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Mexico looms large over Canadian auto talks

Michael Martinez
The Detroit News

Toronto — The Canadian auto workers union is demanding new vehicle investment in labor negotiations with Detroit’s Big Three automakers, but its prospect of success could be headed south — literally.

Ford Motor Co., Fiat Chrysler Automobiles and General Motors Co. have invested billions in Mexico in recent years to build new plants and vehicles. Those automakers promised the United Auto Workers in last fall’s labor negotiations that they would invest $23 billion in the United States over the next four years.

That means Canada, which has much higher labor costs than Mexico, is left fighting for scraps. But union executives hope a cooperative liberal government and a record of high quality and strong productivity will be enough to stop that trend.

“The headlines are coming across all too often — whether it’s Ford, Chrysler or GM that are making investments in Mexico — and that always brings a sense of nervousness to our members,” said Chris Taylor, chairman of the Unifor labor union’s Ford Master Bargaining Committee. “Mexico has been very aggressive, and they’ve been winning out a lot over Canada and the U.S. At some point, we have to stem that tide or we’re just in a dying industry.”

Taylor and union workers at Ford know that all too well: In 2014 Ford’s Windsor Engine Plant lost out on a new engine program that ultimately went to Mexico. Windsor Engine is now at risk of closing, although Unifor is demanding Ford agree to new product there.

Canada lost more than 53,000 automotive jobs from 2001 to 2014, according to a study by the Automotive Policy Research Centre in Ontario. Meanwhile, in Mexico, automotive-assembly capacity is projected to more than double between 2010 and 2020, according to the Ann Arbor-based Center for Automotive Research. It says the country’s capacity ceiling “has no bounds.”

“There’s no question the automakers are taking advantage of Mexican workers and the low-wage system,” said Unifor President Jerry Dias. “Our plants, candidly, are more productive, and it’s not just about the wages, it really has to do with government commitment... Government support far outweighs the difference in our wages.”

Canadian auto workers earn as much as $34 Canadian per hour (the equivalent of $26.20 U.S.), whereas autoworkers in Mexico make the U.S. equivalent of $8 to $10 an hour, according to the Center for Automotive Research. Hourly rates are highest in the United States after the latest raises won by the UAW, coupled with a strong U.S. dollar. Top-tier workers in the U.S. make about $29 an hour.

Dias argues that hourly wages don’t tell the entire story.

“We have a highly skilled workforce ... we have the highest-educated workforce, universal health care, and we have governments now that understand the importance of the automotive industry and are willing to work with the auto industry,” he said.

Unifor says that Ontario alone has won one-third of the North American J.D. Power Plant Quality Awards over the last two and a half decades, despite only having 11 percent of the plants in North America. It says it’s won 29 awards while Mexico has won three.

Beyond that, analysts argue Canada has a favorable exchange rate, better infrastructure, security and more capacity than regions like Mexico.

“Canada has a number of aces it holds ... it just needs to play them strategically, which it hasn’t,” said Mark Petro, a Windsor-based manufacturing business analyst familiar with the auto talks. “There are some game-changing programs to come and Unifor has shown it’s much more co-operative and collaborative as a partner.”

Unifor’s Taylor says there’s “absolutely” a fear about Mexico at Ford’s three Canadian plants. The same goes for GM, where workers at its Oshawa Assembly near Toronto are unsure about their own fate.

Bill McKay, an Oshawa Assembly worker with 35 years of experience at GM, said in an interview outside the plant in Oshawa in late July that things aren’t looking good.

“I would love it to keep running, but it would be kind of hard to compete with Mexico, NAFTA,” he said. “We can’t expect them to invest money in here when they’ve got a brand new plant waiting for the product in Mexico.”

GM plans to end production of the Chevrolet Equinox crossover next year on the Oshawa plant’s Consolidated Line which employs 750. The union believes some production of the Equinox is headed to Mexico.

Joe McCabe, president and CEO of AutoForecast Solutions LLC in Pennsylvania, believes the next-generation Equinox will be built at two GM Mexico plants starting in early- to mid-2017 and at GM’s CAMI Automotive plant in Ingersoll, Ontario, while the next-generation GMC Terrain will be built at one Mexican plant and at CAMI starting in mid-2017.

McCabe says to be competitive in Canada, automakers would need to bring in crossovers and SUVs, which have higher profitability.

Fiat Chrysler has said it will soon end all car production, and Ford is likely moving production of its next-generation Focus and C-Max from its Michigan Assembly Plant in Wayne to Mexico.

Still, Dias is optimistic. “I don’t see this as a competition between us and Mexico,” he said. “I just see it as Ford, GM and FCA finding solutions for our Canadian operations.”

Taylor has a different take. “Mexico, I believe, will always be competition just by their jurisdiction,” he said. “But Mexico can’t be the end-all, be-all.”

Staff Writer Melissa Burden contributed.