Fiat Chrysler workers assemble a minivan at the auto maker’s Windsor factory.REBECCA COOK
The tools that Canadian governments wielded for decades to create a world-class auto assembly industry in Canada have almost entirely disappeared or are now available in other countries, forcing policy makers to offer higher financial incentives.
Those are among the key conclusions of a study of Canadian automotive policy from the 1965 Canada-U.S. auto pact to the recovery from the Great Recession of 2008-09.
During this period, Canadian policy makers lost the ability to use trade policy to lever new investments out of global auto makers; the competitive advantage offered by government-financed health-care costs vanished; and the quality of work forces in other countries has risen to close to or equal to that available in Canada.
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"The combined impact of these changes is that Canadian automotive workers and the governments of Ontario and Canada are in a similar position: vulnerable and exposed," study authors Greig Mordue and Brendan Sweeney of McMaster University contend.
Instead of using financial incentives to buttress those competitive advantages to entice auto makers to open new assembly plants in Canada, taxpayer money is aimed at making sure existing factories stay open.
"Over the past 25 to 30 years, we've given all of our tools away to our neighbours, and then we check in the shed and they're just not there any more," Prof. Mordue said in an interview.
One of the changes the study identified is what the authors call commoditization of vehicle assembly, which refers to production systems that car companies make standard in all their plants around the world. The most well-known example of this is the Toyota Production System, which standardizes the assembly process as much as possible.
Other auto makers have established similar systems that are designed to eliminate mistakes in production and reduce waste.
"The companies pick up their production systems and plop them down in any jurisdiction and when you go to that plant in Puebla [Mexico] and you ask where you are, you're going to say, 'I don't know, Ingolstadt [Germany]?'" he said.
That Puebla plant he referred to is a new factory built by Audi AG. Audi had more than 200,000 applicants for 2,000 jobs at the Mexican operation, the study noted, which meant that when it came to getting highly skilled employees, the company had a huge pool from which to choose.
The Audi plant and decisions by BMW AG and the Mercedes-Benz division of Daimler AG to build vehicles in Mexico show that "auto makers appear to have determined that, despite the high quality of labour in Canada, Mexico is a suitable location for luxury-vehicle production," the study said.
Canadian governments began offering incentives to win new plants as early as 1978 when they gave Ford Motor Co. $68-million for an engine plant in Windsor, Ont.
That plant has been the recipient of tens of millions of dollars in taxpayer money since then, as have existing operations operated by the four other auto makers that assemble vehicles in Canada: Fiat Chrysler Automobiles NV, General Motors Co., Honda Motor Co. Ltd., and Toyota Motor Corp.
The practice of offering financial incentives to retool existing plants in Canada "has become so ingrained that even Honda, a company that long eschewed direct government support, sought – and accepted – cash incentives from Ontario in 2014," the study said.
Earlier this year, Honda said the Ontario and federal governments will provide about $84-million toward an upgrade of more than $400-million at its plant in Alliston, Ont.