March 16, 2005

Professor says Canadian auto parts makers in danger

Toronto, Ontario – Automakers with plants in Canada are putting a squeeze on their Canadian parts manufacturers and that could have a profound and negative impact on the country’s entire economy, says Bernie Wolf, professor of economics at York University’s Schulich School of Business.

“Everyone in the auto industry is looking to consolidate their supplier list and to pressure the parts manufacturers to lower their prices,” Wolf says. “This is not an easy thing to do without substantial improvements in productivity, a low Canada dollar and stable raw material costs, none of which is the case in today’s market.”

Recent reports show that many parts makers are struggling to meet the demands of their largest Canadian customers, which are General Motors, Ford, DaimlerChrysler, Toyota and Honda.

Soaring steel and energy prices have hit smaller parts manufacturers the hardest, as automakers demand lower prices from their primary suppliers and the demand for cost savings passes down to the lower-tier suppliers. Many of these smaller companies are unable to slash prices and meet their contract commitments at the same time.

As well, declining market share, high vehicle inventories and a downturn in production by the Big Three will put further pressure on the parts industry, which has already experienced a drop in employment levels.

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