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Auto parts sector

tightens its belt

The wrenching restructuring of the North American auto industry has pushed employment in Canada's battered auto parts industry down 11 per cent from its peak in 2003 and suppliers are in for another jolt tomorrow when Chrysler Group unveils its second repair job of the decade.

As of the end of November, parts employment had slumped to 92,193, down from 103,413 in 2003 and on track for the lowest annual number since 1998, according to research by DesRosiers Automotive Consultants Inc.

"2007 is going to be a tough year, but I think things will improve after that," said Gerry Fedchun, president of the Automotive Parts Manufacturers Association, which represents auto suppliers in Canada.

One key, Mr. Fedchun said, will be the scope of the Chrysler job-cutting and plant-closing announcement. If adding the Challenger muscle car in Brampton, Ont., allows that assembly plant to maintain three full shifts, that will be good news for parts makers, he said.

One Canadian parts maker that has already reacted to the industry's troubles is Wescast Industries Inc., the world's largest maker of exhaust manifolds, with 50 per cent of the North American market.

"We have taken our pain because we saw this coming," said Ed Frackowiak, chief executive officer of Wescast, which relies on the Detroit Three for more than 80 per cent of its $380-million in annual revenue.

The pain Mr. Frackowiak referred to is the closing of a foundry in Brantford, Ont., last year, which eliminated about 300 jobs.

He's not expecting any direct impact from the Chrysler announcement, but is keen to hear what the company says about its longer-term sales trends.

The view that Chrysler, Ford Motor Co. and General Motors Corp. are going to continue to lose market share to Honda Motor Co. Ltd., Toyota Motor Corp. and Hyundai Motor Co. is probably accurate, he said.

That's one reason behind Wescast's expansions in Hungary and China. Business in Europe in particular is fantastic, Mr. Frackowiak said. "I love that business model because there's no one particularly dominant customer; we've got probably 15 or 20 different customers."

Brantford is just one of several cities in Ontario's auto-making heartland where plants have closed.

Permanent shutdowns there and in Guelph, Stratford, Kitchener, Collingwood, Toronto and elsewhere have eliminated more than 3,000 jobs. Dozens of other municipalities that haven't experienced plant closings have been affected by layoffs and cutbacks.

"A lot of these plants are in survival mode," said Fergo Berto, a CAW national representative whose responsibilities include a Dana Corp. frame-making plant in St. Mary's, Ont. -- a couple of hundred people on layoff -- and wheel maker Accuride Corp. in London, where about 140 employees are off the job.

Parts makers have been striving for years to deal with seemingly contradictory demands by their auto maker customers. On one hand, the car companies have pushed responsibility for design and development of components down to their suppliers. At the same time, they demand price cuts of 5 per cent or more annually.

Those demands and soaring prices for such raw materials as steel and resin were already putting intense pressure on suppliers, but then Chrysler, Ford and GM announced major production cuts. All those factors have combined to propel several of the largest U.S. parts makers into Chapter 11 bankruptcy protection. Canadian companies faced the added burden of the rise in the value of the Canadian dollar.

Dana, Collins & Aikman Corp., Dura Automotive Systems Inc. and Tower Automotive Inc. are all operating in Chapter 11 bankruptcy protection and all have shut, or are shutting, some or all of their Canadian factories.

The struggles in the parts industry are a major headache for the CAW and its president Buzz Hargrove, who thought the union had dodged a bullet during the 2005 contract negotiations when it emerged with just one of the Detroit Three auto makers scheduling a plant closing for Canada.

"We did not believe that we could get hit this bad," Mr. Hargrove said.

Since the 2005 contract, however, Ford and GM announced massive job cuts throughout North America and the closing of at least one plant in Canada.

Chrysler will complete the unlucky trifecta for the CAW tomorrow with job reductions throughout its North American operations.

The third-largest Detroit auto maker is scheduled to chop 2,000 jobs in Canada, industry sources said, with cuts coming at its operations in Brampton and Windsor, Ont.

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