High dollar hits local businesses
November 3rd, 2007 - 7:09pm
High dollar hits local businesses
Orillia Packet and Times (ON)
Sat 03 Nov 2007
Byline: Colin McKim
Source: - With files from CP; The Packet & Times
Orillia manufacturers should not be directly affected by the production cutbacks at Chrysler plants in Ontario.
"I don't know of anybody supplying Chrysler," says Robert Lamb, the city's economic development manager.
But the soaring Canadian dollar, now seven cents higher than the U.S. dollar, is definitely putting a damper on business.
"It significantly hurts profitability," said Tom Bristow, president of Brockworth Industries in Forest Home.
Brockworth, which makes metal fasteners and other custom components for industrial and commercial machinery, has cut back from a 44 hour week to 36 hours and laid off a few workers, said Bristow.
Most of the companies that buy components from Brockworth are in Barrie and the Greater Toronto Area. But a large part of their market is south of the border.
When the dollar was at 85 cents U.S., Canadian-made products were easier to sell in the American market.
But with the Canadian dollar reaching record highs, Americans can buy goods much more cheaply from China, said Bristow.
If the trend continues, Bristow worries he may have to lay off more employees.
"It's going to be tough in the future."
For years, Canadian manufacturers faced competition from Mexico. Now, China is the biggest competitor, said Bristow.
The best hope for Canadian manufacturers would be a decision by the Americans to erect trade barriers against Chinese products.
"I think if the U.S. economy becomes a political issue, they could put up trade barriers. But I'm just guessing."
At one time, 70 per cent of Brockworth's production was tied to the auto industry. Now it's closer to 15 per cent, said Bristow.
"Due to world competition we were losing out."
Manufacturing generally in Canada is a hard go these days,
If he were starting out, he would avoid old technology and put his resources into research and development, designing products which could be produced anywhere in the world, said Bristow.
Earlier this week, Chrysler announced it was shutting down the third shift at its Brampton sedan assembly plant and eliminating 1,100 jobs.
Each lost assembly job ripples out to 7 1/2 related jobs lost in the wider economy, said Buzz Hargrove, leader of the Canadian Autoworkers Union.
Chrysler is cutting a total of as many as 12,000 jobs in North America, on top of 13,000 whose elimination was announced in February.
Hargrove said Pacifica output will end Nov. 26, and production of the Dodge Magnum station wagon in Brampton will cease early in 2008.
As the latest Chrysler move - also entailing shift reductions at four U.S. plants - adds to similar recent reductions announced by General Motors and Ford, "the parts companies are really, really struggling," Hargrove told a news conference.
"This could very well push a number of them over the edge, so I wouldn't be surprised to see some bankruptcies declared in the automotive parts sector, or shift reductions or closures as they react to this devastating situation."
Hargrove repeated his long-standing position that the ultimate problem lies in uncontrolled imports from Asia and government inaction to pry open Japanese and Korean markets to Canadian automotive products.
"The imports are what's killing us," he declared, adding that Conservative Finance Minister Jim Flaherty's tax cuts this week won't solve the woes of the manufacturing sector.
"We have a government that doesn't believe in government," Hargrove said, urging Ottawa in the short term to lower interest rates to improve the competitiveness of the manufacturing sector "and our most important industry, the auto industry."
Federal NDP auto critic Brian Masse, member of Parliament for Windsor West, endorsed Hargrove's analysis.
"We have the most open market in the world, and we're losing a sector of the economy that's been very successful for this nation," Masse said from Ottawa.
"Why would we allow continued lopsided trade imbalances on this?"
Masse said the sinking of the Pacifica is likely to put 100 to 150 Chrysler workers on the street and eliminate several hundred other jobs in the already hard-hit community of Windsor.
Outside the Commons, Industry Minister Jim Prentice said there's not much in terms of specific aid the federal government can do right now for the auto industry, except to help it remain competitive and attract investment.
"At the end of the day, our industry has to face global competition," Prentice said. "We have to be tough. We have to be resilient. We have great workers and we still are a location of choice for auto assembly plants. But this is a time of some structural change and we'll continue to work with Mr. Hargrove, with all of the auto companies to make sure that we're competitive."
Hargrove said that although the United Auto Workers made major concessions in recent negotiations with Chrysler and General Motors in the U.S., "I'm not prepared to give up anything" when the automakers' Canadian contracts expire next fall.
"We are not going to be scapegoats for a lack of government policy in dealing with what is the real problem."
Thursday's news from Chrysler coincided with a Conference Board report estimating that Canadian auto manufacturing as a whole will lose $550 million this year.
This would be half the loss recorded in 2006, and the think-tank expects the industry - including Honda and Toyota with their booming plants in Ontario - to return to a small profit next year.
"Loss of market share by the Big Three automakers and the rise of the loonie have taken a toll on Canada's auto industry," observed Louis Theriault, head of the Conference Board's industrial outlook service.
The report notes that while profits are forecast to improve, "margins in the motor vehicle manufacturing industry will remain extremely slim because material and labour costs are expected to increase."
Sandra Pupatello, Ontario's economic development and trade minister, said the province needs federal government help to attract more auto industry investment.
"We need an auto fund at the federal level to be matching what we're doing provincially," Pupatello said in an interview.
"So far, this federal government does not have a strategy for manufacturing, or specifically for the automotive sector."
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