By on January 17, 2013

The high cost of auto manufacturing in Canada isn’t solely an issue for domestic auto makers; Honda, which manufactures the best-selling car in Canada (the Civic) is grappling with this issue as well.

The Windsor Star spoke to Jerry Chenkin, Executive Vice-President of Honda Canada, who summed up the biggest issue with Honda’s Canadian production:

“Our challenge quite simply is to be competitive,” Chenkin said during an interview at the North American International Auto Show. “We’re producing Civics. We have a factory in Indiana that’s producing exactly the same vehicle. Our challenge at Honda Canada is to be competitive with our sister plants in the U.S.”

The Alliston plant has pumped out everything from the Civic to the Acura MDX, Honda Pilot, CR-V, Odyssey and Ridgeline. But most of those products have departed for other Honda plants, namely the Alabama facility that builds their minivans and SUVs. Most recently, the next-generation MDX has been the latest vehicle to leave Alliston, though Chenkin said that the capacity will be used to build Civics and CR-Vs, which are strong sellers in both Canada and the U.S.

A big part of Honda Canada’s messaging has been the Canadian origins of the legions of Civics sold over the years. The compact Honda has enjoyed a nearly two-decade long stretch as Canada’s best-selling car, with a customer base that spans the gamut of ages, genders and socioeconomic groups. There’s no reason to doubt Chenkin’s assertions that Canadian production is secure; if the market keeps growing at the kind of pace we’ve recently seen, then Honda is going to be glad that they have the extra capacity (some 390,000 cars annually) on hand.

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19 Comments on “The Cost Of Doing Business In Canada Is Too High For Honda...”

  • avatar

    Why isn’t the Harper government using some of that sour gas and oil money to discretely manipulate their dollar downward? I love the fact it’s high, as part of my $$ comes from working in my parents birthplace so I get a raise for doing nothing. But, having worked in that export-intensive oilpatch, I cannot help but wonder at the wisdom of dollar/dollar parity. What do you Eastern Canadians think?

    • 0 avatar

      Having worked in the States for years and watching the purchase power of the US dollar dive lower and lower, I returned to working in Canada. Personally, I enjoy the buying power the CDN dollar now enjoys and would be resentful if the dollar was somehow deliberately devalued in the name of attracting manufacturing.

      If we’re interested in attracting more manufacturing or maintaining it, we should be looking at making the business environment more attractive by making the total cost of doing business here less.

      No, I don’t consider lowering tax rates accross the board to be subsidies as some would twist.

  • avatar

    As we stand right now the Canadian dollar is worth about 1.2 cents or so more than the USD. It wasn’t all that long ago that the Canadian dollar was worth less than 70 cents. That has a MASSIVE impact on the cost of anything you manufacture and want to export to the US. I don’t work in auto manufacturing but businesses I do work with in Ontario are screaming. Even the oil guys out west aren’t happy as they sell oil in US dollars.

    As someone who used to take advantage of the exchange rate by going up to places like Whistler and Lake Louise for a cheaper alternative to Colorado, I too no longer am spending money in Canada. The prices have always been higher up north but if there isn’t an exchange rate to offset that cost the incentive is gone.

    An assembly plant isn’t easy to move and I don’t expect Honda to shutter a plant overnight, but Canada is quite a different place from the US, even with all the 51st state jokes. If the currency is at parity all the costs of doing business need to be at parity to remain competitive. Obviously they aren’t.

    • 0 avatar

      A lot of the pricing disparities have disappeared. Remember, anything that had a significant US dollar component in its input costs has now become cheaper in Canada as well. With a few exceptions (fuel and alcohol come to mind, as both of these are taxed to higher degrees than in the US, and domestic air travel has always been expensive in Canada due to the smaller population and large distances), you will probably find that the pricing differential is largely gone.

      We tend to do a shopping trip once a year to North Dakota (from Saskatchewan) – it’s a fun getaway and there are some good restaurants to experience – but I find myself getting fewer and fewer great deals. It’s $150 for a hotel room in Minot or Bismarck, and it’s $150 for a hotel room in Saskatoon too.

      • 0 avatar

        This right here. Used to buy far more goods in the US due to the close proximity and what used to be huge price disparities. I find myself patronizing local Canadian business far more often now that many of the price disparities are gone.

        It’s a give and take. Those crying about it need to take a look at the bigger picture and adjust with the market instead of demanding intervention with the currency.

      • 0 avatar

        I can’t really comment too much about the pricing disparities on a retail level, but on a export level it’s huge. If Honda exports a car from Canada to the US and sells it for USD there’s a huge difference in repatriating that money at current exchange rates vs. the ones 10-15 years ago. It wouldn’t matter as much if they sold all their vehicles in Canada. Unfortunately geography and population make export to the US not only logical, but absolutely necessary.

        If the Canadian dollar wants to stay at parity, as I said, the cost of business needs to be at parity. OTOH, if the Canadian dollar goes higher than more jobs will be lost to cheaper places, i.e. USA and Mexico, etc. Problem is I’m not so sure what Ottawa’s plan is. If I depended on a manufaturing job in Canada I’d be very worried.

  • avatar

    As I live in Eastern Canada ie S. Ontario as compared to the West, I think that the Canadian dollar is where it should be and not like it used to be a few years back at 60 cents as compared to the US Dollar, Canada’s currency is more or less based on our Oil, Gold, Diamonds, Iron Ore, Nickel, Hydro Electric, if Canada didnt have these assets, you can be sure our Dollar would not be what it is today.
    Why should Canadians suffer for making it lower to satisfy foreign Auto manufactures? We like it where it is despite what Honda says, all manufacturies are always looking to low cost Countries like China and India where they want to pay low wages so they can make the most Money for there Corprations, know as “Greed”!

    • 0 avatar

      Gentle Ted, you forgot Canada’s number 1 export… a smug sense of moral superiority.

      I didn’t come up with the joke but I first saw it commented on TTAC. One of the funniest things I’ve ever read. And I’m one of those hosers. And it is soooooooo true!!!

    • 0 avatar

      Importing Canadians like the dollar where it is; exporting Canadians don’t.

      Lowering the dollar wouldn’t be an easy feat without major manipulation. If the export economy gains traction because of the Canadian dollar dropping, that makes the manufacturing sector do better, which improves the economy, which strengthens the dollar. It’s the opposite of a vicious circle, I suppose, like taking air out of your tire to fill the same tire.

  • avatar
    MRF 95 T-Bird

    I always thought lower health care and transportation costs benefited Honda as well as U.S manufacturers located in Canada.

  • avatar

    I see a lot of commenters talking about the relative value of the dollar, but I don’t see that in the quote or summary of the article. A quick skim of the article didn’t find it either.

    But the article does mention labor costs, product transportation costs, and electricity costs. Probably because these are things that are more local (to Ontario), the value of the dollar.

    As far as I can tell, this is just Honda hinting that they want a government handout. I mean, when was the last time you saw a well-established manufacturer say how great the business environment was when they weren’t announcing some kind of expansion or government incentive? It’s not in Honda’s best interest to make people feel complacent about the relationship.

  • avatar
    Gardiner Westbound

    The Japanese carmakers with Canadian plants must pay near-CAW wages to keep the unionistas outside the gates.

    When the C$ was worth less than the US$ the CAW rationalized higher Canadian wages saying our autoworkers were being paid in cheaper dollars. Now with the currency at par it is burying that rationalization.

    The upshot: Chrysler has so far refused to institute a third shift at the Brampton plant and GM is moving Camaro production out of Canada to Michigan. That’s 2,000 local jobs in the toilet.

  • avatar

    I was looking at the Honda dealer last weekend and saw several of the 2013 Civics on the lot (sidenote: what’s up with the extra chrome?). I noticed that they were manufactured in Alliston, even though I’m in the U.S. and was pretty sure they built them somewhere in the U.S. as well. Is the Indiana plant not up to speed on 2013 production yet?

    • 0 avatar

      My wife’s 2012 Civic was built in Indiana (other Civics on the dealer lot were built in Allston. This one replaces a 2000 Civic that came out of the Allston factory. So the Civics are being built in the USA – their powerplants often come out of Honda’s Lima, OH engine factory. Marysville, OH, Honda’s first USA plant, is mostly Accords.

  • avatar

    When I was gowing up in Canada in the 1960s, the Canadian dollar was worth a few cents more than the American dollar. Approximate parity between them is nothing new. However, the current situation is due to the American dollar’s losing value rather than the Canadian dollar’s gaining value.

  • avatar

    I’m an American who lived and worked in Toronto for six years in the 1990s. I recall the C$ was worth about US$ 0.60-0.65 cents when we were there. Canada seemed to be an export giant then. I remember driving down the 401 past the Ford plant where thousands of vans were waiting for export to the US. I had US$ investments I used to buy a nice house and cars on the cheap. When I came back to San Jose we didn’t have a pot to piss in due to exchange rates.

  • avatar

    As an Indiana resident, all I can say is that we’re Canada’s Mexicans now, LOL.

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