Canada is losing auto suppliers to the U.S. and Mexico because of lower wages and higher incentives south of the border, as well as pressure from Trump trade policies, according to a recent story in Automotive News.
Manufacturing wages, even in northern states, are lower in the U.S. than in Canada, and the incentives offered by state and local governments in the U.S. are as much as 20 percent higher than Canada offers for big investments.
A recent deal that landed a $1.4 billion Toyota plant in Canada represented 16 percent of the total cost. By comparison, the $700 million in incentives built into the deal that sited a $1.6 billion Mazda Toyota plant in north Alabama amounted to 44 percent of total costs, reported Automotive News.
As more original equipment manufacturers choose the U.S. and Mexico, suppliers soon follow. “As automakers invest in the United States and Mexico they are likely to want suppliers nearby, meaning Canadian companies have to invest in the vicinity of new plants,” reported the magazine.
Auto analyst Dennis DesRosiers told the trade magazine that political pressure by the Trump administration also plays a factor in the U.S.-Mexico advantage versus Canada.
There is the recently renegotiated USMCA, an update on the North American Free Trade Agreement, which is awaiting ratification. And there are the tweets by Trump chiding companies that choose plant sites outside of the U.S.
“These companies are big multinationals,” said DesRosiers, “and whether we like the man or don’t like the man, he’s in a very powerful position sitting in Washington to cause these companies a lot of grief.”