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Canadian Auto-makers Worried over Strengthening Loonie
Dec 26, 2007

It’s a time of crisis and worry for Canadian auto manufacturers as the rising currency has made the country the costliest place on earth for this industry.

Canadian auto makers issued the harshest ever warning to the federal lawmakers on November 20, 2007, saying that their industry shall have to face a dreadful crisis because of the Canadian currency Loonie’s rapid rise which has made the country the most costly place around the world to manufacture cars.

Mark Nantais, President of Canadian Vehicle Manufacturers' Association (CVMA), said in a statement that Canada is currently the most expensive territory across the globe for manufacturing automobiles. This rude reality puts Canada at a relative disadvantage in attracting investments, which is highly necessary for being globally competitive, as published by
Theglobeandmail.

Already the auto industry export dependent on the US is in an unhealthy state. Currently, all major American auto manufacturers (including Ford Motors, Chrysler LLC and General Motors) are in a mode of downsizing their business. They are cutting down on their output in the wake of intense competition and a loosening US market. The CVMA also estimates that by end-2007, auto production will slip down by 1.20 Million units in the US and Canada from the last four years.

Many industry experts also believe that loan delinquencies for cars in the US can rise due to prior derelictions. This will turn away many car buyers. Also, there has been a loss of interest by many foreign investors because of speculation that profits will not match their expectations.

The CVMA is now looking towards new measures like levies on employment insurance, refunds on tax credit, etc. for buying new equipments and machinery.

A Research Analyst at
RNCOS says “Canada’s auto industry is presently going through a sticky situation. The country’s economy is shooting up, but automobile manufacturers are seemingly upset because of the tight government policies for investors. The auto industry has been plagued by low investment and if the tax rates do not decline in future, it will spell doom for the auto industry in Canada. Therefore, the government needs to evaluate its policies and make easy conditions for investors to attract them into putting in their money”.

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