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May 11, 2018

'Bad for everybody': Magna CEO says NAFTA, Ontario both need to help auto industry

Magna CEO: NAFTA must be competitive or automakers will leave North America

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While the spectre of a new North American Free Trade Agreement hangs over the automotive industry, the head of one of the world’s largest auto parts-makers warns that Ontario needs to worry about its own competitive climate.

“We do not want to run around the government,” Magna International CEO Don Walker told BNN Bloomberg in an interview Friday. “The government should work on being supportive and they should run at being efficient with our tax dollars, and that’s what I would like to see happen.”

Citing factors including increased regulation, cap-and-trade, electricity costs, and Ontario’s “fair workplaces” Bill 148, Walker said the province and the country at large need to work at enticing businesses to invest.

“I don’t want to be critical without coming up with a constructive solution and we do need to make sure we are business-friendly,” Walker said. “If we’re not business-friendly and other places are – and, everybody else wants to attract automotive around the world - the more we put administration and extra costs in there, it just makes it harder to invest here.”

Walker expressed optimism that a new NAFTA could provide some clarity to the automotive industry and that a deal could be reached, at least in principle, with deadlines looming for both the United States and Mexico.

“I think everybody wants to make sure it’s not too much administrative burden, but we still have to get into a lot of detail. So, I hope they get a deal in principle here that would be workable and then hopefully everybody would work well to make sure it’s not a burden,” he said.



However, he warned on the ripple effect that could come if a new trade pact focuses too much on domestic content regulations.

“If it gets too high – and carmakers say it’s too costly, too administrative and they can’t meet it – that means they’ll say: ‘Well, we’ll just make the vehicles offshore and ship them in,’” Walker said. 

“And then, it would be bad for everybody.  I know the intent is there, but there’s a fine line to how high you make that regional value content.”

Those costs would immediately be passed along to consumers, according to Walker.

“One carmaker may say: ‘We’re going to delay it,’ but if the price goes up, this is a competitive market. That means it’s going to end up with the consumer,” he said. 

“We can’t eat it. The car companies can’t eat it. To the extent that it gets too competitive, people won’t buy cars … This could be really bad if we don’t get it right.

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