After closing the border for nearly two years, Canadian auto suppliers are looking to rebuild relationships with customers south of the border in time to increase demand for new vehicles.
Export Development Canada (EDC) expects a 27 percent jump in auto and parts exports in 2022, erasing declines from the dual shocks of the COVID-19 pandemic and ongoing global shortages of parts.
Only bottlenecks in the supply chain are standing in the way of more car sales to consumers pouring in with cash they haven’t been able to spend in the past two years, said Peter Hall, Crown chief economist.
“We think there is ultimately enough supply in the system, whether it’s raw materials or intermediate goods or computer chips or what you have,” Hall said. “But in general, things are in the wrong places.”
US crossings reopened to Canadians on November 8, two months after Canada began welcoming vaccinated Americans. While the bottlenecks are expected to ease, there is less confidence that Canadian suppliers can pick up where they left off with US customers when COVID-19 forced an unprecedented land border closure in March 2020.
It’s an unknown to cast a shadow over Janine Lassaline Berglund, president of the Canadian Association of Mold Builders (CAMM). “Have we eroded relationships enough that American companies will think twice about doing business with Canadian companies?”
Not business as usual
Goods and people designated as essential workers continue to transit between Canada and the United States during the extended lockdown. But the delay, confusion and cumbersome
Suppliers say COVID-19 testing requirements have charged a high price.
In a June 2021 survey led by the Canadian Tool and Machinery Association, 87 percent of businesses reported quarantine requests for employees and visitors and refused entry to visitors to Canada, and 69 percent said they lost contracts due to border issues.
Among respondents willing to disclose financial details, 65.4 percent estimated that the impact of 2021 could range from $100,000 to more than $5 million.
“It highlights that Canada is another country,” said Scott Allen, COO of the Integrity Tool and Mold in Oldcastle, Ontario, near Windsor. “Just like the people who have huts on the other side of the border think twice about it… Do I want to deal with this?”
Allen said Integrity, which has an annual income of more than $200 million and satellite plants in Tennessee and Mexico, has not incurred “massive” losses from border problems. “Right now, cars and gadgets are very busy, and there’s a lot of demand, so we’re in luck,” he said. “If it wasn’t like it was two years ago, I think we’d have a big problem.”
The industry has welcomed the federal government’s recent decision to end the requirement to prove a negative COVID-19 test for fully vaccinated Canadians taking short trips. But the government reversed course and reinstated the practice in an effort to limit the spread of the infectious Omicron variant. Americans entering Canada still need to be tested, too.
Patience Test Tests
Business groups and politicians on both sides of the border have said the molecular test, which can cost $200 or more, is unnecessary for vaccinated travelers and discourages travel.
“I personally spent over $2,000 on auditions,” Allen said.
“It’s ridiculous,” said Lassaline Berglund, whose template-making group has published an online guide to help members navigate the changing border rules.
She said free movement is vital as companies work to rebuild relationships with customers and suppliers through factory offerings and other activities that cannot be done online.
“I’m a bit of a brush here, but Americans don’t have a good reputation for being patient when it comes to relationships,” said Lassaline Berglund.
However, the Export Development Hall said the border issues were not even mentioned in the online meetings it had recently with manufacturers across the country. For the automotive sector, the shortage of microchips was the number one concern.
“What we get from the industry itself when we talk to our customers is, ‘Look, there’s no problem with our ability to actually deliver the product,'” Hall said. The chips are what stand in the way of that.”
For industry consultant Laurie Harbor, border constraints are just part of the “myriad problems” facing suppliers. Harbor, president of Harbor Results Inc. , a Michigan-based supplier consulting firm: “Every day inside a manufacturing plant, you have nothing but absolute chaos.” “I’m trying to figure out: ‘Okay, can I ship this across the border?'” Well, do I have resin to make cast parts, do I have steel? “
Harbor, like EDC, is optimistic about the prospects for companies that can remain resilient and benefit from rising demand for cars and other durable goods. But the success of the industry also depends on the ease of movement of people and products between the two countries.
“The border is a big deal,” Harbor said. “The Canada-US relationship is critical to industrialization, and we have to continue to strengthen that.”