Linamar sees opening in Asia with trade pact

Auto parts giant says it’s ready to compete

While representatives of the Canadian auto industry were quick to criticize the government’s decision to sign a revised Trans- Pacific Partnership on Tuesday, the chief executive officer of Canada’s second- largest parts manufacturer has come out in support of the trade deal which she said “simply creates more opportunities for growth.”

“I don’t agree that it will be a negative for the auto sector,” Linda Hasenfratz said in an emailed statement to the Financial Post on Wednesday.

“TPP is the biggest trading bloc in the world and it is right we will be in it. It will create huge opportunity for Canadian companies to become more global and grow in a whole variety of sectors.”

International Trade Minister François- Phili ppe Champagne announced Tuesday that Canada and the 10 other countries that remained i n the deal after the U. S. backed out had agreed to sign the new Comprehensive and Progressive Agreement for Trans- Pacific Partnership.

Details of the agreement — including three side- letter agreements with Japan, Australia and Malaysia which a government spokesperson said pertain to the auto industry — have yet to be released. But the deal was met with swift criticism by representatives of the auto industry, including Flavio Volpe, the president of the Auto Parts Manufacturers’ Association, of which Linamar is a member.

One of Volpe’s key concerns is the proposed automotive r ules of origin, which originally stipulated that vehicles must contain between 35 and 45 per cent TPP- produced content to gain access into Canada duty- free. Volpe said the deal will make it easier for TPP countries to import vehicles i nto Canada while hampering the national auto industry’s ability to compete against countries with lower costs — but Hasenfratz disagrees.

“Folks are worried about vehicle imports hurting local production, but the only big player in the group in auto production is Japan and they are already i nvested in Canada and the U. S. for production,” she said.

“They aren’t going to dial back on those investments and suddenly start bringing cars from Japan, that just wouldn’t make sense.”

Volpe would not comment on Hasenfratz’ statements regarding the new agreement.

Hasenfratz also pointed to the government’s side agreements with Japan, which the government has said will provide improved access to the Japanese market by removing some nontariff trade barriers.

David Wortz, the execu- tive director of Canada’s Japan Automobile Manufacturers Association, said the agreement will diversify Canadian trade and level the playing field when it comes to vehicle tariffs.

“Only about 25 per cent of our sales currently are imports from Japan,” Wortz said.

“Last year in 2017 we produced over a million vehicles in Canada, so we’re here to contribute significantly to Canada’s trade picture ... We have a good relationship with the auto parts sector in Canada, and we want to build on that activity.”

John Holmes, a Queen’s University professor and research fellow at the Automotive Policy Research Centre who studied how the original TPP agreement would impact the Canadian auto industry, said auto parts producers with an extensive global footprint such as Linamar, Magna International Inc. and Martinrea International Inc. stand to benefit from the new deal.

“From their point of view, they already have the supply chains and finances so they can tap into sourcing some parts from elsewhere in the world, as opposed to a smaller Canadian- based parts producer who doesn’t have global reach,” Holmes said. “I think those smaller companies are the most vulnerable.”

Tracy Fuerst, a spokesperson for Magna, Canada’s largest auto parts manufacturer, said in a statement that she cannot comment on t he t rade agreement “until we see the details of the plan.”

John Azzopardi, president of mould- maker Laval Tool l ocated near Windsor, Ont., said small t omedium- sized auto industry businesses will not have the same opportunities as companies t hat already have operations around the world.

“Linamar is a multinational company with billions of dollars to invest. They’ll be able to capitalize on markets such as Malaysia, and invest and create value in that move,” he said.

“The agreement is more in favour of large companies with a multinational footprint or the opportunity to create one ... We voiced this concern to the government several times, and we’re waiting for them to comment on that.”

Hasenfratz said t hat given rapid changes occurring in the manufacturing i ndustry, i ncluding f astevolving technology and automation, labour costs will rapidly become less of a factor in operations.

“Real competitiveness will lie in our ability to design great products and efficient systems to manufacture them,” she said.

AGREEMENT IS MORE IN FAVOUR OF LARGE COMPANIES.