By on October 4, 2013

2014-Chevrolet-Impala-Exterior-001-450x255

The Globe and Mail‘s Greg Keenan reported some bleak news for Canada’s auto industry today, with Canada’s auto manufacturing output set to decline by as much as 25 percent by 2020.

While Canada built over 2.4 million vehicles in 2012, that number is expected to drop to 1.8 million by 2020, according to a report cited by Joe McCabe, president of AutomotiveCompass LLC, who spoke at a conference for the  Automotive Parts Manufacturers Association of Canada.

Since 2010, auto makers have invested $42 billion in manufacturing, with Canada receiving a mere 5 percent of that. The biggest declines are expected to come at GM and Chrysler, with both companies moving key product out of their Canadian facilities. Production of the Chevrolet Camaro will move from GM’s Oshawa, Ontario plant to Michigan, while Chrysler’s axing of one of its minivan nameplates could see the end of a full three-shift schedule at its Windsor, Ontario plant.

GM is set to close its Consolidated Line at Oshawa next year, leaving only the Flex Line running. But no new product has been confirmed beyond 2016, when GM’s “vitality commitment” to the Canadian government runs out, and it is no longer obligated to keep a certain percentage of its vehicle production in Canada. No GM vehicle is exclusive to the Flex Line either, with the Buick Regal, Chevrolet Impala, Cadillac XTS, Chevrolet Equinox and GMC Terrain all built at other facilities as well as Oshawa, while GM’s Dan Akerson has stated that Canada is the most expensive location in the world to build a car.

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35 Comments on “A Bleak Forecast For Canada’s Auto Industry...”


  • avatar
    genuineleather

    No shocker there. In 2012, Canada produced 700k MORE units than their domestic market bought. From a cost perspective, this is lunacy given that automakers can produce the same vehicles for less in the US or Mexico and sell them in NAFTA (and in Mexico’s case, the EU) tariff-free.

  • avatar
    mikey

    Yeah its a little scary right now. Personally i’d prefer to see the Loony down to around 75 cents vs the U.S.D.

    My guess,and its only my guess, is you will see “UNIFOR” {formally the CAW} open the Oshawa contract. Without a doubt,were going to take a page out of the UAW playbook.

    Were going to have to trade more concessions for product allocation. plain, and simple.

    Before the “anti union” crowd here gets wound up. With the recent deal at Cami Ingorsall the union give up “Defined benefit pensions” for new hires. GM has informed the union that nobody gets hired at GM Oshawa with a defined a defined plan.

    Pensions, at one time were sacred. Right now, with the CAW gone,nothing would shock me.

    I live by, hope for the best,and prepare for the worst.

    Mikey
    Former UAW and CAW retired GM hourly Canada.

    • 0 avatar
      wsn

      I would prefer $2USD for $1CND. Imagine Porsche 911 at $40k.

    • 0 avatar
      HerrKaLeun

      “the union give up “Defined benefit pensions” for new hires. ”

      The union didn’t give anything up, this is for new hires, not the union members that voted for that.
      Pretty easy to give something up that isn’t yours.

      I’m a hero, I signed up my neighbor for the army…. what a sacrifice I made.

      • 0 avatar
        ect

        There are many logical reasons why a union would choose to protect the status of current memebers, while agreeing to reuced compensation for new hires. We shouldn’t be surprised, or unduly critical.

        • 0 avatar
          mikey

          @ ect….GM’s position concerning Defined Benefits is carved in stone.

          As I’ve mentioned before.

          In days of old the UAW/CAW could pick up the phone,and fire the work stoppage Nuke.

          Today its the company with their finger on the launch button. The diffence being the companys nuke shuts the plant gates for ever.

          All in all it make for a dramatic change, with the power shift/dynamics at the bargaining table.

    • 0 avatar
      ihatetrees

      As a gun-nut Republican NYer, I’m no UAW or GM fan. That said, I consider the Silverado a great value, love Toronto (even if though it’s near NYC-expensive), and am familiar with manufacturers on both sides of the border.

      Canada’s blue collar work force is solid. They’ve got better K-12 (or 13?) schools, they work more cooperatively than us Yankees, and have bargain electricity (compared to the US northeast).

      On the minus side, Canadian manufacturing is saddled with dumb taxes. A pricey Loonie and a booming natural resources sector (which are probably connected) contribute to the problem by pricing capital and blue-collar labor higher than they would be otherwise.

      • 0 avatar
        alexndr333

        I think you’re on to something there. If big oil is demanding so much Canadian labor that wages rise, other industries are at a competitive disadvantage for workers. Other industries will then move out. As long as big oil is big in Canada, it will be a sellers’ market for labor and those companies than can relocate – like auto manufacturers – will do so.

        • 0 avatar
          rnc

          There is a book on what discovering/production shallow water oil did to the netherlands economy in the 60′s, what at first seems liked a pot at the end of the rainbow, almost destroyed the rest of the economy and is thought of as a cursed time now.

      • 0 avatar
        bd2

        It’s basically the same situation as with the Australian auto industry.

        A small market which can’t support current production rates, exacerbated by unfavorable currency rates due to their natural resources industries which inflate the value of their respective currencies.

      • 0 avatar
        mikey

        Oh yeah! The OIL industry is having an impact,in every square inch of our massive country.

  • avatar

    Seems like they didn’t ask Toyota, who relocated RAV4 production to a plant in Ontario some time around 2010. It’s just GM and Chrysler, the bailout companies.

    • 0 avatar
      ect

      And Honda, who have invested big in Alliston.

      The CEO at Harlequin, when I worked there, had as one of his mantras “never believe anyone with an axe to grind”. Over the past several years, GM has lost sales, and is trying to rationalize production into fewer facilities. When Akerson describes Canada as the most expensive place to build (without offering evidence), he is not voicing some eternal truth. He’s simply signalling to the CAW/UNIFOR (wasn’t there a forest products company with that name, or one very much like it?) and the UAW that GM’s looking for contract concessions, as part of the “bidding” on future production.

    • 0 avatar
      bd2

      At the same time, that was back when the value of the Yen was still high, making Canada a still relative bargain as a place of production compared to Japan.

      There’s a reason why almost all the recent auto plant openings and rumblings about new plants have been for Mexico and not Canada.

  • avatar
    Big Al from Oz

    This is what happens when a currency becomes stronger.

    Australia is confronted with this problem. It isn’t so much that the Canadian dollar is strong as much as the US has devalued its currency by pumping trillions into its economy. Much more than the Canadaian’s had to do. Europe and Japan have done the same.

    Let the US be the low cost manufacturer and let the Canadians use its wealth to better ends.

    I wouldn’t subsidise the Canadian auto industry. Subsidising means taxation. Taxation equates to lowering the standard of living when it’s used in inefficient ways.

    The subsidies that the Canadians pump into the auto industry should be used to built better infrastructure to make doing business cheaper and hence more competitive. To keep an edge on its competition.

    I would choose a higher standard of living, send easier to produce products and importantly commodities to the US and let them produce for me.

    • 0 avatar
      golden2husky

      Canada actually is a good example of comparative advantage, as both countries are pretty much even. China offers a low price only, hardly a textbook example

      • 0 avatar
        Big Al from Oz

        @golden2husky
        I haven’t mentioned China.

        But, comparatively Canada has become more expensive for manufacturers, reducing it’s competitiveness.

        Canada is in the position of being a provider of commodities and also an extension of the US industrial machine.

        Canada will always have manufacturing, but the style of manufacturing will be dependent on wages and conditions.

        What I’ve stated is that subsidising to remain competitive is a poor solution. It only creates inefficiencies and distortions in markets, unless a continuous subsidised/protected market exists, ie, Chicken Tax, US vehicle regs etc.

        Taking money from areas other than the vehicle manufacturing sector and pumping it into the manufacturers reduces everyones standard of living, ie, you have less disposable income.

        If you are going to take tax, invest into better infrastructure to assist the competitive industries, not prop up poor industries.

    • 0 avatar
      DinosaurWine

      I’m not arguing in favor of subsidies, but just so you know the US dollar is appreciating against both currencies, and quite rapidly against the Aussie dollar. I wouldn’t count on the current strength of the Canadian dollar as being “the new normal.”

      I don’t see any reason for the domestics to manufacture in Canada other than union obligations and “because they always have.” Manufacturing is cheaper in the US and cheaper still in Mexico, with no appreciable difference in quality.

      • 0 avatar
        Big Al from Oz

        @DinasourWine
        The recent movements have been quick, but not as substantial as one would think. Don’t look at the recent values, go back over the past 20 years.

        Since our currency has risen against the USD we are still finding cost of goods and services are dropping. The impact of a rising currency takes years to flow on into an economy.

        We at one point in the 80s were at one AUD = 49c US. Even when the GFC occurred we fell to 68c US. Our currency rose so rapidly business and industry found it awkward to pass on the benefits of the rising currency.

        But investment into Australia (mainly mining infrastructure) kept us going. So did the mineral export market. Even right now the price of iron ore is a exceptionally high levels historically. But they have built the mines and are digging and exporting the ores.

        I see the world unfolding in an unusual was over the next couple of decades. This change started since the effects of WWII finished in the mid 80s and Thatcherism and Reaganonics took hold.

        The world will not be just advanced (OECD) and poor economies like the past, with a mix of USSR ‘team players’.

        The change we are witnessing will give a ‘strata’ or tiered mix of global economies.

        You will have the ‘advanced’ economies of EU, US, Japan, Korea, etc. You will then have middle economies, these are the new industrial economies. You will still have developing economies, but to a lesser degree than there was 20 years ago.

        But the biggest change for the advanced economies will be a new ‘upper’ economic powers.

        These new economic powers will have something beneficial that will separate them from the existing advanced economies. As I’ve stated this change started in the mid 80s, since Thatcherism/Reaganonics started. The end of the Iron Curtain, and WWII financial and economic rebuilding and costs.

        Countries such as Canada, Switzerland, Singapore, Hong Kong, Australia and Norway all have attribute that set them apart from the rest of the advanced economies.

        Each country has something to offer no other advanced economy can offer. Australia, Canada, Norway can offer massive mineral wealth. Remember these countries already started off a high standard of living base with the highest standards of living in the world. This occurred over the past 20 years.

        Singapore, Hong Konng, and to a degree Switzerland offer centres of trade, small powerful economic global centres.

        These countries will end up being uncompetitive as manufacturers.

        The US, Japan/Korea/Taiwan, most Euro countries will manufacture and will compete against the ‘middle’ countries.

        The main middle country players will be China, Mexico, Thailand, Malaysia, Brazil, some Mediterranean countries and Eastern Euro countries, Sth Africa, etc.

        That’s how I see it. Maybe different from most.

    • 0 avatar
      ect

      The value of all freely convertible currencies, at any time, is determined by the law of supply and demand. Government attempts to artificially manipulate the value of their currency is almost always a very expensive lesson in why this is a bad idea.

      It’s not about the US$ being devalued via government policy. It isn’t.

      The C$ and A$ are both (relatively) thinly-traded currencies whose value is largely driven by commodity prices, because commodities represent a major share of national exports.

      When commodity prices are trending down (see see 1982-2000), the A$ and C$ are depressed. Which provides the industrial sector in both countries with a cost advantage.

      When commodity prices are trending up(see see 2000-20011), the A$ and C$ rise in value. Which slams the industrial sector in both countries with a cost disadvantage. Which is magnified because they got fat, dumb and happy when the currency was depressed.

      No conspiracy here, just market forces at work. Assisted, of course, by lazy management with a very short-term focus.

      • 0 avatar
        Big Al from Oz

        @ect
        I think you will find the AUD is the fifth most traded currency in the world after the USD, Euro, Yen and Pound Sterling.

        Australia has found itself in position similar or more so than the Canadians in that the AUD has become a psuedo reserve currency as well as a commodity currency. Forex’s Reserves are holding the AUD. The commodity aspect of the currency in the future isn’t going to be as severely impacted because other nations now view Australia and Canada as very stable economically with less debt.

        This is why the EU is in so much difficulty, Japan as well and even the US. These countries still require massive borrowing to keep themselves on track with economic growth. This devalue their currencies and makes us less competitive.

        Look at he dates you mentioned and look at he dates I’ve shown as to when these changes started occurring in the richer OECD economies.

        Also, the mineral wealth from countries like Australia and Canada will be around for some time. Remember the ‘middle’ economies have massive infrastructure that their citizens will want. Not to mention agri industrial products that we produce that the ever growing middle class will want as well.

        This type of growth bids well for countries like Brazil and Chile.

        Some of these Sth American economies will pickup once they learn how to put in place effective restructuring of there taxes, finances and manufacturing.

        The globe in in the midst of a transitioning period, a shuffling of countries influences and affluence is occurring.

        The EU, US and Japanese will have to ride it out, probably with a slight reduction in a standard of living. The massive debt has to be paid back somehow.

  • avatar
    SayMyName

    Off topic but for the choice of photo… Jesus, does the Impala have a gigantic ass.

  • avatar
    Dimwit

    GM is being its usual arrogant self, “what’s up with GM is also what’s up with the country” which is not the case but the G&M is being lazy again. Just because GM is in trouble has no bearing on the rest of the auto industry, just Oshawa, unfortunately.

    Ford is investing in Oakville, Toyota and Honda are just fine. Chryco is rationalizing their nameplates but I’m not sure that that will affect sales all that much. Especially in Canada. Every Chryco store is a Dodge store, too, so removing a Dodge Caravan doesn’t mean diddly for finding a minivan. The only deal will be if there isn’t a model at the pricepoint that you’re looking for and I can guarantee you that Chryco will have something there at whatever your budget is. It’s not their bestselling vehicle for nothing you know.

  • avatar
    Lou_BC

    Chrysler and GMC played the “we will leave” card in 2008 with bailouts and I bet that they are playing it now to get concessions from UNIFOR.
    The interesting and scary part about UNIFOR is that this “mega” union includes resource based unions ie. oil and gas as well as pulp and paper.
    They could decide that there should be wage and benefit parity across all trade lines. The problem with that, as someone pointed out, is that “Big Oil” distorts the price of everything. A guy in Fort Mac doing oil and filter changes on heavy machinery gets $45.00/hour. No education needed. HD Mechanics are starting at $60.00/hr. Oil companies subsidize housing in Fort Mac driving houses into the million range. The same house in a town 200 miles away would sell for 250-300K.
    Unifor could think that they are like Detroit – too big to fail.

    • 0 avatar
      Big Al from Oz

      @Lou_BC
      GM and Ford have done ‘if we don’t get we’ll pull up stumps and go home’ in Australia recently.

      It appears the majority of the public are saying well go. You are only a thorn in our sides through the support you get.

      The government here also is saying a similar thing. You are getting very little. Become more efficient and competitive or go.

      Our auto union workers aren’t getting lots of sympathy from the public. They do get some.

      It’s about time the auto manufacturers are told to perform. This will force the auto workers to become realistic on what can and can’t be achieved.

      The auto industry must become more viable to remain. It’s pointless paying taxes and additional money to purchase a vehicle just so you can ‘fly the flag’ and feel good.

      The taxes to support them come from somewhere, and at the moment most OECD economies are borrowing that money. Doesn’t make sense.

  • avatar
    doctor olds

    GM will live up to their agreement, and will make the best business decision thereafter as is appropriate and proper for any enterprise. GM is not weak, but getting increasingly stronger. They are a big company and can build vehicles many places.

    Are Canada and Australia pricing themselves out of manufacturing? It wasn’t long ago that Canada was a low cost production location in NA.

    As a matter of fact, most employers either never had, or have discontinued defined benefit pension plans in favor of defined contribution plans. It is a megatrend.

  • avatar
    mikey

    @ doctor olds…. yes it is a megatrend. Love it, or hate it is reality.

    My guess as far as Oshawa operations go. We may see consolidated, win a little extension.

    The Flex with its contiguous stamping plant…should survive for quite sometime.

  • avatar
    danio3834

    Instead of creating a favorable business environment, our Governments will infuse cash bribes to try and keep them a little longer. Then, once that money runs out, it’s more bribes or they’re gone. In the case of Ford St. Thomas assy, the bribes kept them there for a few years, then even more bribes weren’t enough.

    The CAW won’t concede to be competitive with the UAW, they seem (as always) to convince themselves the companies are always bluffing. Caterpillar gave them a chance to keep their jobs at reduced pay, and they elected to have no jobs at no pay. It’ll turn out the same at the auto plants.

  • avatar
    MoDo

    The 65 cent Loonie ain’t coming back as long as the oil sands are pumping. Our dollar has switched to a petro dollar, and it even fluctuates with the price of oil.

    Last time Alberta had a boom (and the bust that followed) all those workers moved from Alberta to the southern Ontario factories. Except this time I doubt the factories are coming back – and nobody that’s current raking in 6 figures in Alberta would move to ONtario to make $12.00 per hour to stand on a production line.

    Adios manufacturing, it was nice knowing ya.

    Even I did the Ontario factory thing in my late teens and early 20′s. I worked for a tier 1 auto supplier right out of high school 1999~ (went bankrupt around 2004) as well as a tier 2 and 3 auto supplier 2001-2002 (went bankrupt somewhere around 2005). I don’t think either one of those paid over $14/hour – and if I were to do it all over again I’d probably just get at job at the mall selling shoes.

    I’d be clean, get to gawk at hot chicks all day, make the same money and work a normal shift. That first factory would switch hours in the summer to 5:30am to 1:30pm so everyone could leave before the factory hit 100 degrees in the afternoon sun. After that I switched to the afternoon shift – which basically meant having absolutely NO life during the week.


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