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Price of building cars in Canada on the rise
Before the landmark deals between the UAW and the Big Three, Canada was a low-cost alternative to making cars in the U.S. However, the strength of the Canadian dollar and the new UAW-run health care fund has actually made Canada one of the most expensive places to build cars and trucks.
"Any advantage Canada had has disappeared," David Cole, chairman of the Center for Automotive Research in Ann Arbor told The Detroit News. "Overnight, there's a whole new ballgame."
Before the new labor deal, U.S. automakers saved about $6/hour per worker by manufacturing cars in Canada. With 1.8 million vehicles being made in Canada annually, the savings really added up. However, that gap has been eliminated due to the new economic climate.
"What GM, Ford and Chrysler did with the stroke of a pen is eliminate $25 an hour," said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ontario. "Canada is now the most expensive spot anywhere in the world for them to manufacture products. That's a real problem."
Ontario is currently the largest automobile producer in North America — with a 100,000 unit capacity advantage over Michigan — but is forecasted to lose more than 600,000 units of production capacity by 2012. In contrast, Michigan is expected to gain 100,000 units in the same time frame.
The CAW's contract with the Detroit automakers expires in 2008. Negotiations have yet to begin, but it appears that CAW's wages will be a key topic as Canadian health care is already provided by the government.
Before the landmark deals between the UAW and the Big Three, Canada was a low-cost alternative to making cars in the U.S. However, the strength of the Canadian dollar and the new UAW-run health care fund has actually made Canada one of the most expensive places to build cars and trucks.
"Any advantage Canada had has disappeared," David Cole, chairman of the Center for Automotive Research in Ann Arbor told The Detroit News. "Overnight, there's a whole new ballgame."
Before the new labor deal, U.S. automakers saved about $6/hour per worker by manufacturing cars in Canada. With 1.8 million vehicles being made in Canada annually, the savings really added up. However, that gap has been eliminated due to the new economic climate.
"What GM, Ford and Chrysler did with the stroke of a pen is eliminate $25 an hour," said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ontario. "Canada is now the most expensive spot anywhere in the world for them to manufacture products. That's a real problem."
Ontario is currently the largest automobile producer in North America — with a 100,000 unit capacity advantage over Michigan — but is forecasted to lose more than 600,000 units of production capacity by 2012. In contrast, Michigan is expected to gain 100,000 units in the same time frame.
The CAW's contract with the Detroit automakers expires in 2008. Negotiations have yet to begin, but it appears that CAW's wages will be a key topic as Canadian health care is already provided by the government.
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