Ann99 2

Hino Diesel Trucks (Canada) Ltd., Honda Canada Inc., Honda
of Canada Manufacturing, Mazda Canada Inc., Nissan Canada Inc., Subaru
Canada Inc.,  Suzuki Canada Inc., Toyota Canada Inc., and Toyota
Motor Manufacturing Canada Inc.

The Japanese auto industry in Canada is comprised of more than just the current members
of JAMA Canada. For this review, we collect and publish information about Japanese
affiliated parts investments and operations in Canada. For a list of JAMA Canada members,
please see this section. For a list of Japanese affiliated auto
parts companies in Canada, please see this section.

In pursuit of satisfying the ever demanding consumer, Japanese
automakers have stimulated competition and raised the quality of vehicles not only made in
Japan, but increasingly vehicles designed and developed in North America for the Canadian
and U.S. markets. For all automakers, quality is a necessary ingredient just to be able to
participate in an increasingly competitive global industry. But for Japanese automakers,
quality is a constantly moving target, driven by the demands of the consumer, lower costs
and continuous improvement. What’s more, about 54%, or almost three of every five
Japanese brand vehicles currently sold in Canada are built in North America. As such, the
benefits to local communities and local suppliers in Canada continues to grow,
particularly as capacity in Canada expands from 530,000 units in 1998 to over 700,000
units by 2001. In addition, according to opinion polls and industry surveys over the
years, Japanese vehicles still represent the leading edge in terms of reliability,
performance and customer satisfaction.

2. Employment

The Japanese auto industry is multi-faceted and in the aggregate,
employs over 49,000 Canadians in manufacturing both parts and vehicles, imports, exports,
transportation, distribution, sales and service.

In the manufacturing sector, more than 7,700 Canadians work in three
motor vehicle manufacturing plants, and about 9,800 jobs have been created in Canada
through various parts and materials operations supplying the North American auto industry.
Expanding manufacturing investments at Honda of Canada Manufacturing and Toyota Motor
Manufacturing Canada will add hundreds of additional jobs directly, plus significant
indirect employment as a result of increasing local sourcing of supplies and services.
There are about 30,000 Canadians employed in about 1,000 dealerships according to the
Canadian Association of Japanese Automobile Dealers (CAJAD). Finally, there are about
1,600 people employed in the national distribution and head offices of JAMA Canada
members.

Several of our member companies maintain regional offices and
warehouses in different regions of Canada including Western Canada, Ontario, Quebec and
the Maritime region. Some member companies run operations in Canada related to vehicle
engineering, design and testing. These R&D activities focus primarily on vehicle and
component cold weather testing in Northern Ontario and in the Maritimes.

There are three vehicle manufacturing plants and currently thirty-seven
Japanese affiliated auto parts and related materials and machine tool operations in
Canada. Total investment in vehicle manufacturing stands at $4.3 billion. Further details
about parts and vehicle manufacturing in Canada can be found on pages x through y.

Honda Canada announced in 1995 a $300 million minivan plant in
Alliston, Ontario that opened in 1998 with a two-shift capacity of 120,000 units and an
additional 1,200 associates. The new plant started production of the new, larger Odyssey
minivan in the summer of 1998. The plant will be operating on one shift initially, adding
a second shift in mid-1999 to reach projected capacity. Honda Canada also announced an
additional 60,000 units of capacity may be added by 2001, depending on market conditions
in North America.

In 1997, Toyota opened their $600 million plant in Cambridge, Ontario
which increased capacity by 120,000 units and an additional 1,200 team members. TMMC
continues to make Corollas and 1.8L four cylinder engines for the Corolla and officially
began assembly of the Camry Solara in September, 1998. TMMC will also produce about 6,000
convertible models of the Camry Solara annually starting in 2000. Canada is the exclusive
worldwide location for the production of both the Honda Odyssey and the Toyota Camry
Solara.

CAMI Automotive, the 50/50 joint venture manufacturing plant
established by Suzuki and General Motors of Canada in Ingersoll, started production of the
new compact sport utility vehicle (SUV) in October 1998 – the Suzuki Vitara and the
Chevrolet Tracker. Since start-up in 1989, CAMI continues to build two different vehicles,
a sub-compact passenger car, the Suzuki Swift and the Chevrolet Metro, along with the
compact SUV. Total capacity is 200,000 units annually.

When these expansions are complete, over $4.3 billion will have been in
invested in Canadian vehicle manufacturing, with a potential production capacity of
730,000 units, and a workforce of 8,300 Canadians at Honda, Toyota and CAMI.

In 1998, Japanese automakers manufactured about 3.0 million vehicles in
North America. Canadian plants built over 396,000 units or 14.3% of total Japanese
production in North America which grew by 3.1% in 1998 to almost 2.8 million units. With a
significant increase in production capacity from current expansions at Honda and Toyota
together with higher output from new SUV production at CAMI, the Canadian share of total
Japanese vehicle production in North America should expand in 1999.

As in 1997, about 76% of total vehicle output at the three Japanese
affiliated operations in Canada was exported in 1998, primarily to the US. About 9,000
units were shipped to other countries including Puerto Rico and Latin America.

Comparing exports and imports of vehicles in 1998, for the sixth
consecutive year Canada has been a net exporter of Japanese vehicles. Imports from Japan,
the US and Mexico totalled 247,000 units, while 302,000 vehicles were exported, thereby
contributing to Canada’s trade balance.

Comparing production and sales in Canada, there were about 1.3 vehicles
produced in Canada for each one sold by all JAMA Canada members combined. At the same
time, all vehicles that were exported to the US met the NAFTA rule of origin requirements
for North American content.

1998 – The Year in Review

Production:

Honda: Output at HCM increased 8.5% to over
179,000 units in 1998, largely due to start-up of the second plant for the Odyssey.
Production of Civic and Acura EL models gained 1.3% to over 167,000 units, while almost
12,000 minivans were built by the end of the year. While production of the Odyssey is
still on one shift, the second shift is expected to start in the spring, with full
capacity likely to be reached later in the fall. Total output for the model year is
estimated at 75,000 units, with 60,000 units exported (most to the US, some to Japan
including right hand drive) and 15,000 for the Canadian market.

Toyota: At TMMC, both Corolla and Camry Solara
production boosted output 57.6% over 1997 to just under 172,000 units, up from 109,000
last year. Corolla production shifted to the second plant in 1997, and production of the
Camry Solara began in the fall of 1998 at the original plant. TMMC has recently announced
the addition of a Camry Solara convertible for manufacture in Cambridge. The new model is
slated to go on sale in the spring of 2000 and Toyota is expecting to sell 6,000 Solara
convertibles per year. TMMC has teamed up with American Sunroof Corporation (ASC) Inc. of
Michigan for production of the convertible. ASC will establish a facility to integrate the
production of the Solara convertible in Cambridge, and is expected to create over 50 new
jobs.

CAMI: At the same time, CAMI was idle during the
summer due to soft demand in the US, but started production of the new Suzuki Vitara /
Chevrolet Tracker compact sport utility vehicle in Ingersoll last September. While this
should boost their output in 1999, over the past calendar year, total production at CAMI
dropped 59% to about 45,000 units for both the SUV and the subcompact Suzuki Swift /
Chevrolet Metro.

As the Canadian market alone is too small to sustain rising levels of
production in Canada since the Auto Pact was signed in 1965, integration of the industry
on a North American basis has allowed foreign automakers in Canada to benefit from trade
agreements that permit access to the larger U.S. market. Like the U.S. Big 3, Japanese
automakers export a high level of their Canadian production, and likewise, rely on
imported models to serve the needs of the Canadian consumer.

In 1998, three Japanese-affiliated plants in Canada exported about
302,000 units, up 3.4% from 292,000 units in the previous year. About 97% of exports are
shipped to the U.S., while about 9,000 units are exported to other destinations, such as
Puerto Rico and Latin America.

Honda’s exports of finished vehicles from Canada in 1998 reached a
new high level at over 134,000 units, a gain of 10.9%. TMMC’s exports jumped 76.0% to
about 130,000 units, also a record level. CAMI shipped 60.8% fewer units in 1998 than in
the previous year, down to 38,000 units from 97,000 in 1997.

The ratio of units produced to units exported were unchanged from a
year earlier. About 76.3% of all vehicles produced in 1998 were exported, compared to
76.2% in 1997. As mentioned previously, Canada has been a net exporter of Japanese brand
vehicles every year since 1993, as exports exceeded imports. While 302,471 vehicles were
exported from Canada, 246,571 units were imported in total from Japan, the U.S. and
Mexico.

* estimated Source: JAMA Canada

NEXT: Overview of the Canadian Auto Industry –
1998