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Some Aspects of the Canadian Automobile Industry
Published online by Cambridge University Press: 07 November 2014
Extract
The automobile industry is an outstanding example of branch plant expansion in the international field. Proximity to the American centres of automobile production, the policy of tariff protection pursued in the Dominion, and the similarity of Canadian and American manufacturing methods made possible its rapid extension north of the American border.
Ford of Canada was incorporated with an Ontario charter in 1904 just fourteen months after the establishment of the parent concern in Detroit. (A Dominion charter was secured in 1911.) The initiative in the establishment of a Ford assembly plant in East Windsor seems to have come from a group of Canadian business men, and all the actual capital investment in 1904 came from Canadian sources. The Ford Motor Company of Michigan received 51 per cent of the original stock, in amount $63,500, in consideration for which it agreed to extend to the Canadian concern the privilege of using in perpetuity all patents, improvements, and devices used to produce Ford products in the United States. This privilege included the use of such rights in Canada, New Zealand, Australia, South Africa, and some minor British possessions. In the formation of General Motors of Canada the initiative again came from Canada. The McLaughlins of Oshawa, formerly carriage manufacturers, were instrumental in starting the manufacture of the Buick car in 1907. They contributed substantial properties to the enterprise and, for a time, appear to have retained a majority interest in the concern's stock; but the General Motors Corporation of Canada, which grew out of the McLaughlin Motor Car Company, is now a wholly-owned subsidiary of the American concern.
- Type
- Articles
- Information
- Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 6 , Issue 2 , May 1940 , pp. 258 - 274
- Copyright
- Copyright © Canadian Political Science Association 1940
References
1 Sales by the big three in Canada represented 75 per cent of the total in 1930, 88 per cent in 1934. In 1925, 69 per cent of the sales in Canada and the United States was of models with wholesale prices less than $750; in 1933, this percentage rose to 95 per cent. See Brief of the Canadian Automobile Chamber of Commerce, in Canadian Tariff Board, Hearings on the Automobile Industry, 1035-36.
2 A11 statistical data from the Dominion Bureau of Statistics, Automobile Statistics for Canada, unless otherwise noted.
3 Under the Key Industries Act of 1919 an ad valorem duty of 33 1/3 per cent was placed on foreign automobiles, but Empire products received a preference of one-third of the general rate. The other Dominions have given most favourable treatment to the automobile industry of the United Kingdom, but have given Canada more favourable treatment than the United States.
4 A flat excise tax on automobiles had been imposed in 1918. Since 1922 the excise tax had been 5 per cent of the retail price up to $1,200 and 10 per cent of the excess over $1,200.
5 The effective rate of protection on the lower priced cars was approximately 26 per cent, including the benefits derived from the exemption of excise tax on domestic products. The higher valuations for duty and dumping duty applied in 1931 raised the effective rate of protection to 37 per cent. The more highly priced cars received a higher rate under the differentiated tariff schedule, but were not exempted from paying the excise in 1926. Ford seldom took full advantage of its protection; in 1935 for instance the Canadian price of a Ford V-8 was only 30.5 per cent higher than the price in the United States.
6 In table V, col. 2, infra, note how capital invested in United States industry per unit of output increased relatively to Canadian capital during years of falling production. This would indicate relatively higher fixed charges in the American industry.
7 Exports from Canada are largely handled as far as internal company organization is concerned by the export subdivisions of the parent companies in the United States, and this tends to becloud foreign price policy. Ford of Canada's policy is an important exception to this practice as that concern does its own exporting and owns distributor subsidiaries in other countries, though even in this concern the American wholesale price is the basis of arriving at the export price structure.
Lower prices for export are attributable to a series of cost factors other than actual market discrimination. The refund of duty and excise paid on export goods, certain technicalities and usages pertaining to exclusion of certain parts from the car delivered to the foreign importer, and a different distribution of the costs of advertising and merchandizing from that prevailing on the domestic market have been cited. The Ford Tudor was exported from Canada in 1928 at 17½ per cent under the factory list price for the vehicle in the United States or at about $363. This was roughly equivalent to the American wholesale price or 20 per cent less than the Canadian wholesale price which in that year was about $453.75. See Hearings of Advisory Board on Tariffs and Taxation (Ottawa, 1929).Google Scholar
8 Canadian Automobile Chamber of Commerce.
9 The unweighted arithmetic averages of money wages in cents per hour were as follows:
10 From the economic and statistical point of view, some defects in these comparisons must be noted. A rather wide disparity appeared between the quotations for different firms. Lack of homogeneity within the trade and differences of wage scale in different localities account for this. The higher quotations were usually accepted as the more representative, inasmuch as the large firms are located in the centres where the rates of wages are higher. No basis of weighting is available as the number of employees per occupation in each establishment is not given in the official returns. The stability of the quotations over a period of years indicates a likelihood of unreliable quotations in some instances. The United States data provide a greater differentiation by subdivisions of the general occupational or trade groups.
11 Owing to the fact that many imported parts are used for replacement rather than new car construction, it is impossible to determine the ratio, on a value basis, between domestic and imported parts used in the automobile industry.
12 Based on information obtained from Automobile Manufacturers Association.