Buoyant Ski-Doo maker says NAFTA deal may force change
The head of recreational products maker BRP Inc. said it may not comply with Monday’s trade deal between the United States and Mexico, which would up the threshold of auto content to be made in those two countries.
BRP churns out more than $260 million worth of all-terrain vehicles and ATV parts in Mexico that are shipped to the U.S. annually, said president and chief executive Jose Boisjoli.
“In our case, we would not comply,” he told The Canadian Press on Thursday, buoyed by record-high share prices in the wake of BRP’s second-quarter earnings report.
Boisjoli qualified that “if worse came to worst,” he would also consider shifting some of the company’s ATV component suppliers from Asia to North America to meet the higher threshold.
The side deal between Canada’s two NAFTA partners would require up to 75 per cent of auto content to be made in the U.S. and Mexico, up from 62.5 per cent. Between 40 and 45 per cent would have to be produced by workers earning at least US$16 an hour.
Breaking the rules would incur a penalty of two per cent of sales on ATVs — about $5 million — the only BRP product to fall under the auto classification.
The maker of Ski-Doo snowmobiles and Sea-Doo personal watercraft, generated revenue of $4.5 billion last year with a net income of $274 million, making the penalty a drop in the ocean.
BRP shares hit an all-time high Thursday after the Quebec-based company raised its financial guidance for a second consecutive quarter as revenues surged in the second quarter, driven by higher sales of off-road vehicles and watercraft. The stock price peaked at $74.67 on the Toronto Stock Exchange and closed up 7.78 per cent at $70.22.
“Many of our customers, because they have a job, they have a roof, they have more disposable income, they’re buying our product,” he said.