Canada’s auto industry is revving back to full speed after putting on the brakes in the spring, almost shutting down entirely for several weeks.
The industry – consisting of automakers such as General Motors, Ford and Toyota, and parts manufacturers such as Magna International Inc. – is the country’s second-leading exporter.
In 2019, it accounted for about 13 per cent of all exports, worth about $86-billion, Export Development Canada (EDC) data show. But the flow of goods was reduced to a near trickle for about two months in the spring when the industry ground to a standstill.
“Our revenues went down by about 98 per cent,” says Rob Wildeboer, chairman and co-founder of Martinrea International Inc., one of Canada’s largest auto-parts manufacturers.
Rob Wildeboer, chairman and co-founder of Martinrea International.SCOTT LEGATO/Courtesy of Martinrea International
“We laid off about 14,000 people in March of our 16,000-person work force.” That included many of its 2,500 employees in Canada.
The company, a world-leader in lightweight auto parts, provides components to automakers in North America and overseas. It halted most operations from mid-March to late May – except for one plant, which was helping fight the pandemic.
“We had just one plant going full-bore making ventilator stands,” he says about its partnership with GM, which was manufacturing ventilators instead of vehicles during that span.
Indeed, manufacturers had little need to build cars. Automobile sales fell more than 70 per cent year-over-year in North America in April, says David C. Adams, president of the Global Automakers of Canada.
“The industry was adversely impacted by COVID in that production on a global basis was essentially shut down,” he says. Canada’s main markets – the U.S. and Mexico – locked down their economies.
However, the auto sector experienced a big bounce-back as economies reopened.
As a result, North America’s total vehicle sales for July were only down 5 per cent year-over-year, Mr. Adams says. Exports were again about $7-billion for the month, up from the low in April of about $864-million, Statistics Canada data show.
Of course, automakers had no choice to shut down production facilities over safety concerns. Among them was GM Canada, which included its CAMI Assembly plant in Ingersoll, says spokesperson Jennifer Wright.
About 60 per cent of its Canadian work force, including most of its factory employees, were laid off, she says. “In mid-May, GM Canada began a gradual resumption of our automotive manufacturing operations … under strict new COVID-19 safety protocols,” she says, adding that most of its more than 3,700 Canadian factory employees are now back at work.
New protocols included physical distancing, additional personal protective equipment (PPE) and plans regarding workers who test positive for COVID-19, Ms. Wright says.
Because the industry is so integrated, it’s been critical to ensure supply chains were unimpeded by borders, which have been closed to most travel, says Walid Hejazi, an associate professor of international business at the Roman School of Management.
“Auto parts and vehicles often cross borders multiple times … so we don’t think about exporting cars or parts,” he says. In effect, North America is one unified, manufacturing market.
As such, parts can be made here, shipped to Michigan to be assembled into other components, which are then sent to Mexico for assembly into automobiles.
This interlocking system was suspended partly because “demand collapsed” and consumers stopped buying cars, he says.
Even if demand had remained strong, companies still faced operational challenges, including a lack of PPE for their employees.
Mr. Hejazi says the industry overcame those obstacles, but the pandemic will still loom, likely for the next two years. Indeed, EDC forecasts that auto exports will be down 30 per cent this year while stating overall global economic output will not return to pre-pandemic levels until after 2021.
That said, COVID-19 is just another challenge for the industry. Chief among them was the North American free-trade agreement (NAFTA) renegotiations that led to the United States-Mexico-Canada Agreement (USMCA), which came into effect July 1.
Its completion “was a relief to everyone in the auto industry,” Mr. Hejazi says.
Mr. Wildeboer agrees, noting the industry was “heavily involved” in maintaining the North America common market.
Plenty was at stake for Canada. The industry employs about 130,000 Canadians directly and about another 650,000 through indirect jobs.
While trade uncertainty, including the U.S. tariff war with China, has been tricky, COVID-19 was an unexpected gut punch for the industry.
“When you have no revenues and your plants are empty, you still have to pay the bills … and that’s stressful stuff,” Mr. Wildeboer says. “But we knew at some point we were going to be back to work, and that people will buy cars.”
He adds the pandemic may even provide tailwinds; more people are moving to the suburbs and less likely to use mass transit. That may mean that now they have a need for a car or a second vehicle.
Millions of individuals are returning to the workplace after working from home for several months, Mr. Hejazi says. “As they do, demand for cars will grow.”
Mr. Adams says demand is already on the rise, fuelled by SUV and truck sales. “Gas prices plummeted with COVID, making the cost of operating a larger vehicle less expensive,” he notes.
Even electric vehicle (EV) makers such as Vancouver-based ElectraMeccanica Vehicles Corp. are seeing growth. The startup spent much of 2020 in the final design and engineering phase for its Solo EV – an electric, single-person car. The pandemic could have killed those plans.
Yet it “did not materially impact us,” says spokesperson Sean Mahoney. Rather, the company began commercial production this year. “Orders and deposits continue to grow as we expand our retail footprint in the U.S.”
Overall, the Canadian auto industry is cautiously optimistic, even though the pandemic will remain for several more months at least and economic growth is anything but certain, says Mr. Wildeboer, who co-chairs the Canadian Automotive Partnership Council, which includes major automakers.
“We’re an industry that is used to a lot of challenges and dealing with them,” he says.
COVID-19 is no exception. “As an industry, we’ve shown that you can still conduct business safely even with the disease.”