An auto analyst is warning that Canadian auto production could decrease by as much as 25 per cent by 2020.
Auto production in Canada is projected to fall from 2.454 million vehicles to 1.823 million, according to Joe MacCabe, president of auto consulting company Automotive Compass. That’s a loss of 600,000 units.
“A lot of the manufacturing in Canada has shared manufacturing in other places in NAFTA. As the exchange rate punishes labour costs in Canada … it’s more cost feasible for some manufactures to move their operations to build the same exact vehicle on the same exact platform in a less costly area,” McCabe told CBC News on Monday.
MacCabe said Canadian manufacturing still has a lot of benefits, including efficiency and productivity.
“But the exchange [rate] is overshadowing. The strong dollar is punishing the ability to produce there,” he said from his offices in Pennsylvania.
MacCabe said “we’ll see a lot of business south of the Ohio border.”
Mexico is 'fierce competition'
Earlier this year, Ontario’s Minister of Economic Development and Innovation Brad Duguid, called Mexico, with its low wages, "fierce competition."
"It’s competitive out there. We recognize that. Ontario is there to fight for those future mandates down the road," Duguid told CBC News during the North American International Auto Show in Detroit. "It’s a global economy. Ontario is not an isolated island."
MacCabe said foreign automakers, like Honda and Toyota, are more likely to stay in Canada than in Detroit.
He called the Japanese automakers “long-term players” but said no automaker – foreign or domestic - will increase its production in Canada.
In fact, Honda is expected to open its first Mexican assembly plant in 2014.
And General Motors already ceased all production in Windsor and last year moved the production of its Camaro to Lansing, Mich.
Last year, Canada’s federal government announced it would reinstate the Automotive Innovation Fund to the tune of $250 million over five years.
Last month, the federal government said it will invest $71.6 million in Ford’s operations in Oakville. Ontario will contribute $70.9 million to upgrade the plant.
MacCabe said Canadian governments have shown “a desire to help” the auto sector, pointing to mainly to the bailouts of 2008.
“There was some sort of a handshake deal that said, ‘yes, we’ll maintain investment here,’” he said of the Detroit 3. “But when you’re satisfying a shareholder at the end of the day and they just care about profitability, the numbers sometimes overshadow someone’s desire to do the right thing.”
Windsor Assembly Plant safe
MacCabe said the only truly safe assembly plant in Canada is Chrysler’s Windsor Assembly Plant in Windsor, Ont.
“It’s the only place they build minivans. We don’t see a reason why they would move that Windsor facility,” MacCabe said.
Even then, the news isn’t all good. Chrysler plans to, at some point, eliminate one of its minivan nameplates, likely Dodge experts say.
“So we don’t think Windsor’s going away but we do see a drop in production,” MacCabe said.