Southwestern Ontario nervous as Toyota moves production to Mexico

Steam rises from a stack at a Toyota plant in Cambridge, Ontario on Tuesday February 10, 2015....

Steam rises from a stack at a Toyota plant in Cambridge, Ontario on Tuesday February 10, 2015. CRAIG GLOVER/Postmedia Network

Debora Van Brenk and Megan Stacey, Postmedia Network

, Last Updated: 8:35 PM ET

LONDON, Ont. -- That was a nervous shudder you felt roll through Southwestern Ontario Wednesday. The question is, are more coming down the road?

Toyota, the world's No. 1 automaker and the industry's southwestern Ontario backbone, with two assembly plants and 8,000 workers, is sending its "bread-and-butter" Corolla production to Mexico as the Japanese giant ends an expansion freeze to flex its muscle in Mexico and China.

Toyota Canada says production at its Cambridge, Ont., plant -- half of the company's regional profile, along with a Woodstock, Ont., factory -- will be replaced with a high-end vehicle, but it hasn't said which one.

While thoughts are divided on the potential fallout in the region -- one mayor says "don't worry about it," but a union head insists it can only spell bad news -- those whose livelihoods depend on car-making are left to worry about an uncertain future.

"I think everybody, honestly, has got to have some concerns," said Darryl Watkins, a contract worker at the Cambridge plant, about 100 km west of Toronto.

The Corolla is Toyota's best seller in North America.

"It definitely has been their bread-and-and-butter for years," Watkins said.

Not even a high-end vehicle with higher profit margin – such as the rumoured Lexus – can make up for the sheer production volume of the Corolla, he said.

Sideswiped by the 2008 recession, southwestern Ontario's auto industry has bounced back, leaner and meaner, but faces intense competition for new plants from lower-wage foreign zones, including the southern United States.

Mexico offers aggressive subsidies that can offset up to 70% of a manufacturer's re-tooling costs.

"Overall, I think Ontario has some very tough decisions to make," said Mike Moffatt, a Western University economist and specialist in the manufacturing economy. "I think we need to take a really hard look at this and ask ourselves how much are we willing to pay to keep companies like that here?" he said.

Toyota said it will spend $1 billion to build a new plant in Mexico to produce 200,000 Corollas a year and employ 2,000 people. Some Corolla production will also go to Mississippi.

But the issue of migrating manufacturing goes beyond Toyota.

Ontario tried to sell Ford, which closed its sprawling St. Thomas, Ont., sedan plant a few years ago, on building a $2.5-billion engine and transmission plant in Windsor. But Ford is expected to announce this week it will also build in Mexico instead.

Toyota's move leave a sour taste in the mouth of Jerry Dias, president of Unifor, the union for workers at many assembly and parts plants, including the GM-owned Cami assembly plant in Ingersoll, Ont.

Unifor has tried to unionize both Toyota plants.

"It's about making more profit. It's about more," Dias said. "It's about Mexico having an auto strategy that we don't have."

Ontario and Canada have talked for years about putting together a co-ordinated auto strategy, while more jobs shift south of the border.

But Cambridge Mayor Doug Craig said there's no cause for concern -- that he's confident Toyota's move is merely to reinvest in a new product line there.

Workers are keeping their jobs and Toyota's Cambridge plant remains competitive and efficient, he said.

"There's more bread and butter coming. Don't worry about it, seriously," he said.

"They're bringing different, other platforms to Cambridge that, in fact, reflect the area of northern United States and what's being produced, and what we may be producing in the near future."

Canadian auto analyst Dennis DesRosiers shares that view and said Corolla's move south is a positive one.

"This secures jobs in Canada, it doesn't cost jobs in Canada."

DesRosiers said sending production of a lower-cost, lower-margin vehicle south allows Toyota to build a higher-value, higher-margin product.

Canada's high standard of living means "you can't do entry-level, low-cost vehicles in Canada," he said.

 

FACT BOX

TOYOTA CANADA

-- 24,000 employees, a little more than half in Ontario

-- $9 billion invested, two-thirds of that in Ontario

-- Has produced 5.6 million vehicles in Canada since 1988

-- Produces four models -- the Corolla, RAV4, Lexus RX 350 and RX 450h Hybrid. -- Together, those account for about 50% of all vehicles sold in Canada.

Cambridge plant -- Began producing Corollas when it opened in 1988.

-- Also produces Lexus RX 350 and 450h sport utility vehicle, the first Lexus vehicles built outside Japan.

Woodstock plant

-- Started producing RAV4s when it opened in 2008.

Source: Toyota Canada)

TOYOTA'S SHIFT

-- New $1 billion plant to build Corollas in Guanajuato, in central Mexico.

-- Will employ 2,000 workers and make 200,000 vehicles a year

-- First plant using Toyota's new production blueprint, a smaller factory costing about 40% less. -- Some Corolla production to go to Mississippi.

-- Cambridge Toyota plant to switch to higher-end, mid-sized vehicle.

-- $440 million expansion of plant in China jointly owned with Guangzhou Automobile Group Co. Ltd.

debora.vanbrenk@sunmedia.ca; megan.stacey@sunmedia.ca

 


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