Review Ind 98

The Japan Automobile Manufacturers Association of Canada is a non-profit
trade association established in 1984 to promote greater understanding
on economic and trade matters pertaining to the motor vehicle industry
and to encourage closer cooperation between Canada and Japan. JAMA Canada’s
members include the following companies who import, distribute, manufacture
and export automotive products:

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.

JAMA Canada Members’ Operations in Canada

(click on the image to enlarge)

As a group, JAMA Canada members have become an integral part of the
Canadian auto industry that makes a significant and growing contribution
to Canada:

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.

Contributions
to the Canadian Economy

1. Consumer Benefits

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.

3. Investments in Manufacturing

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:

Japanese-affiliated vehicle production in Canada grew
by 3.4% in 1998 to over 396,000 units. Behind this modest increase, however
significant changes are evident. Output at Honda (HCM) in Alliston rose
8.8% over 1997 to just under 180,000 units and Toyota (TMMC) in Cambridge
increased production 58.6% to almost 172,000 units. Both HCM and TMMC
opened new or renewed plants in 1998 for the Odyssey minivan and the Camry
Solara coupe, respectively.

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.

* estimated Source: JAMA Canada

Exports:

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

Imports (Shipments):

Overall imports of finished vehicles by JAMA Canada members
grew 4.6% in 1998 to 246,571 units from 235,767 units in the previous
year as a result of higher shipments from both the US/Mexico and Japan.
The increase was mainly due to strong consumer demand for Japanese brand
vehicles.

Japan: Shipments of vehicles from Japan in 1998 were
up 3.4% to 145,755 units from 140,960 units in 1997. At the same time,
finished vehicle shipments from Japan to Canada changed direction in the
course of 1998. While strong in the first quarter, over the last three
quarters, shipments were declining. For the fiscal year beginning in April,
vehicles exported from Japan have fallen 12.8% overall, from 115,000 to
100,000 units to the end of December.

Source: JAMA

US/Mexico: Vehicles shipped from plants in the US and
Mexico for JAMA Canada members rose 6.3% in 1998 to under 100,800 units,
up from 94,800 units in 1997. Passenger car shipments edged up 1.4%, while
light trucks rose 26.1% year over year.

* estimated Source: JAMA Canada

Sales:

Sales of JAMA Canada members in 1998 attained a new peak,
topping out at 330,148 units, an increase of 10.9% over 1997. The previous
peak was in 1991 when Japanese automakers sold 325,000 vehicles in Canada.
The key difference between then and now is the fact that in 1998, 54%
of all vehicles sold were models built in North America, compared to only
20% in 1991.

In 1998, although the total market in Canada was flat,
Canadian consumers continued to be attracted to Japanese brand cars, light
trucks, minivans and sport utility vehicles. A combination of new models,
high quality and reliability, as well as competitive prices were likely
factors in establishing this record performance. The top-selling passenger
car in Canada for 1998 was the Honda Civic at 54,065 units, the first
time that a Japanese brand has topped the field in Canada. The Toyota
Camry took the top sales honours in the US for 1998 for the second year
in a row.

Passenger car sales recorded an increase of 9.0% to
246,336 units. Reflecting the strength of the light truck market in Canada,
JAMA Canada members’ light truck sales jumped 17.1% in 1998 to 83,123
units from 71,033 units the year before. About 54% of sales were models
built in North America. By class of vehicle, about 60% of passenger cars
and 35% of light trucks were North American built. Several JAMA Canada
members achieved new record high sales in 1998 including Hino, Honda,
Subaru and Toyota.

Japanese brand market share gained over two points in
1998 over the previous year, rising to 23.7% from 21.4%. Passenger car
share rose to 33.3% from 30.6%, while the light truck share rose almost
two points to 12.8% from 10.9% in 1997.

Source: AIAMC, JAMA Canada