FCA’s big investment in U.S. ‘doesn’t bode well’ for Ontario

Analysts worried about future of factory in Brampton with shift to bigger vehicles

Canada’s auto industry was left on the sidelines in a major spending commitment by Fiat Chrysler Automobiles this week, just as analysts were raising concerns about the future of the company’s Brampton, Ont. assembly plant. The US$4.5-billion commitment by FCA in Michigan, set to create 6,500 jobs, will build a new assembly plant and upgrade existing ones comes after intense political pressure in the U.S. to increase domestic manufacturing.

The investment, which will pave the way for a new three-row Jeep and other models as part of the company’s increasing focus on trucks and SUVs, highlighted the risks for the Brampton, Ont., plant that produces passenger cars. “That doesn’t bode well,” said John Holmes, professor emeritus at Queen’s University in Kingston, Ont., who co-wrote a report out this week on Canada’s auto industry. “The big challenge for Brampton has been that, yeah they got the new paint shop after the last round of bargaining with Unifor, but they’re building mainly sedans, and the market is really, really soft for cars.”

The company and union have downplayed threats to the plant, but the report by Holmes and University of Guelph provost Charlotte Yates notes the plant needs new vehicles in growing segments to survive, even as capital commitments to Canada’s auto sector decline. Investment in Canada’s vehicle assembly sector averaged just $1.2 billion a year between 2010 and 2017, down from $2.3 billion a year in the previous decade, the report said, while since 2004, greenfield investment in Canada has totalled $1 billion compared with $15 billion in Mexico.

There’s little sign the trend will reverse as the auto sector prepares for flatter growth in North America and a dip in demand in China.

The big Detroit auto companies are increasingly shifting to higher-margin large vehicles to prepare, such as General Motors’ decision to shut its Oshawa, Ont., assembly plant that produces sedans by the end of the year. FCA has also shifted away from cars, discontinuing the Chrysler 200 and Dodge Dart in 2016, as it focuses on expanding its SUVs and trucks under the Jeep and Ram names as well as its higher-end Italian brands.

The company is predicted to phase out the Chrysler 300 produced at Brampton by 2021, said Joseph McCabe, president and CEO of AutoForecast Solutions LLC, though the plant should still get the next generation Dodge Charger and Challenger muscle cars.

There is a chance, though, that the company could cut the Chrysler car lineup, built on its LX rearwheel drive platform, entirely, said McCabe.

“It’s going to be literally an on and off approach. Either they stay in the car business and they need a place to put the LX and they’ll keep it there. Or, they get out of the car business and then all of the sudden, unfortunately, Brampton gets ramped up to the highest risk facility that Chrysler has in North America.”

FCA spokeswoman LouAnn Gosselin said the company doesn’t discuss future plans and products, including the future of Brampton, but did say the company is committed to what it’s producing there.