Though automakers have committed billions to overhauling factories and creating or retaining jobs in the United States, the strength of the loonie and the refusal of the Canadian Auto Workers union to adopt a two-tier wage structure have contributed to slow recovery for the automotive industry in Canada.
“You have stabilization in the U.S., you have plants in the next couple of years for Mexico and you’re not really seeing anything with respect to Canada yet,” said Carlos Gomes, a Scotiabank economist. “We could become somewhat of a laggard in the sector.”
Investments in Canadian auto plants have dropped to just $1.2 billion this year, a staggering decrease of 62 percent from average spending in the past decade, according to Bank of Nova Scotia. That figure compares with $13.3 billion spent on United States auto factories.
One of the factors that makes Canada a less appealing nation for manufacturing is the rising value of the loonie, which was evaluated at 96 U.S. cents at the end of last week (compared with 64 U.S. cents a decade earlier).
Another issue is the unwillingness of the CAW to adopt a two-tier wage structure, a system adopted by the UAW in 2007 that CAW president Ken Lewenza has referred to as “divisive.”
“You cannot have a strong currency, you cannot have an uncompetitive wage rate and then expect Chrysler or all the other carmakers to keep on making cars in this country and be disadvantaged,” said Sergio Marchionne, CEO of Chrysler, on November 22.
Under the terms of GM and Chrysler’s bailouts, which were contributed to by the Canadian government, both automakers must maintain a certain percentage of production in the country: GM must keep 16 percent of its North America output in Canada, while Chrysler needs to maintain at least 20 percent of its output and product-related investments in the country. Last year, GM and Chrysler’s Canadian plants constituted 18.9 and 30.2 percent of total North American production, respectively.
While total investments in the Canadian auto industry are on the decline, that’s not to say that they’ve stopped altogether: General Motors recently spent $185 million to prepare its Oshawa facilities to produce the upcoming Cadillac XTS and Chevrolet Impala, and rumors indicate that production of the Caprice could shift from Australia to Oshawa in the near future.
Ontario remains the largest single jurisdiction on the continent in terms of auto production, manufacturing one in six North American-built vehicles.
References
1.’Canada lags U.S…’ view
