CHICAGO Seven major automakers are spending at least $12.2 billion on facility expansions in North America through 2015, according to an AMM analysis of announcements over the past 16 months. About 70 percent of the total is being spent in the United States and 27 percent in Mexicoand just 3 percent in Canada.
What does that mean for the future of Canadas auto industry? Ken Lewenza, president of the Canadian Auto Workers (CAW) union, believes neither suppliers nor workers should worry that Canadas auto industry is in danger of fading.
Lewenza said the union evaluates every investment decision that automakers announce. The most recent include a $250-million investment by General Motors Co. in its CAMI Automotive plant in Ingersoll, Ontario, and $100 million by Toyota Canada Inc. in its Cambridge, Ontario, facility.
"Im not totally alarmed about investments outside Canada. Investments operate in cycles, and GM (for example) made significant investments in its Oshawa, Ontario, plantin the neighborhood of $1 billionprior to the 2009 restructuring," he said. GMs St. Catharines engine plant also received nearly $250 million in 2010.
Automakers have realized higher capacity utilization and productivity rates at their Canadian plants, offsetting perceived disadvantages such as high wages and a high Canadian dollar. "The reality is, in the last negotiations we had to make wage concessions on new-hire rates ... due to pressure from global companies that can move capital from country to country without dealing with the consequences. That is problematic for us (the union) unless governments step inCanada, the United States or Chinaand make companies invest in their domestic markets," Lewenza said.
"We painfully made sacrifices," but as a result "GM said we positioned ourselves as well as possible for future investment, he said. "It is frustrating to think that if wages were the (primary) determination for getting investment, then all the investments will eventually end up in Mexico. There is always a country that will do it cheaper."
But Lewenza doesnt believe wages are the sole determinant, noting that a mere 7 percent of the total cost of assembling a vehicle is for labor. "Its the quality and productivity of the workforce. J.D. Power & Associates rated the Oshawa and CAMI plants as highly productive," he said. "Our health care, infrastructure, stability, quality and productivityput all that in the pie, and Canada is a good place to invest."
The CAW expects further investment in Ford Motor Co.s Oakville, Ontario, plant and, potentially, at the Windsor minivan assembly plant.
"I keep emphasizing the advantage of Canadian business operations. Our dollar is coming down, which is important with so many exports," Lewenza said.