Automotive News Canada - August 2020 - v2 - 11

* AUGUST 2020

Assembly-plant outlook is grim despite supplier optimism
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 StatesMexico-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."

FROM TORONTO

JOHN

IRWIN
COMMENT
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
The Canadian
thought about
[General
supply chain
Motors]
would benefit
Oshawa
from a healthy [assembly
ending], and
Canadian
then it hapauto-assembly pened. Now
no one
sector.
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 upcoming 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. Once

the trade pact is fully enacted,
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.

- ANC

As Detroit-based
automakers reduce
assembly in Canada, it might
be time for governments to
provide incentives to attract
other automakers' assembly
operations, said analyst Joe
McCabe. F I L E P H O T O

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Automotive News Canada - August 2020 - v2

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