That VW loan is a winner

Canadian auto sector companies are selling more abroad, and that’s good for Canada

Last week, Export Development Canada, the agency responsible for helping Canadian companies sell their products and services throughout the world, announced a $525-million loan to Volkswagen that will generate hundreds of millions of dollars in new business for Canadian auto parts makers and toolers, and create jobs for Canadians.

This is a commercial loan, at market rates, and fully repayable with interest.

Unifor, the union that represents a portion of Canada’s auto sector workers, released a statement a few days later questioning the value to Canada of this loan and expressing concern for the protection of some of their members’ jobs. And yet Canadian companies have been clear on what they need from EDC: financial support and connections to new customers outside of Canada.

Canadian companies have reacted positively to EDC’s announcement. Within a day or two, more than 30 Canadian companies contacted EDC to find out how they could connect with VW.

According to Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association representing Canadian companies which employ more than 40,000 Canadians, “this is great news for our companies and their employees, and we’re confident that the stronger connection with Volkswagen, created through this loan, will help Canadian toolers and parts manufacturers win new business with VW.”

Volkswagen already purchased $85 million worth of parts from Canadianbased suppliers last year, and now they want to buy more.

Canada is a trading nation. More than 60 per cent of Canada’s GDP is derived from international trade, and small- and medium-sized businesses (SMEs) account for 90 per cent of Canada’s exporting companies.

Canadian SMEs are very clear that they want, and need, to grow their export trade. Selling to new and different markets is a must for them, and the reasons why are compelling. Deloitte’s seminal “Future of Productivity” research paper shows that exporters have 30 per cent higher productivity; 70 per cent more revenue per employee; triple the three-year returns and are less likely to go out of business.

Last year, in the Canadian auto sector alone, EDC provided more than $3.4 billion worth of financial services to help 440 Canadian suppliers sell to buyers all over the world. EDC’s financial services helped those Canadian companies fund their operations, financing their expansion into new markets and insure their sales so that they do not take a financial hit if a buyer doesn’t pay on time.

Canada has a strong and innovative tooling and parts sector. Helping these Canadian companies grow their export business is absolutely critical to the growth of Canada’s auto sector overall, sustaining and growing Canadian jobs within the broader global auto supply chain. EDC’s automotive strategy builds long-term lending relationships with global carmakers and assemblers, with the primary goal of growing the value of Canadian exports. This is not built on grants or subsidies, but on true market dynamics.

The goal is to make as many connections as possible, and we use all means at our disposal — including seminars on how to win business with specific suppliers, technology innovation days that allow companies to show off their offer to senior level buyers, trade show matchmaking, outbound missions, buyer site visits, one-to-one introductions, among many others.

The bottom line is this: The future prosperity of Canada’s auto sector, and exporters in general, is not a choice between jobs at home and helping Canadian companies export. These strategies support each other, and both are essential.

The goal is to make as many connections as possible