Canada's on a Roll

Industry shows no signs of letting up It's not quite so bright that automakers need to wear sunglasses, but the Canadian industry's future could make some squint.

While the U.S. market is poised for a downturn, "there are still about three years of life and relatively strong sales in Canada," says Canadian auto analyst Dennis DesRosiers. "It's unique in that you're going to see ... a stronger new vehicle market in Canada than the U.S."

That is because Canada traditionally lags cyclical change in the U.S. It took Canada three years longer to pull out of the last downturn, and it will take that long to enter the next one.

The Canadian market is steaming towards 1.58 million sales in 2000 and should plateau in that range for another three years. "Anything over 1.5 million in Canada is fantastic," says Mr. DesRosiers. Ward's Automotive Reports figures to the end of October show year-to-date sales at 1,353,134, ahead of like-1999 sales of 1,285,364.

There are a couple factors propping sales.

* About 40% of the vehicles on the road are at least 10 years old.

* Increased export of used vehicles, aged one to five years, to the U.S.

Four years ago, Canada exported about 3,000 of these newer vehicles. This year, the figure could reach 200,000, now that carmakers have discovered they can buy these vehicles cheap at Canadian auctions and export them back to the U.S. Stripping Canadians of a used car market encourages more new car sales, says Mr. DesRosiers.

Another bright spot is that almost all of the major carmakers are investing in their Canadian operations, setting the stage for Ontario to topple Michigan as the largest vehicle producing region in North America.

Ontario is within 230,000 units of the title and may have taken it in 2000 if it weren't for downtime at DaimlerChrysler Corp. plants for model changeover and inventory control, at Ford Motor Co. facilities due to a parts problem, and at General Motors Corp., where a couple of plants await new product.

The more than C$3 billion(US$1.9 billion) in investments announced in 2000 will increase Canadian capacity.

DaimlerChrysler is spending C$1.5 billion (US$970 million) to triple the size and more than double the capacity of its Pillette Road Truck Plant in Windsor, Ont. It will cease making fullsize vans/wagons in the spring of 2001 and begin assembly of the high-volume Ram fullsize pickup in the fall.

The minivan plant in Windsor has launched the new '01 model and will add a tall wagon, codename CS, for '03.

General Motors of Canada is on a spending spree, with plans to spend C$300 million (US$194 million) to assemble the '03 Pontiac Grand Prix in Oshawa, Ont., C$440 million (US$284 million) to build the new Electron V-6 engine in St. Catharines, Ont., and another C$100 million (US$65 million) to expand the Oshawa Stamping Plant.

CAMI Automotive Inc, GM's joint venture with Suzuki Motor Corp., is getting a new, small light truck for '04.

Toyota Canada is spending C$650 million (US$419 million) to expand its Cambridge, Ont., plant to assemble the Lexus RX300 crossover vehicle in 2003, boosting production by 10% to 220,000, including 60,000 RX300s.

Ford of Canada is expanding its engine facilities in Windsor, creating as many as 450 new jobs by 2002 and boosting V-8 capacity by 325,000 engines.

The carmaker also is spending more than C$100 million (US$65 million) on new paint facilities in its St. Thomas, Ont. (Crown Victoria/Grand Marquis) plant, and says there is more investment to come. After a delay to replace a defective module in the safety system, the launch of the new Ford Windstar minivan in Oakville, Ont., is back on track.

One question mark remains: GM's Ste. Therese, Que., plant, which has no product after the '02 buildout of Camaro/Firebird.

By February, the Canadian government must dismantle its historic AutoPact, the trade agreement credited with building the industry but which was found to be discriminatory by the World Trade Organization. It is felt to have outlived its purpose now that the industry is so well entrenched.

Another bright spot is Canada's emergence as an automotive intellectual center for OEMs as well as suppliers.

"In the past you couldn't blast it (R&D) out of Detroit with dynamite," says Mr. DesRosiers. But the industry is taking its first cautious steps by choosing nearby Windsor and Toronto to design vehicles as well as build them.

"Ten years ago we had no engineers doing automotive R&D in Canada," says Mr. DesRosiers. "There are 2,000 to 3,000 now and it could be 5,000 to 10,000 within five years."

DaimlerChrysler will spend a further C$500 million (US$323 million) to expand its sprawling complex in Windsor over five years.

GM is spending C$20 million (US$13 million) and hiring 350 employees to transform an experimental facility in Oshawa into a regional development center. It will be in operation by October 2001 with room to easily double again in size.