Ontario auto parts makers view the billions of dollars the Detroit Three said they will spend on their United States facilities as a business opportunity, says the association that represents them.
Any increase in vehicle volume means a rise in the number of parts that automakers need, said Flavio Volpe, president of the Automobile Parts Manufacturers’ Association of Canada. (APMA).
Most of the improvements and expansions to factories announced since Jan. 3 will be made in Michigan and involve at least five new models and the possibility of 13 “electrified” vehicles from Ford alone. More new models means more parts from suppliers will be needed.
General Motors said Jan. 17 it would spend $1.3 billion (US$1 billion) in its United States manufacturing operations, including moving production of pickup axles to Michigan from Mexico. The automaker also said it would create at least 5,000 more U.S. jobs in other parts of its business during the next few years, but didn’t offer details.
Fiat Chrysler Automobiles said on Jan. 8 it would spend a combined $1.3 billion retooling its Warren Truck Assembly plant in Michigan to build Jeep Wagoneers and Grand Wagoneers as well as its Toledo Supplier Park to one day build Jeep pickups.
And Ford said Jan. 3 it will spend $914 million in its Flat Rock, Mich., plant, where it will build electrified vehicles. The automaker plans to offer 13 newly electrified models over the next five years.
Ford also confirmed at the North American International Auto Show in Detroit Jan. 9 that it will build the new Bronco and Ranger in Michigan.
More parts needed
“Ontario-based manufacturers see it as a positive development, for sure,” Volpe told Automotive News Canada. “Any localization of manufacturing is good news in Ontario.”
About 30 per cent of parts used at Michigan assembly plants are made in Ontario, the association said. Volpe declined to say what the U.S. investments might be worth financially to Ontario suppliers, but said any increase in vehicle volume in Michigan means an increase in the number of parts needed by automakers.
“The question people are asking is, ‘What does that [supply chain] look like under a Trump presidency, after a post-NAFTA discussion?’“ Volpe said. “It’s too early to tell. I don’t know what the future dynamics are, but under current dynamics, Ontario-based supply is welcoming to Michigan-based assembly.”
'Border tax' threatening
President-elect Donald Trump will be sworn into office Jan. 20. He has repeatedly said he will either tear up the North American Free Trade Agreement (NAFTA) or seek to renegotiate its terms. He’s also threatened a 35-per-cent “border tax” on vehicles built in Canada or Mexico and shipped to the United States for sale.
Linamar CEO Linda Hasenfratz, speaking at the Automotive News World Congress in Detroit, made it clear that the tax, if applied to parts, too, would be detrimental to business.
She said the average automotive part crosses a border seven times in North America before it ends up in a consumer’s driveway.
“Can you imagine adding a border tax seven times to these products that are passing back and forth between our borders?” asked Hasenfratz. “It would add enormous cost that no one can bear.
General Motors said in a statement Tuesday it has been “executing a strategy to create supplier parks adjacent to its U.S. manufacturing sites.” It’s something the automaker already accomplished at four of its U.S. facilities in as many different states.
“Supplier parks located near assembly plants result in significant savings from reduced transportation costs, higher quality communications and continuous improvement activities as suppliers are located closer to the final assembly location,” the automaker said.
Volpe said his association should not be concerned by the increased number of supplier parks.
“That’s just prudent management. I don’t see it as a threat,” he said. Automakers simply want to build the highest-quality vehicle as efficiently as possible, Volpe said.
“As long as we stay competitive in those two elements, I think Canadian suppliers will see this as managing efficiency,” he said of supplier parks. “I don’t see it as a break from current operational management trends. I think they (GM) expressed it in a way that may seem new, but we’ve all been working in that direction anyway.”
Volpe said Ontario is still in close enough proximity to Michigan assembly plants to remain competitive.