Canadian Dollar’s Strength a Factor in Autoworkers Talks

The following is an excerpt from an article in 

The New York Times
Tuesday, August 14, 2012

Canadian Dollar’s Strength a Factor in Autoworkers Talks

By IAN AUSTEN

OSHAWA, Ontario — For many in Canada, the rise of the Canadian dollar to parity with its American counterpart is more a source of anxiety than pride.

Prominent among those concerned are the 20,600 Canadian Auto Workers union members employed by the Detroit Three. Contract talks for the industry open here on Tuesday. But the dollar’s high value, which most economists anticipate will continue, has more than obliterated the traditional cost advantage Canadian auto plants once enjoyed.

In 2009, when contracts were renegotiated after the rescue of General Motors and Chrysler, the Canadian dollar was worth about 78 American cents. Last week, it traded briefly at just over $1.

Regardless of the outcome of those talks, the strong currency, and higher wages for Canadian workers, seem likely to continue the shrinking of the Canadian auto industry since its peak in 1999. The underlying issue is how much that decline will continue.

Detroit automakers have been scaling back their operations in Canada at a growing pace even as they add workers and shifts in the United States.

Last September, Ford Motor Company of Canada closed a plant that made taxis, police cruisers and Lincoln Town Cars, eliminating 1,500 jobs. General Motors of Canada plans to close one of two assembly plants in this city east of Toronto and will move some of its production to a mothballed Saturn plant in Tennessee, laying off another 2,000 workers. The future of other Canadian auto factories, including Chrysler’s vast minivan plant in Windsor, Ontario, remains murky.

Over all, factory closings by the Detroit automakers have lowered Canada’s vehicle production from three million cars and trucks in 1999 to 2.1 million last year, despite offsetting factory openings and expansions by the Canadian arms of Toyota and Honda.

The number of Canadian Auto Workers members employed by the Detroit Three has fallen by 28,200 over that time. In 2011, a booming year for North American car sales, production grew by 3.2 percent in Canada, 14.4 percent in Mexico and 11.5 percent in the United States.

While a number of factors have led to Canada’s steady decline as an automaker, the new contracts for the C.A.W. workers will probably play a critical role in determining Detroit’s future investment plans in the country.

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