Japanese Auto Makers in Canada Face Opposition to Tariff Break

Strategic Insights -

Maureen Kempston Darkes, president of General Motors of Canada Ltd., argued that the two Japan-based auto makers running manufacturing plants in Canada, Toyota and Honda, already have significant cost advantages over the Big Three and should not be given a tariff break. She stated that the transplants have a significant cost advantage of up to $10 an hour due to younger workforces and less generous benefit packages. This comes as a surprise to officials from both Japanese companies, who claimed their wage and benefit packages match Big Three levels.

Key Takeaways:

  • Maureen Kempston Darkes, president of General Motors of Canada Ltd., expressed opposition to reducing tariffs on auto parts imported from outside North America for Toyota and Honda, citing a $10 an hour cost advantage.
  • The two Japan-based auto makers face duties of 8 per cent on complete vehicles, 9 per cent for some tires and rubber items, and 2.5 per cent for some other parts if the vehicles or parts are imported from outside North America.
  • The cost of tariffs for the Japanese auto makers is offset by two duty waiver programs that are scheduled to be eliminated by the end of the year.
  • GM Canada, Ford Motor Co. of Canada Ltd., and Chrysler Canada Ltd. can import cars and parts duty-free from anywhere in the world under the 1965 Auto Pact.
  • Vaughn Hibbits, vice-president of administration for Honda, stated that Honda's wage and benefit packages match Big Three levels, but acknowledged that their workforce is younger.
  • Adriaan Korstanje, spokesman for Toyota, argued that tariffs are a separate issue from wages and benefits, and questioned why Toyota should seek lower tariffs if GM Canada were to hire a lot of young people.
  • Maureen Kempston Darkes emphasized the importance of maintaining the Auto Pact's provisions, citing its value in creating a world-class auto industry in Canada.

Statistics:

  • Maureen Kempston Darkes estimated that the transplants have a significant cost advantage of up to $10 an hour.
  • The Japanese auto makers face duties of 8 per cent on complete vehicles.
  • 9 per cent of tariffs on tires and rubber items.
  • 2.5 per cent of tariffs on some other parts if the vehicles or parts are imported from outside North America.
  • GM Canada, Ford Motor Co. of Canada Ltd., and Chrysler Canada Ltd. can import cars and parts duty-free under the 1965 Auto Pact.
  • 200,000 vehicles per year will be produced at Toyota's expanded plant in Cambridge.
  • 120,000 Civics are assembled annually by Honda at Alliston.
  • GM Canada and its joint venture, Cami Automotive Inc., have the capacity to produce about one million cars and trucks a year.

Sources:

  • Maureen Kempston Darkes, president of General Motors of Canada Ltd.
  • Vaughn Hibbits, vice-president of administration for Honda.
  • Adriaan Korstanje, spokesman for Toyota.
  • A Canadian Club audience in Toronto.
  • The federal government's tariff policies.
  • The 1965 Auto Pact.