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Vehicles on the assembly line at Ford Motor Co. of Canada’s Oakville plant. A troubling trend in auto maker investment is beginning to raise questions about the medium- and long-term health of an industry that contributes 1.5 per cent of Canada’s gross domestic product directly, and much more when the spinoff benefits it generates are included. (Fred Lum/The Globe and Mail)
Vehicles on the assembly line at Ford Motor Co. of Canada’s Oakville plant. A troubling trend in auto maker investment is beginning to raise questions about the medium- and long-term health of an industry that contributes 1.5 per cent of Canada’s gross domestic product directly, and much more when the spinoff benefits it generates are included. (Fred Lum/The Globe and Mail)

Lagging investment a threat to Canadian auto industry Add to ...

The CAW has been pleading with successive federal governments for more than a decade to develop a strategy for the industry in Canada – most recently during a meeting between CAW president Ken Lewenza and Prime Minister Stephen Harper last month.

Mr. Walker has long advocated that governments do whatever they can to try to make sure assembly plants in Canada stay open.

He is encouraged by the recent federal budget, which singled out the manufacturing industry and skills training as areas that require financing and tax incentives.

“I think we have to try and figure out what the Canadian government can influence,” he said, but the big Canadian-owned parts makers such as Magna, Linamar Corp. and Martinrea International Inc. will also have to play a role in making sure the industry’s health is restored.

“It’s up to Linamar, Martinrea, Magna – companies who are here – to say we’ve got to be innovative, we’ve got to have better products, we’ve got to have better manufacturing processes, we’ve got to be competitive.”

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THE MEXICO FACTOR

Canada’s loss is Mexico’s gain when it comes to the auto industry, and the gap between the two countries is widening in favour of the country that was seen as the junior partner when the North American free-trade agreement came into effect in 1994.

Wages of $40 (U.S.) a day in Mexico, compared with about $32 an hour at Canadian assembly plants, are a big attraction for international auto makers. So is Mexico’s location near growing markets of South America and a raft of trade deals it has signed with South American countries, say Chicago Federal Reserve Bank senior economist Thomas Klier and James Rubenstein, a geography professor at Miami University in Ohio, in a paper about the Mexican auto industry released this week.

The lower wages are particularly attractive as fuel efficiency regulations boost demand for smaller vehicles throughout North America.

Four car companies have new assembly plants under construction in Mexico and all are slated to produce small vehicles.

In another sign of Canada’s declining prospects, parts makers in Mexico shipped $33-billion worth of components to the U.S. market last year, compared with $13.8-billion exported to the U.S. market from Canada. In 2000, auto makers in the United States bought $14.7-billion worth of Canadian parts, compared with $13.8-billion from Mexico.

Greg Keenan

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Follow on Twitter: @gregkeenanglobe

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