By Jim Stanford, Ph.D., Economist, Unifor

Toyota is the 8th largest global corporation and largest vehicle maker measured by revenue ($265 billion U.S. in 2013). And Canada has been critical to Toyota’s continuing success. Canada accounts for close to 30 percent of Toyota’s total North American assembly – and North America is now Toyota’s largest market.

Toyota arrived in Canada in the 1980s, helped by special trade policies and government subsidies. Once they got here, they liked what they found: A high quality, healthy, educated workforce. Good infrastructure. A good supply chain. Very attractive costs. That’s why Toyota’s Canadian footprint expanded so steadily since.

Worldwide, Toyota’s financial results are getting stronger every year, since the twin disasters of the world economic crisis and the Japanese tsunami. For fiscal 2012-13, revenues were up 19%, and profits almost tripled. This fiscal year (which ends March 31), things are going even better. Revenues are up another 15%, and year-end profits will possibly double again. Toyota has increased its dividend, too: a sure sign they are confident about future profits.

Canada has been very profitable for Toyota . . . We think Toyota earned well over $1 billion on its Canadian business last year.

CanadianProductionSome people worry that forming a union might undermine Toyota’s economic success in Canada. Given Toyota’s successful history in Canada, and the flexibility and innovativeness Unifor (and before it, the CAW) showed during the auto industry’s recent challenges, this is not convincing. Toyota’s operations are not based on the lowest possible wages (if that was their strategy, they’d have moved all their plants to Mexico, China, or the Philippines long ago). They are in Canada for deeper fundamental reasons; that won’t change because team members form a union:

  • A recognized high-quality, capable workforce.
  • Superior productivity and quality (including more JD Power gold plant awards than any other plants in North America).
  • First-class infrastructure and supply chain.
  • Proximity to final markets.
  • Huge fixed investments in two production complexes.

Canada has been very profitable for Toyota. Globalcompanies are not required to divulge their Canadian profits. But we can make an educated guess. We think Toyota earned well over $1 billion on its Canadian business last year.

WorldWideFinancialsAnd things are looking even better for Canada now that the overvalued loonie is finally coming back to earth. The fall in the dollar last year is already equivalent to reducing Toyota’s labour costs at Canadian plants by over $5 per hour. Even when the dollar was high, at par with the U.S. dollar, total “fully loaded” labour costs at Toyota Canada were competitive. Now the dollar is coming back down, and labour costs here are once again cheaper than in the U.S. At 90 cents (U.S.), Toyota Canada workers are about $3 per hour, or around 5%, cheaper than Toyota’s employees in the U.S. That’s a saving of $40 million per year across Toyota’s total Canadian hourly workforce.

Toyota’s Canadian investments have been very successful: with outstanding volume, quality, and profit. Those core advantages will not disappear when team members form a union. In fact, by requiring the company to deal with its workers on an equal footing, with respect and stability, forming a union will enhance Toyota’s long-term success in Canada.

This is a summary of a longer analysis by Unifor Economist Jim Stanford.