Mexico is on pace to surpass Canada as the second-largest auto-producing country in North America early in the next decade, adding another competitive threat to the host of problems afflicting Canada's largest and most important manufacturing industry.
That's one of the key conclusions of a study called Competing Without a Net, which was undertaken by the Council for Automotive Human Resources (CAHR) and paints a grim outlook for the future of the auto industry in Canada, already battered by the soaring dollar and a big slide in sales in the U.S. market, which soaks up more than 80 per cent of the vehicles manufactured here.
“Viewed in a global or regional context, Canada's competitive position continues to decline,” the report says. “In fact, the long-term viability of the Canadian automotive industry is in question.”
Employment at light-vehicle assembly plants and parts makers has already tumbled 12 per cent from the peak reached in 2000 and is forecast to drop at least another 8 per cent in the 2010-14 period, the report says.
The auto sector has deteriorated in Canada even since the study was begun in early 2007, the report notes, pointing to the dollar, U.S. labour agreements that substantially reduced costs in that country and increased investment in small-car manufacturing in Mexico caused by the requirement that light vehicles sold in the United States average 35 miles per gallon by 2020.
“It's a realistic view of what the situation is out there,” said John Mavrak, executive director of CAHR, which was established in 2004 to create a human resources strategy for the industry.
Vehicles will still be assembled in Canada, noted CAHR chairman Mark Nantais, but “it's going to be a very different industry, that's for sure.”
The study was completed even before the latest blow to the industry in Canada. That's the move General Motors Corp. announced on Monday to eliminate the second shift of production at its pickup truck plant in Oshawa, Ont. GM will wipe out 900 direct jobs, thousands more at suppliers and reduce output to just a single shift at the plant, which just four months ago was operating around the clock.
The move to stricter fuel economy regulations will be a major boost to Mexico, the report says, causing small-car production in that country to triple by 2014.
Output in Mexico will jump to 2,615,793 vehicles by 2011 while Canadian production will be static at about 2,507,038, said William Pochiluk, president of consulting firm AutomotiveCompass LLC and one of the co-authors of the study.
The report echoes recommendations from the Canadian Automotive Partnership Council – a joint industry, government and labour advisory body – and other organizations that called for governments to help the industry.
Among the recommendations are financing support for parts suppliers, which are having difficulty raising money from banks amid the credit crunch; government incentives for creating and developing innovation, both in research and development and human resources; removing obstacles such as the bottleneck at the Windsor-Detroit border crossing; government incentives to develop more environmentally friendly processes and products; and encouragement of partnerships to strengthen supply chains and simplification of the programs governments already offer to support the auto industry.
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