General Motors may soon dramatically scale back its operations in Ontario, which is a sign that the auto industry is not doing so well in Canada, an auto analyst says (via CBC). But, is it as bad as it sounds?
Canada invests $1.5 billion annually into plants and equipment for the automotive industry, which is down from $3 billion annually in the early 2000s. This finding shows that Canada could be losing its share of auto investment to big players like the United States and Mexico.
Canada makes 2.4 billion vehicles a year, which is 15 per cent of production in North America. This number will decline though as the industry is not getting 15 per cent of investment any longer. Instead, that amount is closer to five per cent.
The beginning of the end may begin with GM. The bailout terms set in 2008 stating that GM must keep 16 per cent of its production in Canada will end in 2016. According to Joe McCabe, the president of AutoForecast Solutions, the auto giant is expected to reduce the Ingersoll plant in Ontario to a single shift, potentially by 2019. He also said that GM will not continue producing vehicles in Oshawa.
A major issue that was addressed by McCabe is that only a small number of vehicles that are made in Canada are actually sold here. In fact, GM sells only about seven per cent of the vehicles it makes on home soil.
Other issues include the Canadian dollar, which was considered quite high until recently, and increasing competition from production powerhouses in Mexico, China and the U.S., which command much bigger labour forces. Michigan, for instance, has recently become a “right-to-work” state in an effort to increase jobs, which is where GM moved the Camaro production from Oshawa.
McCabe urges the Canadian government to make new investments in GM before it’s too late.
Greig Mordue, the general manager of corporate planning with Toyota and a Canadian Automotive Partnership Council (CAPC) spokesman, stresses that the automotive industry is still “the most important manufacturing industry in Canada.”
CAPC suggests that in order to keep up with the competitors who understand that the auto industry is the centre of a healthy economy, Canada should establish an Automotive Investment and Attraction Board. This would be a one-stop shop for prospective investors to lead Canada back to success in the automotive industry.
At this point, investment is imperative for Canada if it wants sustain productivity and improvements in the auto sector.
Image courtesy of © General Motors.
