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Assembly-plant outlook is grim despite supplier optimism

John Irwin, Automotive News Canada
September 11, 2020

When it comes to the competitiveness of the Canadian auto sector, it might be the best of times and the worst of times.

Talk with many Canadian suppliers and you’ll hear excitement about what the coming years could bring to the industry as new regional content requirements for the United States-Mexico-Canada Agreement (USMCA) potentially boost business.

“It’s a line of sight into new business that usually only gets created with new [automaker] investment,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.

“Now it’s being created through legislation.”

But listen to labour leaders and observers of Canada’s auto assemblers, and you’ll hear concern about the industry’s longterm viability, with questions hanging over the Detroit-based automakers’ assembly plants.

“There is a scenario that has no Detroit Three production in Canada,” said Joe McCabe, CEO of AutoForecast Solutions. “That’s a scenario. No one thought about [General Motors] Oshawa [assembly ending], and then it happened. Now no one thought about [Ford’s plant in] Oakville, and it could potentially happen.”

The contrast in tone between suppliers’ optimism and observers raising questions about the future of many of Canada’s assembly plants points to the complex nature of the automotive supply chain. It also points to the state of transition the industry finds itself in, navigating a new, more stringent regional trade agreement in the middle of a pandemic.

The future of auto assembly in Canada, particularly among Ford, GM and Fiat Chrysler Automobiles, will be the central focus of bargaining between Unifor and those companies, just as it was in 2016. But since those negotiations, Canada’s production footprint has shrunk, with the end of assembly at Oshawa and cuts at Ford’s Oakville, Ont., plant and Fiat Chrysler Automobiles’ Windsor, Ont., factory.

The long-term prospects for Oakville are murky after AutoForecast Solutions said that Ford would no longer assemble the Edge crossover there after 2023, potentially leaving the plant without a production mandate. Ford has not confirmed the report.

To be sure, it is not all bad news for Canadian auto assembly. Toyota’s and Honda’s plants appear secure, according to McCabe and others, while no imminent plans have been announced for GM or FCA to leave their remaining Canadian plants.

But given that the Detroit Three have been largely scaling back in Canada, McCabe said, it might be time for the federal and Ontario governments to incentivize other automakers to set up shop here.

“From my perspective, it’s a great place to do business,” McCabe said. “It has a dedicated and highly skilled work force. It has a dedicated nucleus of automotive in Ontario. There are so many check boxes in the pro column. Now it’s about incentivizing somebody else to come in.”

Executives at many suppliers expressed optimism about their long-term prospects, as rising regional-content requirements under the USMCA could compel automakers to source more components in Canada and elsewhere in North America. Under the new trade deal, 75 per cent of a vehicle’s contents must be sourced from within the USMCA member nations to trade without tariffs, up from 62.5 per cent.

Still, despite the fact that Canadian suppliers can source plants outside Canada, the sector would benefit greatly from a healthy Canadian auto-assembly industry, as Rob Wildeboer, chairman of Martinrea International Inc., acknowledged.

“We’ve got to support the assemblers here,” he said.

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