Chrysler Warns Canada Auto

Anthony Fontanelle
January 15, 2008

The problem continues for Canadian automakers as the value of the loony maintains its high value. Ford's Alan Mulally has already called for a change to be implemented by the Canadian auto industry if they want automakers to continue investing in the country. Recently, Chrysler also pointed out that the Canadian auto manufacturing sector is in danger of losing automakers.

Tom LaSorda, vice-chairman and president of Chrysler LLC, had this to say according to the National Post: "This is all about us being more competitive. We're not asking any government to bail us out or anything." He said though that the government should step in that would say that Canada will "do things that are so unique that industries want to come here and we can make it beneficial to them".

With the increasing value of the Canadian dollar, automakers producing vehicles in the country can no longer take advantage of huge profits from importing the vehicles into the United States. In the past, automakers have set up vehicle assembly facilities in Canada as they can build vehicles in the country at lower wages and raw material price. But with the soaring loony, importing vehicles from Canada into the United States does not necessarily translate to huge profits. In fact, Canadian auto buyers are looking more and more at purchasing vehicles in the United States.

LaSorda pointed out that to build an assembly facility in Canada that will produce 200,000 vehicles per year would cost about $800 million. That figure is much higher than what it would cost if the new assembly facility will be built in China or Mexico. If a new vehicle manufacturing plant is built in China which can also produce 200,000 vehicles annually, it will only coast $250 million and in Mexico, around $450 million. That disparity is what LaSorda is warning Canada about.

"We can get approvals in other states here much faster than in Canada," added the Canadian-born LaSorda. "If you're competing with an investment in different locations and others are faster, you lose out."

With the United Auto Workers union agreeing to lower contracts from automakers, it is expected that Canadian manufacturing facilities have lost its bargaining chip. After the contract with the UAW was signed, it was official that wages in Canada are $25 an hour better than in the United States. Thus, automakers will no doubt look to just build vehicles in the United States if they are forced by Canada to maintain the wages. If that happens, it will negatively affect the Canadian auto industry including facilities manufacturing auto parts like brake accumulator Canada.

Source:  Amazines.com