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Canada may become most expensive place to build a car
Until Detroit automakers signed landmark deals with the UAW that shifted retiree health care costs to the union, it was cheaper to make vehicles in Canada. Government health care saved automakers about $6 per work hour, a savings of over $12,000 a year per worker. Since Ontario produces more vehicles than any state in the Union, that represented huge savings for the Detroit Three. However, after the new deals were struck with the UAW, that advantage has disappeared. To make the situation worse, the loonie has made huge advances over the dollar. At one point you needed $1.61 in Canadian cash to equal one greenback, but new oil wealth for our northern neighbors coupled with a growing US credit crunch have brought the two currencies neck and neck. With Canada's higher taxes and unfavorable contracts, the northern frontier could soon be the world's most expensive place to build cars and trucks.
Wards Automotive thinks the CAW will soon start to feel the pinch of Canada's new economic reality. The publication sees Ontario losing 600,000 units per year by 2012, while Michigan will gain 100,000 units during the same period. With the CAW contracts expiring in 2008, it looks like another opportunity for US automakers to cut labor costs. Since CAW health care is already free, however, there is no magical fund to cut labor costs without taking cash out of worker's pockets.
[Source: Detroit News]
Reader Comments (Page 1 of 3)
Hamud 8:56AM (12/11/2007)
Most expensive place in the World??? You have never heard of Brazil, do you? Labor costs are cheap, but taxes kill the price...
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cowboy bob 9:07AM (12/11/2007)
This currency thing is why the Chinese mandate their currency value be tied to the dollar. This way the devaluation of the dollar does not affect prices of goods sent to their biggest consumer-the U.S. The downside of this is the realitive increase of petrolium costs, since the value of oil is rated in U.S. dollars by OPEC. As far a Canada being expensive, yes, it is. The mandated social services network is the main reason. This is certainly worth considering when looking at the intent of U.S. candidates for president. Who is it that wants a socialized medicine plan? Looking to our northern neighbors, and reflect that Canada is a wonderful country, but it also has some lessons to show us. Devaluing the loonie is the obvious solution. Painfull, as our ongoing dollar devaluation shows, is the way this will go.
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Polly Prissy Pants 12:33PM (12/11/2007)
RE: The mandated social services network is the main reason (Canada is expensive). This is certainly worth considering when looking at the intent of U.S. candidates for president.
It certainly is. Currently the U.S. pays more per capita for healthcare than anyone else in the world while delivering results that are far lower than those who pay less. Look it up. You can either vote for the status quo and keep paying more than anyone on the planet, or you can vote for change and save us all a lot of money and get better healthcare at the same time.
I agree with Cowboy Bob that this should be a very high consideration when deciding who deserves your vote.
cowboy bob 1:21PM (12/11/2007)
Polly- You are correct.
Guenther 8:26PM (12/11/2007)
I'll vote for whomever promises to not make me have Canadian health care. That stuff just isn't funny. It's also a completely different discussion.
tankd0g 3:46AM (1/26/2008)
WTF are you talking about. How does that make cars more expensive? Do cars pay Canadian income tax?
cowboy bob 7:58AM (1/26/2008)
Tank-The money has to come from somewhere. This is accomplished by increased taxes on all things from gasoline, liquor, ...and cars. Add to that the mix. Some vehicles are produced in Canada, but others have import duties as well. ANY GOVERNMENT PROGRAM, IN ANY NATION, needs to be funded somehow. ADD programs like universal healthcare, and the cost of everything the government either has a hand in, or is part of the supply chain, will go up. Vote for anyone who wants more "stuff", and you pay more for everything. Period. Thats how it works Tank.
AlexP 9:08AM (12/11/2007)
"At one point you needed $1.61 in Canadian cash to equal one greenback"
$1.61!?! WO-OOH, that's never happened and it's unlikely it will happen in the near future.
I think the max we reached was 1.10, but we're below the USD now.
As for most expensive place to manufacture vehicles: uh, wouldn't that be England?
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AlexP 9:10AM (12/11/2007)
1 Canadian Dollar = 0.98736 USD as I post this.
AlexP 9:13AM (12/11/2007)
Oh nevermind Chris, I read your post wrong.
dougjp 9:56AM (12/11/2007)
AlexP, where have you been? My guess is that you mis-read the article.
Since 1950, the lowest the Canadian $ has been is $ 1.6184 Cdn needed to buy 1 US$, on January 21, 2002. The highest its been is $ .9066 Cdn needed to buy 1 US$, on Nov 7, 2007. Source - Bank of Canada (the equivalent of your Fed).
More recently than 2002? It took $ 1.18 Cdn. to buy 1 US$ on March 8 of THIS YEAR!
ThwartedEfforts 11:44AM (12/11/2007)
What makes you say England is the most expensive place to build a car? Half the country's output is high-volume, low margin Japanese cars for Toyota, Nissan, and Honda, and the rest for General Motors, Ford, VW, not forgetting an endless stream of MINIs...
AlexP 1:04PM (12/11/2007)
http://en.wikipedia.org/wiki/British_motor_industry
I'm not seeing many low-margin cars there, most are sports car or high-margin luxury vehicles. The lowest margin vehicles are essentially compacts or midsize cars, keeping in mind that cars cost much more there than they do here (the Mini is a subcompact, but it's a luxury subcompact... At least in North America).
I don't know about the salaries nor unions there, but I know that the pound is worth about 30% more than the Euro and it's even more ridiculous when you put it against the USD (100% or more).
RAS 9:27AM (12/11/2007)
Their health care isnt "free". They pay for it through taxes which is a very real cost on their paychecks.
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Carl Q. 10:30AM (12/11/2007)
I can confirm that. 35% of my paycheck is going to the state, directly.
Then there's sales taxes, 6% for canada, 7% for my local province.
-A friend from the north.
Cq
AlexP 11:07AM (12/11/2007)
It's not nearly as big of a cost as the American private equivalents, everyone is eligible and the government doesn't pull the kind of crap health insurance companies pull on their clients.
Polly Prissy Pants 12:29PM (12/11/2007)
Very true, although the U.S. pays more per capita for healthcare than anyone else in the world while delivering results that are far lower than those who do it the best. Look it up.
Do those high Canadian taxes suck? You bet, but the alternative is what we have down here in the U.S. so it could always be worse. Much worse.
psarhjinian 1:02PM (12/11/2007)
You'd pay much more and get much less in the US. The only difference is that:
* In the US, you have the option of paying _huge_ dollars and getting prompt service. You also have the choice to pay nothing, get sick, and die in poverty. The middle ground in Canada isn't great, but the middle ground in the US sucks more.
* US Medicare/Medicaid is does cost the average US citizen more than the same in Canada. Canada has additional taxes, though, for things that in the US you would be paying tolls for. The US Medicare bill is also dwarfed by the US defense bill, so it really seems smaller than it is.
* In the US, you pay those dollars partially to a government bureacracry that spends the bulk of it's funds deciding who _shouldn't_ get coverage; the other part goes to private insurance, whose job it is to maximize shareholder return at the expense of patient care. In most Canadian provinces, the funds get dumped into the health care system directly.
Personally, I think there's some things that socialism does better than the free market and healthcare is one of them: it's sad that US citizens spend more in taxes alone (not including corporate and private insurance), and that the bulk of those taxes and premiums go to deciding who _shouldn't_ get coverage (and discouraging preventative care).
Sad, really..
Gardiner Westbound 9:58AM (12/11/2007)
The CAW extorted every possible cent from automakers in the good times. With the Canadian dollar trading at par with the U.S. greenback and VEBA substantially negating the socialized health care advantage the union now feels it should be exempt from sucking it up in the tough times.
Buzz is screaming for more taxpayer handouts for his members' employers. If tax dollars must be involved they should go to winners only.
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Marcus 12:03PM (12/11/2007)
Did you copy and paste this from a previous post? I'm getting sick of your biased commets.
"If tax dollars must be involved they should go to winners only."
The GM Oshawa Car plants are repeatedly the best plants in North America in terms of productivity and quality. Educate yourself!