Weaker loonie no savior for ailing Canada auto sector, executives say
By Allison Martell and Euan Rocha
TORONTO (Reuters) - A strong Canadian dollar has wounded the country's auto manufacturing sector over the last decade, but the currency's recent drop to a near six-year low is unlikely to spur a rush of new investment, say senior industry executives.
Canada has struggled in recent years to win new investment from automakers, losing out to both the United States and lower-cost Mexico. While some major automakers have announced new investments in Canada in recent months, they are expected to preserve jobs rather than significantly increase employment.
Reid Bigland, chief executive of Fiat Chrysler's Canada arm, said the currency was not a major factor in the company's recent plan to invest some $2 billion to build its next generation minivan in Windsor, Ontario, as the choice was made before Canadian dollar's recent slide.
"Under normal circumstances, when it comes to Canadian manufacturing, when the Canadian dollar goes down it's really an opportunity to strike up the band," Bigland told Reuters on the sidelines of the Canadian International Auto Show in Toronto. "Unfortunately the (Canadian) dollar has been strong for so long that a lot of the band has left."
In 2014, car makers announced over $10 billion in investments in the United States, some $7 billion in Mexico, and only about $750 million in Canada, according to the Center for Automotive Research.
Bigland said Chrysler has lost local suppliers to the strong Canadian dollar, to the point where only 25 to 30 percent of those serving its Windsor operation are Canadian. He noted that in the last few years, Canada has also lost former Caterpillar, Daimler, Ford and Navistar plants, among others.
In 2013 the Canadian Automotive Partnership Council, an industry group, looked at challenges facing the industry. Exchange rates made the first page of their report.
"Canadian auto assembly labor costs have been reduced significantly in own-currency terms in recent years," they wrote. "But the appreciation of the Canadian dollar has more than offset those savings when expressed in U.S. dollar terms." Continued...