Ford Canada Plant Idled By Parts Shortage

TORONTO (CP) -- Violent strikes and protests at a parts supplier in India are forcing a one-week shutdown of Ford Canada's plant in Oakville, Ont., the automaker said Friday.

Ford spokeswoman Lauren More said the parts shortage is the result of labour unrest at the supplier, Rico Auto Industries, which produces transmission components.

Reports say auto workers in India's Haryana state have been engaging in increasingly violent strikes and protests after clashes between workers and police left one Rico employee dead last weekend.

"We are monitoring the situation and continue to work with Rico to reduce the impact on our operations," More said in an email.

A Canadian Auto Workers spokesman said the temporary lull in operations at the plant, which employs about 3,000 people is a concern, but everyone hopes to be back at work soon.

"We're getting closer to Christmas, and we don't want people laid off during this period of time," said Gary Beck, president of CAW Local 707.

Auto industry analyst Bill Pochiluk said all the major automakers are doing what they can to cut costs as the industry struggles with its worst sales slump in decades, including outsourcing parts production to lower-cost operations in India, China and Mexico.

This trend has been encouraged by the high Canadian dollar, which is nearing parity with the U.S. greenback and makes it even cheaper to buy parts from foreign producers.

"As a trend, you can say very definitively that there is an erosion of Canadian content on Canadian-assembled vehicles because of extreme cost pressure," said Pochiluk, president of industry adviser AutomotiveCompass.

"And this latest movement in the exchange rate, the higher value of the Canadian dollar, allows us to buy import parts for cheaper, and that's only going to make this trend worse."

In a recent commentary, industry analyst Dennis DesRosiers predicted that only 76 per cent of vehicles bought in Canada will be produced in Canada by the end of the next decade, which means further pain for Canadian suppliers.

"Adding to the woes of our materials and parts suppliers will be an expected increase in products sourced from offshore," DesRosiers wrote.

"Chinese, Indian and Italian products factor into this to a degree, but most of the increase will arrive courtesy of the countries from which we already buy vehicles: Japan, Korea and Germany."

Pochiluk said most automakers with operations in Canada are buying what he called "commodity-type parts" that are ordered in bulk, such as electronic components, from foreign countries.

Oftentimes, automakers will guarantee certain volumes to suppliers to get the best price possible, which can leave them without a backup supplier -- a problem that likely resulted in the shutdown at Ford, Pochiluk said.

"I'm pretty certain that the Ford purchasing people won't let this problem happen again on this particular commodity," he said.

Ford builds the Ford Edge, the Ford Flex and the Lincoln MKX at its Oakville plant, just west of Toronto.

The temporary work suspension comes as the Canadian Auto Workers and Ford are preparing to resume formal contract negotiations on Monday.

Ford and the CAW have been negotiating a new labour contract since early September, but talks have stalled on the issue of how much manufacturing capacity the company will keep in Canada.

Ford has asked the union for the same concessions it gave General Motors and Chrysler in negotiations earlier this year so it can remain cost competitive, but the union says it wants production guarantees in return. However, Ford says it currently has no plans to manufacture vehicles at its St. Thomas, Ont., plant beyond 2011.

Currently, the 1,600-employee plant builds the Ford Crown Victoria, the Lincoln Town Car and the Mercury Grand Marquis -- all full-sized cars, demand for which is limited to niche markets. In fact, the Crown Victoria is only sold as a part of fleets, such as police cars and taxis.

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