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]

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