March 11, 2005

Canadian auto parts suppliers looking to China

Toronto – Industry experts say China presents a growing threat to Canadian auto parts firms, where a low-wage workforce can make parts cheaper.

China pays less than $3 per hour in wages, well below the $23 to $27 per hour average in Western nations.

With automakers increasingly asking suppliers to build complete vehicle sections, Canadian auto parts firms find they can make subcomponents cheaper in China, and then ship them back to Canada for assembly into larger components. This allows tier-one suppliers to cut costs further at a time when automakers want to reduce the prices they pay for parts.

Still, the move is not without risk. “You have to be very careful about taking technology over there,” said Don Walker, chief executive of parts maker Intier Automotive. “What we’re trying to do is not give away anything that’s proprietary in producing in a low-cost country.”

Intier says increasing its presence in China over the long term will help win contracts for new vehicles made in Asia. At present, however, the focus is to reduce costs for modules shipped to North America. Walker said that in Intier’s case, car doors can be made in North America or Europe using subcomponents made in low-wage shops in China, Brazil, Mexico and Eastern Europe. The strategy helps reduce costs passed on to the Big Three automakers, who have sought parts price reductions of three to five per cent annually.

The move has already affected Canada’s auto parts sector, where as many as 5,000 jobs have been lost since 2003.

Connect with