From PLANT’s print edition: On the road again

Building the Ford Flex at the Oakville, Ont. assembly plant.

Canada’s automotive sector enjoyed its second-best year ever in 2012. It sold more than 1.6 million vehicles, a level reached only once before in 2002, thanks to pent-up post-recession demand, consumer confidence and buying power, and Japanese automakers looking to diversify their supply chains.

In the US, 15 million units boosted demand for Canadian-made parts, helping to bring overall North American sales to their highest level since 2007. Of course, the economic meltdown that followed in 2008-2009 sent the auto sector into a skid that required a multi-billion dollar bailouts from Canadian and US governments, so it has been quite a rebound. The Canadian industry earned pre-tax profits of $1.35 billion last year, while surging double-digit sales growth in the US culminated in a 15% boost to Canadian exports, according to the Conference Board of Canada, an Ottawa-based research agency.

DesRosiers Automotive Consultants, based in Richmond Hill, Ont., reports Canadian production was up 24%, producing 2.003 million units through the end of October, compared to 1.6 million units during the same period in 2011.

Parts production also ended the year on a high note, increasing by 22.4%, according to the Conference Board. Its Autumn 2012 Industrial Outlook suggested increases in parts output, like vehicle production, were led by heavier sales in the US and more activity by Japanese automakers.

Honda’s North American vehicle production was up 29% in October to 161,142 vehicles, while Toyota, which led nationwide sales increases (up 14.8%), will increase RAV4 production at its Woodstock, Ont. plant to 200,000 units from a current 150,000.

US manufacturing production is another accurate indicator of what’s going on in Canada.

“What happens in the US is really a key driver for the Canadian automotive industry because so much of our production goes there,” says Carlos Gomes, senior economist and automotive industry specialist at Scotiabank Economics.

Indeed, about 80% of Canadian vehicle and part production is shipped to customers south of the border

And despite all the hubbub created by the “fiscal cliff,” the outlook for 2013 is rosy. Low-interest rates, attractive buying incentives, and aging vehicles are driving demand, while healthier job numbers have boosted consumer confidence and buying power.

Gomes says the cost of living is at its lowest level in a decade, averaging 16% of disposable income, a factor that puts more cash in consumers’ wallets to replace the clunker leaking oil all over the driveway.

“As long as people have the ability to buy, we will continue to see the auto sector improve,” he says.

That’s good news for the parts sector.

2012 Canadian vehicle manufacturing

• $1.35 billion in pre-tax profits
• Total sales of 1.6 million unit
• Growth of 7.1% between Jan. and Aug.
• 15% increase in exports of Canadian auto goods
• Canadian parts production up 22.4%
• Automakers assembled 2 million vehicles through October.

Source: Conference Board of Canada

Thanks to a strong showing in 2012, parts companies are handling increases in demand by boosting capacity, hiring more employees and investing in new machinery and equipment to make their operations more efficient, says Remi Tosti, manufacturing lead for southwestern Ontario at Toronto-based consultancy Deloitte LLP.

“A lot of companies have introduced six sigma and lean manufacturing practices in their operations, so they’ve cut a lot of fat to boost capacity,” he says.

Toyota Boshoku, which supplies seat, door trim panels and interior components for the Woodstock-built Toyota RAV4, is adding up to 100 positions to handle
increased demand for the popular crossover. Meanwhile, Aurora, Ont.-based Magna International has projected 2013 sales will exceed $32.7 billion, 70% of which will come from North American operations.

Among assemblers, Toyota is adding 400 jobs at its Woodstock, Ont. RAV4 plant to handle production increases.