Geographic Shift in Plant Locations of U.S.-Canadian Automotive Industry

In a recent paper circulated by leading Canadian automotive analyst Dennis DesRosiers, he pointed out that transportation costs and uncertainty about long delays at the Detroit/Windsor border crossing were pushing automotive manufacturers and suppliers away from the region – a drain that’s already clear in southwestern Ontario and southeastern Michigan. He added the following points and ideas:

Development follows infrastructure

Vehicle assembly plants and parts plants are making a geographic shift away from Detroit and Windsor and toward the Sarnia-to-Fort Erie corridor

This shift affects employment, population, tax revenue and economic vitality in southeast Michigan and southwest Ontario

The automotive sector in Michigan and Canada is now more aligned along an east-west corridor starting in Sarnia and ending in Forth Erie, rather than a north-south corridor starting in Windsor and ending in eastern Ontario

Commentary

As most everyone knows, the automotive industry makes manufacturing decisions multiple years in advance. As has been stated by the automotive industry (e.g. CAPC report), increasing transportation costs and uncertainty about the reliability of the Detroit/Windsor border crossing are great negatives for the region. The industry has mitigated these negatives by revising where products are produced and suppliers located. The risk here is that these changes may progress at an ever increasing rate given the current market loses and financial pressures the industry faces.

Automotive companies and their suppliers are moving along this corridor, bypassing Windsor and Detroit. The corridor gives them access to suppliers in New York and central Ontario as well as nearly direct access to Chicago via I-69. Also, the CN high-capacity rail tunnel in Port Huron makes shipping of parts and finished vehicles easier.

One example of this movement is Toyota’s recent announcement that places its new assembly plant for the RAV-4 mini SUV in Woodstock, Ontario, between London and Hamilton, right along this east/west corridor. This plant location hedges Toyota’s bets by allowing it to use the Windsor/Detroit if the border gets fixed

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The Detroit River Tunnel Partnership (DRTP) owns and operates the 100-year-old rail corridor that runs from Highway 401 in Canada to I-75 in Detroit. Learn about the project to build a replacement rail tunnel at www.thejobstunnel.com

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