It is becoming more costly for Magna International Inc. to do business in Ontario because of high electricity costs, new workplace legislation and growing administrative burdens just as the United States becomes more competitive with lower taxes and reductions in regulation.
That’s the view of Magna chief executive Don Walker, who told the annual meeting of the auto parts giant that he’s worried about the future of Magna’s plants in Canada if the factors that make a company competitive continue to be eroded here, while improving in the United States and elsewhere.
“It’s going to be very difficult − if these things remain − that our plants in Canada can competitively quote against other plants in other jurisdictions that don’t have all these burdens on them,” Mr. Walker said.
He told reporters after the meeting that he’s worried about Ontario’s debt level and inefficient government, taxes on companies and individuals and elements of the province’s new labour legislation that make it easier for unions to organize and mandate sick days at companies that employees can bank.
He made his comments on the second day of an Ontario election campaign where many of those issues are being debated. The remarks also come amid a deadline crunch in negotiations on a new North American free-trade agreement that could also alter the competitive balance for auto parts in Canada.
“This is the exact wrong time to be doing anything that’s putting a bigger burden on industry,” Mr. Walker told reporters, “especially the automotive industry because it’s difficult enough as it is.”
Magna, with about 22,000 employees at 51 factories in Ontario and its head office in Aurora, Ont., is one of the province’s largest employers. The company warned the Liberal government of Kathleen Wynne last year that the labour legislation, known as Bill 148, threatened the company’s competitive position in the province.
Mr. Walker said Magna has not yet shifted work out of Ontario.
But chief financial officer Vincent Galifi told reporters that, when it comes to capital invested, the after-tax returns are now greater in the United States than they are in Canada.
“If I’ve got two equal projects in jurisdiction A and jurisdiction B, and in jurisdiction B I get more after-tax dollars, that’s where we going to start allocating more dollars,” Mr. Galifi said.
The uncertainty around NAFTA amid negotiations that began last year and threats to the agreement by U.S. President Donald Trump have so far not affected Magna’s investment plans in Mexico or the United States, Mr. Walker said.
As the largest automotive supplier in North America − with 31 plants in Mexico and more employees there than in Canada or the United States − Magna theoretically would benefit if a new NAFTA deal requires substantially higher North American content than the current 62.5-per-cent level, he said.
But if content requirements rise too high, car companies will say they can’t meet them, shift production outside North America and export them to the United States under the non-NAFTA tariff of 2.5 per cent, Mr. Walker said.
The Americans started the negotiations demanding 85-per-cent North American content in vehicles built in the three countries in order to qualify for duty-free shipment.
They have since lowered the percentage to 75 per cent amid strong opposition from Canada and Mexico.
Sources said Mexico offered a 70-per-cent content level in a counterproposal it submitted earlier this week.
The figure of 70 per cent is probably reasonable, Mr. Walker said, but that depends on how that number is calculated.
U.S. negotiatiors have also proposed that up to 40 per cent of a North American vehicle’s content come from regions where wages are in the range of US$15 to US$17.
Raising wages for all auto manufacuturing in Mexico to that level “would destroy Mexico,” Mr. Walker said.
“We’d lose jobs out of NAFTA and [it] would drive the price of cars up a lot which means the end consumer pays more.”