DesRosiers, a Windsor native, said he does not enjoy being the bearer of bad news. “Every plant could be saved with the right labour deals, investment, government assistance and tax structure. But we have failed on some of those fronts. If it continues, and you’re not getting greenfield investments, you’ll have to fight harder to keep existing plants.”
Canadian light vehicle production rose slightly last year to 2.382 million units, according to auto analyst Dennis DesRosiers. Meanwhile, Mexico saw its light vehicle production rise to 3.2 million vehicles in 2014.
Global automakers invested $7 billion in Mexico last year, according to the Ann Arbor, Mich.-based Center for Automotive Research, compared to $750 million for Canada.
Labour costs in Mexico average about $7 an hour, including benefits.
Canada’s auto industry may be headed down the same road as Australia’s and cease to exist between 2030 and 2040, says auto analyst Dennis DesRosiers.
“We may not lose it all,” DesRosiers said Tuesday. “But on every cyclical downturn, we’ve lost capacity. We won’t close all at once. That’s why I’m putting in a long time frame.”
Once home to six carmakers, Australia is expected to lose its remaining manufacturers – Toyota, Ford and Holden – a General Motors subsidiary – within three years. After the government turned down a request for a $275 million subsidy, Holden announced last year it would shutter its operations by 2017. Soon afterward, Toyota Motor Corp. said it too would shut down its plants by 2017. The automakers cited the high value of the Australian currency as the key reason for their decision.
DesRosiers said Canada could meet a similar fate as long as it continues to lose out on new capacity investments to such jurisdictions as Mexico and the U.S. south.
“In the longer term we’re heading toward Australia,” he said. “Every vehicle produced in Canada, every plant is vulnerable.”
While existing automakers – GM, Ford, Fiat Chrysler, Toyota and Honda – have recently announced investments in their Canadian plants, none will add new vehicle production, said DesRosiers. Even Fiat Chrysler’s $2-billion investment in the next-generation minivan and retooling of the Windsor Assembly Plant does not guarantee a long-term future for the facility, he warned.
“They could easily have spent twice that much on Windsor and Brampton, but Chrysler is spending enough money to keep the minivan plant viable and competitive without putting in world class production technology. ‘We have to put some money into the plant, but do we really want to put in the ultimate investment?’ The answer is ‘no.’”
DesRosiers said a host of factors – labour costs, government regulations, tax structure, delays in building a third border crossing, lack of port infrastructure as well as lower costs and richer government incentives in other jurisdictions – are contributing to the industry’s ongoing decline.
When it comes to greenfield investments, Canada is no longer competitive, and the gap with other jurisdictions keeps growing, he said.
“The U.S. southern states have done almost everything in terms of government incentives, while governments here have grown more cautious.”
Both Ontario and Ottawa have a track record of providing financial assistance for auto investments. During the 2008-09 financial crisis, the two levels of government gave Chrysler and GM billions in loans in exchange for guarantees to maintain their manufacturing footprints. However, those guarantees will expire after 2016. That has led to growing concern for the future of the industry, in particular, GM’s Oshawa plant, which is set to lose production of the Chevy Camaro muscle car later this year and one of two plants sometime next year.
Last year, Ford chose Mexico over Windsor for a new, multibillion-dollar, small-engine program, despite negotiations involving the company, senior levels of government and Unifor.
DesRosiers’ analysis validates the need for a comprehensive, national auto strategy, said Matt Marchand, executive director of the Windsor-Essex Regional Chamber of Commerce.
The chamber, Unifor and the auto industry have been pushing for a federal-provincial investment board that would be headed by an auto czar — a model similar to Michigan’s Automotive Office. “We have been pushing for an auto strategy because we all know of the lack of reinvestment in Ontario over the last 15 years,” said Marchand. “The current trends are not favourable. Other jurisdictions have been very, very aggressive.”
Marchand pointed to the increase last month in the Windsor area’s unemployment rate as a reflection of the role the auto industry plays in the local economy. The jobless rate soared from 9.6 per cent in February to 11.1 per cent in March, a jump attributed to the three-month shutdown of the Windsor Assembly Plant, which has caused the temporary layoffs of thousands of autoworkers.
While Australia serves as a cautionary tale for Canada, it isn’t necessarily a harbinger of things to come, said Jim Stanford, chief economist at Unifor.
“There are key differences,” said Stanford. “Our industry is three times as big as Australia’s industry. Our proximity to the U.S. gives us a huge geographic advantage so that 85 per cent of our output goes to the world’s biggest car market. And, our plants are highly productive with capacity utilization rates close to 100 per cent.”
As well, the lower Canadian dollar makes labour costs on this side of the border cheaper, he added.
However, Stanford agreed with the need for a national auto strategy. “Our union has been arguing about this for about 15 years,” he said. “Countries that have auto strategies, even those with higher costs, such as Germany and Japan, have governments that are determined to keep their share of this sector. If our governments are determined, they can make it happen. But if our government walks away like Australia did, we will go into a long decline.”
DesRosiers, a Windsor native, said he does not enjoy being the bearer of bad news. “Every plant could be saved with the right labour deals, investment, government assistance and tax structure. But we have failed on some of those fronts. If it continues, and you’re not getting greenfield investments, you’ll have to fight harder to keep existing plants.”
http://www.edmontonjournal.com/business ... story.html
Jabberwalker @ Fri Apr 17, 2015 4:01 am
The low dollar helps slow this, somewhat.
OnTheIce @ Fri Apr 17, 2015 6:10 am
And while many will be quick to blame the big corporations for looking to maximize profit, the blame also lies at the feet of the consumer who's looking at price first when buying a car. Quality, safety and where it's made come second.
herbie @ Fri Apr 17, 2015 8:44 am
I usually decide on the car I want then look for the best price. I don not consider other models after that.
When I wanted an AWD/4WD SUV back in 2005, it was the Japanese makes that were too expensive.
My sister & her husband are the cheap car buyers. Even though I have a huge photo gallery of all the cars I've owned since I was 16, theirs would be three times the size. They're always disappointed, but never seem to learn.
andyt @ Fri Apr 17, 2015 8:52 am
Quality =/ price. Lots of overpriced, unreliable cars on the market, while a Toyota tercel, say, will just keep on ticking. In fact the high priced cars are often unreliable exactly because they are overpriced - they have a lot of advanced tech in them that hasn't been sorted out properly.
The Japanese, on the whole, still come out on top, with Lexus consistently outscoring everybody else.
As to where it's made, that's more and more irrelevant, with the drive train coming from one country, the frame from another and the whole thing assembled in a third, using parts from all over.
andyt @ Fri Apr 17, 2015 8:54 am
Loss of Corolla doesn't have to be lethal blow for Canadian auto production
http://www.cbc.ca/news/business/loss-of ... -1.3033914
Jabberwalker @ Fri Apr 17, 2015 4:40 pm
andyt andyt:
Loss of Corolla doesn't have to be lethal blow for Canadian auto production
http://www.cbc.ca/news/business/loss-of ... -1.3033914
http://www.cbc.ca/news/business/loss-of ... -1.3033914
There is another big Japanese manufacturer in the neighborhood... actually, two if you include the Cami plant, as well. The Honda plant in Alliston exports to Japan.