A New Day in Canada
The new automotive investment strategy of Ontario certainly raised eyebrows in 2004 with a foray into incentives, albeit incentives related to work force development and R&D and not outright cash. That program was followed in October 2004 by the issuing of "A Call for Action: A Canadian Auto Strategy" by The Canadian Automotive Partnership Council (CAPC).
Since peaking in 1999 with 3 million vehicles produced, Canadian automotive production has declined. Formed in September 2002, CAPC consists of senior executives and stakeholders involved in the industry, and was formed to provide a forum for all auto sector stakeholders to
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Led by 12 OEM plants at eight locations, the Canadian auto industry makes 16 percent of all vehicles sold in North America, while also serving as a prime staging ground for the European marketplace. But it makes less than 10 percent of North American autos sold. CAPC wants to see that number reach 15 percent by 2010.
The Canadian automotive sector exports some US$82 billion annually, and invests between US$2.5 billion and $3.3 billion annually in plants and equipment. CAPC would like to see another US$16 billion in Canadian-made components shipments by 2015, and an improvement in Canada's automotive trade balance of at least US$12.2 billion by 2010.
CAPC recognizes that several global factors — not to mention the rising quality and
Alliance of Automobile Manufacturers Association of International
Automobile Manufacturers Mexican Automotive Manufacturers
Association Canadian Vehicle Manufacturers
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- Large-scale Investment Incentives
- Infrastructure
- Innovation
- Regulatory Harmonization
- Human Resources
Meanwhile, the country already
has some built-in advantages. Among them is a benefits cost that hovers
around 20 percent of payroll, vs. 29 percent in the U.S. Also, while
the U.S. imposes a 2.5-percent tariff and Mexico imposes a 15-percent
negotiable tariff on non-NAFTA parts,
Canada has no such penalty. But the one advantage
that always rises to the top in Canada is its R&D tax credit scheme:
The after-tax cost of R&D in Ontario is about 50 cents on the dollar,
says CAPC.
Given questions about machinery and equipment tax credits in the U.S. as a result of the Sept. 2004 federal court decision, CAPC's call for a federal-level investment tax credit for new machinery and equipment may take on an added gleam. CAPC is also calling for elimination of capital tax at the federal and provincial levels, and an expansion of the manufacturers and producers tax deduction. The two most pressing challenges are power supply cost and certainty and border congestion.
"The industry would like to see the implementation of the 'Let's Get Windsor-Essex Moving' strategy and the implementation of an emergency/ contingency plan to protect the reliability of Canada's supply chain," says GM Canada's David Paterson. "We would very much like to see the plans and implementation of the next phase of infrastructure investments at Windsor-Detroit. And of course, we are following with great interest the progress of the Bi-National Review which is looking at the longer-term options for an additional border crossing."
Paterson also points out that while the country's skilled trades have traditionally been an advantage, its publicly funded health care program is becoming more and more attractive.
"One other area that was identified as a CAPC challenge for the industry was for automakers to create supply procurement offices in Canada in order to grow the Canadian parts supply business," he says. "Engineering and related innovation are noted in the report as key strategies for success for the auto industry in Canada. The automakers need to do more vehicle engineering in Canada, but government policies can help as well."
Given questions about machinery and equipment tax credits in the U.S. as a result of the Sept. 2004 federal court decision, CAPC's call for a federal-level investment tax credit for new machinery and equipment may take on an added gleam. CAPC is also calling for elimination of capital tax at the federal and provincial levels, and an expansion of the manufacturers and producers tax deduction. The two most pressing challenges are power supply cost and certainty and border congestion.
"The industry would like to see the implementation of the 'Let's Get Windsor-Essex Moving' strategy and the implementation of an emergency/ contingency plan to protect the reliability of Canada's supply chain," says GM Canada's David Paterson. "We would very much like to see the plans and implementation of the next phase of infrastructure investments at Windsor-Detroit. And of course, we are following with great interest the progress of the Bi-National Review which is looking at the longer-term options for an additional border crossing."
Paterson also points out that while the country's skilled trades have traditionally been an advantage, its publicly funded health care program is becoming more and more attractive.
"One other area that was identified as a CAPC challenge for the industry was for automakers to create supply procurement offices in Canada in order to grow the Canadian parts supply business," he says. "Engineering and related innovation are noted in the report as key strategies for success for the auto industry in Canada. The automakers need to do more vehicle engineering in Canada, but government policies can help as well."