The fate of Canada’s auto industry is linked to whether or not the nation’s leaders can convince FCA to reinvest into its Brampton, Ontario facility.
The Brampton Assembly plant is home to three of FCA’s biggest draws, the Chrysler 300, Dodge Charger, and Dodge Challenger. Yet, the high rate of production and quality found there clashes against the oldest paint shop the automaker has in North America, an aging line of assembly robots, and the trio themselves looking for a major makeover, Automotive News reports.
There’s also the fact FCA is already investing $2 billion into the Windsor Assembly facility in Windsor, Ontario, where a new generation of minivans are expected to begin production in 2016. The Brampton facility needs $1 billion to modernize, something CEO Sergio Marchionne may be wary of doing.
According to the Windsor Star, Marchionne approached the Canadian and Ontario governments last year with a request for a financial incentive package totalling $700 million to augment the $3.6 billion he planned to put into Windsor and Brampton. He explained his reasoning before reporters during the 2015 Detroit Auto Show:
This commitment that we’re making is a multibillion dollar commitment. We have to resolve the issue about the competitiveness of this investment in Windsor. So, I have to make sure the environment and the conditions that support the investment are adequate to ensure a proper return on our capital. That means labour costs, that means everything.
Months later, Marchionne backed down from moving forward with the proposal, choosing to invest in Windsor on his own while Brampton remains left out in the cold.
Unfortunately for those holding onto hope Brampton will remain, the business case may not be there to continue. Despite exchange rates between Canada and the United States providing a level playing field regarding unionized labor costs for now, nonunion factories in the Southeastern U.S. and Mexico offer both competitive incentive packages and labor-cost advantages.
Finally, Marchionne’s preference toward running factories flat-out through three shifts may prompt a reallocation of production if another model couldn’t be added to Brampton’s schedule. Thus, FCA could send the three full-sizers to either Toluca or Saltillo, Mexico, with the latter more likely than the former as a result of supplying engines like the 3.6-liter Pentastar V6 and 6.4-liter HEMI V8 to Brampton.
The only issues with either location amount to retooling Toluca and sending Fiat 500 production elsewhere — the Dodge Journey will move to Windsor to join the new-gen minivans next year — or adding a new line to assemble the cars in Saltillo.
[Photo credit: Chrysler]
The Brampton Ontario facility should produce nothing but HELLCAT
Profit!
FCA blinked on Windsor, they won’t on Brampton.
Agreed. The provincial government has to pony up some cash this time around.
It’s a good thing that that the Cons under Tim Hudak didn’t win the election, or we wouldn’t have seen an investment in Windsor either.
“It’s a good thing that that the Cons under Tim Hudak didn’t win the election, or we wouldn’t have seen an investment in Windsor either.”
It happened regardless of the result. That happened before the election.
It makes more sense to retool in Mexico – now. Retooling in Canada means FCA is stuck with Brampton’s high production costs for a very long time.
The $700 million in incentives amounts to $206k per worker at the plant. Spend a fraction of that to retrain these folks for a different career, and let FCA walk – taking their drama with them.
Given FCAs apparent woes, their growing desperation to get married, ovedr capacity issues, and the cost structure in Canada compared to Mexico in the NAFTA zone (or the southern US for that matter), I’d say it looks bleak. The only thing that helps is the CAD is in the toilet right now.
CAD needs to go to approx .70 to 1 USD (ideally, .55) in order for Canadian manufacturing sector to regain competitiveness.
I thought 500 production was moving to Poland for the next gen. That’s where the European 500s are assembled.
“The fate of Canada’s auto industry is linked to whether or not the nation’s leaders can convince FCA to reinvest into its Brampton, Ontario facility.”
This seems a bit melodramatic when you’re talking about one factory for one car company, and the least able car company at that.
It was alleged that the sticking point in Windsor was that FCA would not give guarantees on keeping production in Canada in exchange for $$$$. The Canadian/Ontario gov’ts were looking for some guarantees after being hosed by GM. GM got their bailout money and now have walked away with a plant closure. In the end, taxpayers are on the hook for ~$3.5 billion from these bailouts, and GM closing a plant did nothing to encourage the gov’ts to want further investment.
Sounds like it’s a slow-motion goodbye for the Canadian auto industry. Noncompetitive electricity, labor and environmental costs will do that. The Ontario government’s recently announced cap ‘n trade carbon tax is the kiss of death, a tax too far.
The fools.
The average NAFTA worker in Mexico makes $3.65 to $4.00 an hour USD to put together cars – and even Toyota and Honda have said no more Canadian or US expansions, it is all about heche en Mexico now that the drug war has reached a quieter level. $4.00 USD right now is about $3.08 CAD with exchange rate.
You simply cannot compete at $3.08 an hour — regulations or not.
$4.00 USD = $4.93 CAD
Blaming Mexico for the end of US industrial expansion is an act of denial.
Ross Perot, a 1992 U.S. presidential candidate, famously warned the North American Free Trade Agreement would create a “giant sucking sound” by vacuuming away American (and Canadian) jobs to Mexico. It did, impoverishing millions of factory workers.
And the Libs are doing a fine job with the Ontario Teachers right now…I wouldn’t bank on cash flowing until the cheque is written.
Does FCA HAVE a billion to invest in upgrades? Wouldn’t that money be better spent on a new large platform from this century? A V8 that doesn’t wear so much? Some better small car to replace the poor Dart?