Here’s a plan to fix Canada’s auto sector as its biggest customer tries to turn away

In 2023, Flavio Volpe spearheaded Project Arrow, which made a prototype vehicle entirely from Canadian parts, to show people the depth and breadth of the Canadian auto industry. Photo by Derek Ruttan/London Free Press/Postmedia files

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Canada’s auto sector has been moving backward for the past decade, with overall vehicle production dropping 45 per cent to about 1.3 million vehicles last year from 2.4 million in 2014, but it’s now facing perhaps its biggest challenge yet: its biggest customer, the United States, says it no longer wants Canadian-made vehicles.

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“It’s unprecedented,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, an industry lobby group, told an audience at the Canadian Club in Toronto on Wednesday about President Donald Trump saying his country does not want Canadian-made vehicles anymore. “We don’t have a negotiating table and I actually don’t know what the next step is.”

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Volpe was joined by Rob Wildeboer, executive chairman of Martinrea International Inc., one of Canada’s largest auto-parts companies, and others to discuss whether Canadian policymakers could help create a self-sufficient homegrown auto industry, how to support existing companies and what an ideal regulatory situation would look like.

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“We’re used to being punched in the face,” Wildeboer said, recounting how the 9/11 terrorist attacks, the 2008-09 financial crisis and the pandemic’s supply chain challenges have hobbled the sector in the past.

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Wildeboer said he travelled to Washington, D.C., twice, even making it inside the West Wing, to meet with Trump’s top policy advisers, whom he warned that the North American auto production system is so integrated that any tariffs on Canadian or Mexican auto parts would quickly shut down production.

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He said the advisers took notes and eventually listened, as far as auto parts tariffs go, at least so far. Nonetheless, automakers have already warned the tariffs on finished vehicles will eat up billions of dollars in profits at a time when they face the costly task of reinventing themselves as the electric vehicle transition accelerates.

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“That’s the nature of how policy is going,” Wildeboer said. “In my view, if you try to figure out one word for it, I would call it incoherent. That doesn’t mean that we can’t lurch towards something that’s really good.”

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What “really good” could look like at its simplest, he said, is completely free trade on auto parts in North America, and more rules around using only North American parts in vehicles, with higher penalties for non-compliance.

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Wildeboer also said there need to be new rules that penalize automakers from Europe, Japan, Korea and elsewhere that sell a lot of cars in North America, but don’t manufacture here.

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However, he said Chinese automakers and parts companies need to be kept out of the market.

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“They cheat,” he said, saying their companies receive too many government subsidies for Western companies to compete.

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Volpe made similar points about renegotiating a free trade agreement that brings more auto production back to North America, but he also characterized the industry’s problem as a failure of imagination.

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In 2023, he spearheaded Project Arrow, which made a prototype vehicle entirely from Canadian parts. It was not made as a potential product for sale, but more as a publicity stunt to show people the depth and breadth of the industry and spur entrepreneurs to imagine what is possible, he said.