CAPC issues new “Call to Action” plan for Canadian auto industry

Following an original “Call to Action” 10 years ago, the Canadian Automotive Partnership Council (CAPC) has issued a new “Call to Action” for the Canadian industry, to combat what it now sees as shrinking capital spending and a tiny share of additional automotive production over the next few years.

CAPC – which represents the key players in Canada’s automotive industry, including assemblers, parts makers, and labor – describes a perfect storm of troubles that handicapped Canada’s auto production industry over the past five years: the value of the Canadian dollar soared, GM and Chrysler had to be restructured, and labor agreements in the U.S. and much cheaper labor in Mexico have shifted the momentum for investment away from Canada.

Although production has recovered to pre-financial crisis levels, CAPC notes Canada has become one of the more expensive places to build vehicles. “The Canadian industry is responding by keeping its cheque book closed,” says the report, noting capital spending is now half of what it was in the 1990s and 2000s.

At present, Canada produces 19.6% of all vehicles made in the U.S. and Canada, and about 16% of all vehicles produced in North America, CAPC said – but of the 3.5 million units of assembly capacity that will be added to the North American auto industry between 2011 and 2015, Canada will receive just 3%.

And as most North American investments announced in the past two to three years come on-stream (almost exclusively targeted the U.S. South and Mexico), the report notes Mexico’s share will continue to climb as the U.S. decline appears set to reverse.

“The eventual effect of this is that Canada will be hard-pressed to maintain its 16% share,” the report said. “The longer the Canadian industry is starved of investment, the older and less productive its capital base will become. The less productive Canadian plants get, the more difficult it will be to justify new spending; a cycle of spending deferral that, left unchecked, will eventually send the industry to irrelevance.”

CAPC has identified several factors that would bring in more investment and production.

• Put in place meaningful, tangible, and effective support measures for the industry to allow it to compete in the global marketplace.

• The fully-loaded cost of labor impacted by government must be reduced, notably employment insurance, the employer health tax, and workers compensation premiums.

• Provide a single window experience for investment that coordinates federal, provincial, and municipal government stakeholders similar in approach to that so successfully employed by ProMexico.

• Improve transportation infrastructure and border policy to reduce logistics costs and risks by closing the transportation infrastructure gap.

• Ease the regulatory burden by eliminating unique, overlapping or redundant regulations between provinces, between Canada and the provinces, and between Canada and the US.

The full CAPC “Call to Action II” report is available at this link.

CAPC was formed in 2002. The Council, consisting of senior executives and stakeholders involved in the industry, was established to provide a forum for industry stakeholders, government, and the research community to discuss common issues and to identify actions to strengthen the Canadian automotive industry in both the short and long terms.