Andersson: GM considered cutting back on Canadian parts

DETROIT -- General Motors in recent years considered slashing its $10 billion annual parts purchasing budget in Canada because of currency issues, manufacturing quality and productivity problems.

Canadian suppliers got the message, though, and kept GM happy.

Asked if GM were prepared to drop its Canadian supply base, GM Group Vice President of purchasing Bo Andersson told Automotive News that, "We are the largest buyer in Canada. And we have always been large in Canada, but I expected us to have our purchases drop."

A cheap Canadian dollar in recent years allowed Canadian suppliers to reduce their investment in technology and productivity. Then, as the Canadian dollar rose in value, the country's parts became less price-competitive, said Gerry Fedchun, president of the Canadian Automotive Parts Manufacturers' Association.

Canadian auto parts imports to the United States declined from $15.52 billion in 2005 to $14.98 billion in 2006, according to U.S. Department of Commerce data. Canada maintained a slight lead over Mexico as the top exporter of auto parts to the United States.

Three years ago, Andersson alerted Fedchun to Canada's declining value as a GM supply base. "We saw that they became uncompetitive," Andersson said he told Fedchun.

Andersson made his comments after a meeting today of the Original Equipment Suppliers Association, the trade group representing auto suppliers based in the United States.

Andersson said he met early on with Fedchun and other senior members of the Canadian auto parts industry.

"Andersson sounded the warning," Fedchun said. "Bo is a very straightforward guy. He laid out what he found among our suppliers, and we put the message to the association to get cracking."

Andersson and Fedchun said Canadian suppliers improved productivity and quality. They also invested heavily in new technology.

Canada has about 550 parts makers, about 350 of which are dedicated auto parts makers, Fedchun said.

Andersson said he saw dramatic improvement in Canada's auto parts supply base this year. The gains have come despite no significant advance of the Canadian dollar, he says, "so the improvement had to have come from increased productivity and the use of new machines and technology."