Skip to main content

On one level, it makes sense for Export Development Canada to be lending Germany's Volkswagen AG $525-million to help it build auto assembly plants in the southern U.S. and Mexico.

Ottawa's export lender says these kinds of loans are a proven way to "open doors" for Canadian exporters – in this case, helping parts makers join Volkswagen's supply chain. Auto production is migrating, and EDC says its job is to help Canadian companies go where the business is in the world.

"Growth today is looking different than it did 10 or 15 years ago, and that's a fact," explained Carl Burlock, an EDC senior vice-president. "What we can do is help companies with the opportunities where they are now."

And yet seen through the lens of a Canadian auto worker, it probably seems like a raw deal.

Why would the federal government encourage foreign auto makers to build plants in Mexico or the southern U.S. when this country is in a desperate fight to keep the dwindling auto investment it has?

This week's federal budget earmarked $100-million to help auto parts makers develop new products.

But there was no hint of support for auto assembly plants. Many industry experts have warned repeatedly that without more government help, vehicle production will continue to wither in Canada.

Toyota Motor Corp. announced last week that it's moving production of the popular Corolla from Cambridge, Ont., to a new plant in Mexico. Toyota insists it will reinvest hundreds of millions of dollars to convert its Canadian plants to make larger, pricier vehicles.

General Motors of Canada Ltd. is closing one of its two assembly plants in Oshawa, Ont., next year, and the future of the other one is unclear because the company hasn't yet assigned it a new model to make.

There are also persistent worries about production of Chrysler vehicles in Brampton, Ont.

There is investment in Canada, but it's mainly focused on retooling and extending the life of older plants. The country is losing the race to get new production.

The investment trend is decidedly not in Canada's favour. In 2014, the world's auto makers announced $24.1-billion worth of investment on new vehicle production capacity, and none of it was in Canada. Indeed, last year marked the fourth year in the past five that Canada has been shut out, according to an annual study by the Office of Automotive and Vehicle Research at the University of Windsor's Odette School of Business and the Automotive Parts Manufacturers' Association of Canada (APMAC). Since 2011, the industry has announced seven new assembly plants in Mexico.

The parts industry is also moving south, to be closer to where vehicles are assembled. As The Globe and Mail's Greg Keenan reported in February, Canada's Magna International Inc. now operates 29 plants in Mexico, employing 24,050 people – more than in any other country where the company makes parts.

The EDC says the loans it's making to Volkswagen, and to BMW last year, will help Canadian parts makers join global supply chains. But there is no guarantee the strategy will create many new jobs or generate investment at home.

Indeed, Ottawa is actively helping auto-parts makers set up shop in Mexico. In February, EDC joined the federal Trade Department to host an online "webinar" to help suppliers invest in Mexico.

The industry in Canada is in survival mode. And selling to Volkswagen, BMW or Honda in Mexico is better than not selling anything to anyone.

With its latest plan to help parts makers innovate, Ottawa presumably hopes this country can retain production, a vibrant research-and-development base, along with thousands of high-paying jobs.

But with less vehicle assembly in Canada and a dearth of new investment, the pressure for parts makers to follow the southward migration is intense. Canada has fewer free-trade deals in place than Mexico, and it's unwilling to offer many of the same financial incentives to attract new factories.

Why, one wonders, would Ottawa use its limited resources to encourage the industry's migration, rather than find a way to stem it?

Report an error

Editorial code of conduct

Tickers mentioned in this story