There were two major announcements this week that could mean big change for Canada’s beleaguered auto sector. First, Chrysler announced it will continue to build its minivans in Windsor, Ontario and redevelop plants in both that city and Brampton. It also said it will not need any government assistance to make it happen.
Second, Prime Minister Stephen Harper announced a free trade deal with South Korea that would allow companies like Hyundai and Kia to import cars into Canada without any tariffs.
Here’s a look at what these changes will mean for our auto sector, and what consumers can expect to pay on the sale lot.
Chrysler Announcement Is Good News For Jobs
The automotive giant has says it will spend $3.6 billion to retool both plants in Windsor and Brampton. Windsor will continue to build the new generation minivan and Brampton will be rolling out larger cars and sedans. Both cities were dramatically affected by the economic downturn in 2008 when the automotive sector lost 43,500 jobs, most of them in southern Ontario. According to Statistics Canada, the number of jobs in the auto sector is still 24 per cent less than it was in pre-recession 2007. It is expected to create 4,600 well-paying hourly jobs in Windsor and 3,000 in Brampton.
A Rejection of Government Aid
Chrysler surprised auto industry experts by announcing in a press release “its intention to withdraw all requests for financial assistance in relation to the development of its two assembly plants in Windsor and Brampton, Ontario.” It was previously reported the auto giant was seeking $700 million in assistance from both Ottawa and Queen’s Park to rebuild these two plants. Ottawa also pledged more money for its Automotive Innovation Fund in the last budget, indicating they were willing to help the auto sector get back on its feet.
But Chrysler boldly stated, “it is clear to us that our projects are now being used as a political football” and added the aid “will ultimately not be to the benefit of Chrysler.” They further state they will continue to operate in Canada “in an unfettered fashion with its strategic alternatives regarding product development and allocation.”
Criticism of Chrysler
The union that represents autoworkers, Unifor, says it regrets Chrysler’s decision to not receive government assistance. “The bottom line is that the people of Ontario and our leaders need to understand the importance of developing a long-term strategy, including public investment, if we want to have a strong, competitive advanced manufacturing sector,” said Jerry Dias, Unifor’s national president.
Although pleased with the fact that Chrysler is pledging more jobs in the area, Dias is concerned about the future of Canada’s manufacturing sector. “The need for provincial leadership and vision has never been clearer if we are going to build and maintain a strong economy in this province,” he stressed.
A New Free Trade Deal
A week after the big Chrysler announcement Prime Minister Harper revealed Canada’s Free Trade Agreement with South Korea. It will virtually eliminate all tariffs on imports from both countries, including a 6.1 per cent tariff levied on cars imported from South Korea. It also means Canada can export cars to South Korea without paying the 8 per cent tariff levied there. For the automotive sector the deal is lopsided as Canada exports only 2000 cars a year to the Asian country while South Korea exports more than 124,000 cars from makers like Hyundai and Kia to Canada.
The Verdict – It’s All Good News
Despite criticism of both Chrysler’s announcement and the Free Trade deal, this new development shows there’s an increased appetite for cars in Canada. During a recession the first items to be dropped from families’ “must buy lists” are big ticket items like cars and appliances. Renewed interest in big ticket purchases indicates consumer confidence is rising as Canadians are feeling more comfortable with their financial situation. Many may be using low interest loans to fuel their need for a newer car, but the benefit of this economic stimulation will continue to boost one of Canada’s most important sectors. And this should be welcome news for everyone.