Canada auto industry shifting into high gear as US sales accelerate
The Canadian auto industry is taking off, mainly because of rising car sales in the United States. This has meant expansion: In the last month $1.1 billion worth of new plant was announced, including a factory to be built by Honda, the first Japanese carmaker to come to Canada. And unions, seeing big profits by the automakers, are lining up for their share.
Canada and the US have a free-trade agreement in cars and parts, and Canada has been doing rather well by it. Statistics issued this week show that Canada's surplus in automotive trade with its southern neighbor was $1.08 billion during the first quarter of this year, an increase of $265 million from the same period in 1983. Canada sold $6.9 billion worth of automotive products to the US during the first quarter, an increase of 52 percent over the first quarter of '83.
''We expect this momentum to carry on into the summer,'' an executive of a Canadian auto company said.
One of the biggest sellers was the Chrysler mini van, made for the North American market at Chrysler's plant at Windsor, Ontario, across the river from Detroit.
A large surplus with the US compensated for a deficit in auto imports from countries other than America. Import figures almost doubled in the first quarter of this year, to $665 million, up from $345 million for the same period a year earlier.
This has not stopped Canadian car companies, subsidiaries of the four American makers, or the Canadian branch of the United Automobile Workers from asking for more protection, especially from Japanese imports. Only this month the Canadian government announced a new set of quotas on Japanese cars. Canada and Japan have agreed that imports will range from 166,000 to 170,400 in the year ending next March.
One way the Japanese have been getting around quotas, according to Arvid Jouppi, a Detroit auto analyst, is to send Canadians luxury cars such as Toyota Cressidas at $17,000 instead of cheapies like Datsun B-210s, which sold for less than $5,000.
Another way to get around the quota system was for Honda to say it will build a car assembly plant north of Toronto, in the town of Alliston, now known as the potato capital of Ontario. Late this year or early next, Honda will start building a $100 million plant to assemble the Accord model, the same one it builds at Marysville, Ohio. Production will start in 1987, and by 1989 it will be building 40,000 cars a year.
Honda made the announcement only days before Ottawa came out with its new quota numbers. The minister of trade, Gerald Regan, said the two were directly linked and added that quotas would be extended beyond '85 unless there are ''very dramatic investments and changes by the Japanese.''
The Canadian head of the United Automobile Workers, Robert White, was not impressed by the Honda announcement, mainly because Honda will run a nonunion shop, paying well below the UAW hourly rate, if its operation in Marysville is anything to go by.
''Japanese automakers owe Canada about 20,000 jobs,'' Mr. White says. The UAW in Canada is looking for more money this year. Contract talks with General Motors of Canada open on July 17 and with Ford of Canada the following day. The union will be looking to win back concessions given to auto companies during 1982, when the industry was in a slump. One big item will be the return of nine paid personal holidays lost in contract talks two years ago.
Canadian wage costs are now $6 to $7 an hour lower than in the US because of the falling Canadian dollar (just slightly above 76 cents American this week), and lower health costs in Canada because of government-sponsored medicare.
Two of the North American carmakers have announced expansion plans in southern Ontario. General Motors is going to spend $255 million retooling its engine plant in St. Catherines, Ontario.
American Motors will spend $764 million to put up a new plant to make a new small Renault based car in Brampton, the hometown of Ontario Premier William Davis.
The car boom helps the province of Ontario, where the government says 1 job in 6 depends on the car plants and the parts manufacturers, steel plants, and other industries that supply them. Increased revenue for the province, from retail sales taxes on car and truck sales and increased income taxes from workers and corporations, meant that the government sidestepped raising taxes in a spring budget. Although it is mainly a made-in-America auto boom, federal and provincial politicians in Canada are taking credit for it.