September 26, 2002
The exclusion of Canadian steel producers from restrictions on imports to the U.S. was a relief after months of uncertainty. The Canadian steel industry wants to ensure that the Canadian market does not become a back door for imports into the U.S. Keeping the industry strong by opening new markets, developing lighter, stronger and more corrosion-resistant steel products, and working closely with the automotive industry is vital to that goal.
In a trade relationship with the U.S. defined more by cooperation than confrontation, Canada's steel and automotive industries felt little impact from the 30 percent tariff on steel imports imposed by President George W. Bush earlier this year.
The exclusion of Canadian steel producers from restrictions on imports to the U.S. was "a relief after months of uncertainty," said Barry Lacombe, president of the Canadian Steel Producers Association (CSPS, www.canadiansteel.ca). "We were pleased that we were excluded from the U.S. remedies. The U.S. and Canadian markets are integrated markets and a common market environment, and we were very pleased that the integrated nature of the market was recognized."
Canada's steel industry is working with the Canadian federal government to investigate the dumping issue, including monitoring non-North American Free Trade Agreement (NAFTA) imports that end up in Canada. "We want very much to ensure that the Canadian market does not become a place where diverted steel goes," said Lacombe. "We don't want the Canadian market to become a backdoor for imports into the U.S."
Keeping the steel industry strong is vital to achieving that goal, Lacombe said. Canada's steel industry posts more than $11 billion a year in sales and boasts 150,000 direct and indirect jobs across Canada. A technological revolution in the 1990s doubled the number of new steel products and created lighter, higher-strength, more corrosion-resistant steels for such uses as automotive bodies and in residential construction and public utilities.
Among the steel industry's highlights is the opening of new North American and worldwide markets in the automotive and other transportation industries, agricultural and industrial equipment, construction, and oil and gas sectors. The automotive, construction, and oil and gas industries account for about 70 percent of Canadian steel demand, which is growing by about 8 percent a year.
Canada's automotive industry, the steelmakers' largest customer base, is the biggest contributor to the gross domestic product (GDP), producing $100 billion in vehicles and parts, most of which are destined for the U.S. It is Canada's largest manufacturing employer, employing close to a quarter million workers. With 20 assembly plants, 554 parts manufacturers, and 3,600 dealerships, Canada's auto sector directly or indirectly employs one in seven Canadians.
The sixth-largest vehicle producer in the world, accounting for 5 percent of world automobile production, Canada's auto sector has faced numerous challenges in recent years, largely because of overproduction and the challenge of imported vehicles. Canadian carmakers now are looking to the Canadian federal government to lead the creation of a new auto policy to spur investment and reduce job loss.
As Canada's largest industrial employer, General Motors (GM) of Canada (www.gmcanada.com) has a big stake—it accounts for $37 billion in annual revenues and employs 25,000 workers. GM of Canada President Michael Grimaldi was among the players who called on the Canadian federal government's help at the annual conference of the Automotive Parts Manufacturers' Association (APMA, www.apma.ca) earlier this year. The biggest challenge is the threat of imports, which rose by almost 20 percent in 2001.
The Canadian Autoworkers (CAW, www.caw.ca), one of the country's leading unions, has stated that the industry is in a crisis and has pushed for tariffs on European, Japanese, and Korean vehicles.
And, pressured to cut costs, Canada's auto parts industry—representing sales of $35 billion, with 400 members and 106,000 workers' last year reduced its work force by 10 percent. Additionally, GM of Canada, Ford, and DaimlerChrysler are poised to close 14 assembly plants, with a potential loss of 4,500 workers over several years.
Guy Leclaire, director of automotive for the federal Industry Canada ministry (www.ic.gc.ca), said the federal government is welcoming input from the automakers to establish a new policy.
"We've been consulting with the auto industry, the assemblers, and the auto parts people for some months now, with that in mind," said Leclaire. "We are asking what the issues are that these stakeholders see as being important to the industry over the next five years. They've come and given us their suggestions.
"We're going to continue with consultations, and eventually bring these suggestions together for a larger consultation. It's key to Canada and the Canadian economy. We're looking to develop consensus and priorities and a work plan."
That effort has brought Canadian automakers into increasingly close contact with their steel suppliers, working closely in the design of everything from bumpers to side panels. Steel company engineers and designers often become a part of the automaker's design team, allowing for a synergy and sharing of ideas that weren't seen in the past.
One synergistic success story in Canada's steel industry is steel producer Dofasco (www.dofasco.ca), which reported a major earnings leap in its first quarter earlier this year and a $27 million profit in 2001, making it the only profitable integrated steel producer in North America.
The only Canadian steel company on the Dow Jones Sustainability World Index, Dofasco was named in 2001 as one of the world's most sustainable companies by the index for the third consecutive year. The company employs 7,500 workers at its Hamilton, Ontario, headquarters.
More than 33 percent of the company's steel goes to the automotive market, including prepainted galvanized, GALVANNEAL®, and GALVALUME®, as well as cold-rolled and hot-rolled material. Early vendor involvement and close collaboration with major vehicle manufacturers allow Dofasco to get involved in design activities, down to the provision of on-site, full-scale testing facilities, said Don Kenny, the company's general manager for market development and product applications.
Dofasco's product lines are tooled specifically to create niche products in an environment that integrates all phases of design, product development, testing, and manufacturing under one roof.
Since 1990 the company has invested almost $2 billion in new processes, including a joint-venture partnership project with European steelmaker Usinor (www.usinor.com), for a new product line, DoSol Galva. Usinor uses a proprietary steel galvanizing technology to produce high-quality steel for use in exposed auto body panels.
Another key project for Dofasco was the successful Ultra Light Steel Auto Body (ULSAB) initiative, a joint venture with 34 other steel companies to design a lighter, stronger, more energy-efficient auto body. ULSAB's success led Dofasco to begin producing hydroformed tubes and laser-welded blanks on a large scale.
"We are aiming to create products with a significantly higher strength that take weight out and reduce energy consumption," said Kenny. "Those are the goals of the original equipment manufacturers and I think of society in general."
And that kind of progress will mean better cars and a healthier environment—and economy—for Canada's auto industry.
John Cooper is a freelance writer based in Whitby, Ontario, and can be reached at firstname.lastname@example.org.
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