Investment in Canadian auto plants dips, lowest since ‘80s

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Michael Babad | Columnist profile | E-mail
Globe and Mail Update
Published Tuesday, Nov. 29, 2011 7:39AM EST
Last updated Tuesday, Nov. 29, 2011 9:00AM EST

Auto investment loses steam
Canada's auto industry is losing steam in the global race for investment as the car industry rebounds from its crisis, a new report suggests.

Though the Canadian industry continues to recover from the financial crisis and recession, investment will shrink to just $1.2-billion this year, warns the report from senior economist Carlos Gomes. That's the lowest since the mid-1980s, and more than 60 per cent below the annual average of $3.1-billion over the past 10 years.

The industry is strong in Canada in terms of ratings, and will hold on to its traditional 16 per cent of North American production, but "current investment plans are less positive for Canadian plants, suggesting that it will be difficult for Canada to increase its share of North American output going forward."

The auto industry has long been a manufacturing powerhouse for Ontario, and today's report by Mr. Gomes suggests the province's factory sector will still struggle to keep pace with other industries. It comes as Ottawa studies what to do about the auto sector.

On a per-vehicle basis, investment in Canada's auto industry this year will shrink to 43 per cent below that of the United States.

That's a dramatic turnaround given that the trend over the past 10 years was that it ran 3 per cent above the levels in the United States and Mexico.

And a note for the Canadian auto workers union: Mr. Gomes says that U.S. investment is gaining partly because U.S. workers won more investment for their plants in the lates round of labour talks.