Slower Demand to Blame

by : Anthony Fontanelle

The Canadian auto sector has been hit hard and is in danger of losing more workers. Canada's Finance Minister Jim Flaherty said that the problem is not in the value of the Canadian dollar or the loonie but the dwindling demand in the United States auto market.

"In the auto sector, there is weakness. In the forestry sector, certainly there is weakness," said Flaherty recently according to the Financial Post. "That has a lot to do with the reduction in demand in the U.S. economy. Most of the vehicles built in Canada are exported to the United States."

The Big Three all have large manufacturing facilities in Canada. Several thousands of Canadian workers have already been dropped by Ford, Chrysler, and General Motors in their effort to cut down cost. The Big Three are still battling lowered sales and demand in the face of Asian automakers surge. These American automakers have been successful in producing and marketing large vehicles in the past but that day may be over.

The growing threat of global warming and the increasing price of petroleum fuel on the world market have forced car buyers to opt for smaller vehicles. Small vehicles consume less fuel than trucks and SUVs and also produce less greenhouse gases. This combination forced consumers away from large vehicles produced by the Big Three. This results to a massive workforce reduction on the Big Three's assembly facilities in the United States and in Canada where are manufactured.

There have been sectors like the Canadian Auto Workers Union which have been blaming the loonie for the woes of the Canadian auto sector. But Mr. Flaherty is quick to defend the Canadian dollar which reached its highest level against the US dollar on Friday. "There is market weakness in the auto sector and the government can't correct that," said Flaherty. This statement after Buzz Hargrove of the CAW asked the government to take action against the Canadian dollar to protect the Canadian auto sector.

Hargrove had this to say: "You can't ignore the fact that the unfair trade with Asia is undermining our industry - killing our industry - and there's going to be more bad news. We need action by this government on the trade issue."

"Why don't we lower interest rates by a couple of percentage points and start getting the dollar back to where it should be," continued Hargrove. This problem is still seen to continue in the near future and the concerned sectors need to come up with a solution that will benefit all those concerned.