Canada has a big productivity advantage

In view of newspaper headlines proclaiming that General Motors could cease its operations in Canada, an assessment of our automobile industry is essential.

A recent analysis by economist Jim Stanford for the Canadian Auto Workers union should be required reading for all automobile companies who have production facilities in Canada.

It is extremely encouraging for our industry.

The economic stimulus legislation just passed by the U.S. Congress included a Buy American provision. Subsequently, it was watered down amid fears that clause could lead to a trade war, but the U.S. should note that efficiency and competitiveness imply that if anything, more manufacturing should be shifted to Canada rather than the other way around.

Furthermore, public sentiment south of the border is much more anti-union than the view prevailing here, and this new study should serve as a wake-up call to U.S. neighbours.

Stanford revealed that, “In 2007 all Canadian vehicle assembly plants took an average of 20.71 hours of labour (including plant-level salaried and supervisory labour) to make a vehicle.” Canadian average assembly productivity was the highest of the three NAFTA countries, that is Canada, the United States and Mexico.

That means average labour productivity was 11.3 per cent worse in the U.S. than in Canada, and furthermore, that we had an average productivity advantage of 2.35 hours per vehicle compared  to the U.S. – and much more than Mexico.

In addition, we continue to improve, with productivity higher by 22.4 per cent per year over a nine year period, while the United States was able to gain by 18 per cent.

There is more good news on this situation.  About half of the gains in productivity were in quality improvements.

Then, for all those who argue that unions have added to costs here and made us less competitive, statistics dramatically contradict that. Our unionized assembly plants have the highest average productivity levels in North America, followed by our non-union facilities, and much better than the unionized plant operations in the United States, while the so-called offshore transplants in Mexico were the continent’s least efficient.

The Canadian Auto Workers union also has demonstrated a willingness to discuss industry problems with General Motors, in order to dispel any plans there may be to move operations from Canada back to the United States.

The effectiveness of productive effort is the most important ingredient in an industry, and therefore, a free market would strongly suggest that the automobile companies should consider switching as much as possible of their operations to Canada.

All that is unadulterated good news for Canada.


Bruce Whitestone