Canadian consumers have spent most of their savings in the last decade as their government taxed its way out of deficit troubles. Now they have among the lowest savings rates in the world.
At the same time, they've been piling up debt to their eyeballs - and beyond. Recent statistics suggest many Canadians actually owe more money than they earn.
All the while, unemployment remains double that in the U.S., and a fledgling economic recovery seems under siege from collapsing markets in South America and Brazil.
But despite those sobering statistics, analyst Dennis DesRosiers says he expects them to keep buying new cars at least for the next year. That's because the Canadian auto fleet is about as old as it has ever been, and the northerners are driving record numbers of kilometers to boot, he says.
It will likely mean fewer luxury items purchased in other sectors of the economy, but Canadians are going to have to buy new cars, he says.
While such shaky economics won't be enough to take Canada back to the 1.5 million unit sales of yore, it should be enough to keep them in the neighborhood of 1.2 million units, Mr. DesRosiers says.
And besides, the Canadian automotive industry really doesn't care too much about how many of its citizens are visiting the domestic showrooms. With no native vehicle producers and a slew of major automotive suppliers, the real attention is focused on whether Americans are going to keep buying cars and trucks.
With U.S. sales projected to settle in the neighborhood of 15.5 million vehicles (including heavy trucks) for 1998, Canadian suppliers are happy indeed, he says.
The Canadian industry has been running at record levels for five or six years. Even with theCorp. strikes and the lost production from the LH car launch at Corp. it could be close to a record year in 1998. With a third shift in full swing at the Chrysler LH plant in Bramalea, Ont., and Toyota and both adding capacity, things are going to be stronger still.
And even the tool and die industry seems to be emerging from the doldrums, says Chris Morand, a supplier analyst for TD Bank in Windsor. From February through September the tool and die shops were languishing in their slowest stint in years, he says.
"But things are definitely looking a lot better. They're not booming, but most shops now have good booked business," Mr. Morand says. Some of the lag may have been just taking up the slack as more automakers shift from four-year to sub-three-year development cycles, he says.
Efficient workers, favorable currency and an industry forced to get lean by hard economic times should keep Canada's auto economy booming, Mr. Morand adds.
But that doesn't necessarily give Buzz Hargrove any reason to relax. The president of the country's Canadian Auto Workers (CAW) union says it has been a tough year, and 1999 could be even tougher.
The biggest fight and biggest victory for the CAW in 1998 was Ottawa's decision to stick with the current AutoPact arrangement that gives, GM, Volvo and Motor Co. the right to import without duty but doesn't extend the same privilege to other automakers.
The 1965 deal was structured to recognize long-term investments that U.S. automakers and Volvo had made in Canada. It was carried over when the U.S. and Canada negotiated their piece of the North American Free Trade Agreement.
and had asked Canada to reconsider now that both automakers have significant manufacturing in Canada.
But the unions argue that the duty-free importers, which are union, still are owed protection from Japanese-based automakers, which don't employ CAW members.
Mr. Hargrove and the U.S. automakers won that battle but the Asian and European automakers are appealing to the World Trade Organization. And the Asian automakers haven't given up the fight.
David Worts, executive director of the Japanese Automobile Manufacturers Assn. (JAMA) says the WTO appeal remains in the initial stages. It's also not clear when, or if, the Koreans might join the effort, he says.
Ironically, shortly after winning the right to keep their status, Volvo decided to give it up by closing its Halifax, Nova Scotia, knock-down plant on Dec. 17. Angry workers seized the plant and forced Volvo to negotiate a better severance and retirement package for the 300 workers who will be displaced.
Mr. Hargrove says he expects such closings to be more common as globalization spreads and individual countries are less important. The union also is worried that GM still intends to close the Camaro/Firebird plant in Ste. Therese, Que. Unemployment and the local economy remain a concern.
In addition, the union would like to get a bigger share of the supplier pie. Unlike the still low union penetration in the U.S. supplier ranks, the CAW already has a 50% share, Mr. Hargrove says. But if they can figure out a way to get suppliersInternational Corp. and Linamar Corp. into the union fold, they'd be able to wrap up 80% of the workers, he says.
Mr. Worts says his members expect to finish 1998 with a good year, but slower than in the first three quarters. And 1999 is expected to be flat at best.
"But even if it's flat, this isn't a bad place to settle," he says. "For our members, it's equal to the late 1980s peak."
And maybe that's the underlying message from the folks in Ontario and thereabouts. They may be a little nervous, but things are still looking pretty good from their perch atop North America.