The Canadian dollar was worth about 78 cents compared to its American counterpart when President Obama bailed out General Motors and Chrysler. Last week, the Canadian dollar equaled the value of the America dollar.
While one would think the increased value of Canadian currency would be a source of Canadian pride, the parity has further diminished vehicle manufacturing in Canada, costing the country countless high-paying union jobs.
High union labor costs in Canada have set off factory closings by U.S. automakers, lowering Canada’s vehicle production from three million cars and trucks a year in 1999 to 2.1 million last year, according to a New York Times report.
Canadian Auto workers employed by the Detroit Three has declined by 28,200 employees since 2009, and the lingering question is how much further will the relatively high-wage union job pool shrink.
In 2011, an excellent year for North American automobile sales, production in Canada increased at an anemic 3.2 percent pace in Canada. Meanwhile, Mexico saw a 14.4 percent rise in production and the U.S. was up 11.5 percent as Detroit automakers continue scaling back operations in Canada as they ramp up production in the United States and elsewhere.
Canada’s steady decline in status as an automaker will be further tested by new contracts for C.A.W. workers. While other factors are involved, the cost of Canadian union labor and a near parity of currencies mean U.S. companies will build automobiles at home where unemployment has been over 8 percent for years.
For decades, the low value of the Canadian dollar along with government-provided health care helped make Canada a profitable place to manufacture cars, but the advantage has evaporated with the currency exchange rate.
“Canada is the most expensive place to build a car in the world right now,” Daniel F. Akerson, the chairman and chief executive of General Motors, told a news conference after the company’s annual meeting in June.
For their part, Ford Motor Company is just as negative on Canadian production costs.
“With the dollar at par, we can see fairly clearly what the Canadian landscape looks like in North America,” said a Ford Canada executive, who spoke on condition of anonymity. “When labor costs are unequal, it makes it more difficult to make the business case for Canada.”
In comparison, Canadian labor costs, including benefits, are about $79 an hour, compared with $64 an hour for American employees, with currency values being equal.