Toyota Motor Corp., which has two assembly plants in Ontario, dodged a bullet when Canada agreed to participate in NAFTA 2.0.
The Japanese automaker is Canada’s top vehicle producer. Last year, the automaker’s two assembly plants in Cambridge and Woodstock produced 572,000 vehicles.
“I couldn’t imagine a North American region that didn’t include Canada,” said Bob Young, chief purchaser for Toyota’s North American region. “We’ve spent the last twenty to thirty years developing a common supply chain. So yes, Canada is good news.”
But the devil is in the details. Toyota – and other automakers – need to see the final agreement to understand the impact. And some requirements will be easier to meet than others. Based on publicly available information, the agreement would require:
- 75 percent of a vehicle's content must be produced in North America, up from 62.5 percent.
- 40 to 45 percent of a vehicle's content must be produced by workers earning at least $16 per hour.
- 75 percent of a vehicle's steel must be produced in North America.
- Automakers must boost local production of powertrains.
During a Monday phone interview, Young said Toyota can easily meet regional steel requirements. North American mills produce 95 percent of the steel used in Toyota vehicles built here.
Likewise, North American suppliers account for 90 percent of Young's $32 billion annual component purchases. So Toyota’s assembly plants in the U.S. and Canada can meet the $16-per-hour rule.
But Young is still analyzing the impact of that proviso on Toyota’s two assembly plants in Guanajuato and Tijuana.
Since wages in those two plants won’t come close to $16 per hour, some Toyota suppliers may have to produce more parts in the U.S. “Clearly our in-house labor would not achieve” that pay scale, Young said. “We would have to rely on our supply base to achieve that.”
Toyota also likely would have to invest in higher powertrain production in the U.S. “We are still running the numbers to see what that would look like,” Young noted.