Canadians Build ’em Faster, says Vehicle Assembly Report

Canadian assembly facilities continue to widen their productivity advantage over the United States, according to the latest Canadian Auto Report released today by Scotia Economics.
“Our estimates indicate that productivity — measured by the number of worker days required to assemble a vehicle — currently stands at 3.04 in Canada compared with 3.27 in the United States, nearly a 7% advantage,” says Carlos Gomes, Scotiabank’s auto industry specialist.
“This represents a further improvement from Canada’s 5% edge in 2000 and 1% advantage in the mid- 1990s.”
According to the report, the U.S. south and Mexico represent significant challenges going forward, but the Canadian auto industry is recovering from a two-year downturn, is hiring again and outperforming its competitors.
“Auto manufacturers and parts suppliers in Canada have created 8,500 new jobs so far this year, recouping more than half of all job losses since late 2000,” comments Gomes. “In addition, job creation in the Canadian auto sector this year has matched that of the much larger U.S. industry, where only 7% of all jobs lost since late 2000 have been recovered.”
Three of the top 10 most efficient assembly plants in North America are located in Canada. In particular, vehicle assembly facilities clustered in the Greater Toronto Area (GTA) are among the most efficient in North America, with a 15% advantage over facilities in the United States. Assembly plants in the GTA have nearly a 40% edge over operations in Mexico and are even 7% more productive than facilities built in the U.S. south.
“The competitive advantage of auto assembly plants in the GTA is important to highlight because the region accounts for roughly half of all assembly capacity in Canada,” adds Gomes.
“Going forward, industry and government should focus on initiatives that bolster the competition vis–vis the U.S. south because the latter region is the next growth area.”
Most of the new assembly facilities coming on stream in North America over the next five years will be located in the U.S. south. This shift in capacity reflects big incentives offered by these States as they attempt to diversify their economies by attracting new vehicle assembly plants.
Turning to overall market conditions, the re-introduction of “0%” financing lifted North American vehicle sales to near-record highs. U.S. car and light truck purchases soared to an annualized 18.1 million units in July–the highest level since last October’s record of 21.3 million–from an average of 16.4 million during the first half of 2002.
In Canada, vehicle purchases remained red hot in July advancing to an annualized 1.66 million units–8% above a year earlier. As in the United States, volumes were buoyed by new interest-free financing programs, which lifted purchases to a record high for July–2.5% above the previous record set in 1986. Year-to-date volumes in Canada have advanced 9.8% above last year’s record, leaving little doubt that full-year 2002 sales will exceed 1.6 million units for the first time in history.