Linamar exposed, Magna not so much, to U.S. NAFTA auto threat

Of the U.S. demands expected to complicate round five of NAFTA negotiations this week in Mexico City, here’s one of the more contentious: an American proposal that half of all parts and vehicles that cross borders under the pact be made in the United States.

While that might sound onerous for auto-parts manufacturers in Canada, some companies aren’t far off from that threshold, according to data compiled by Bloomberg.

Canada’s largest auto-parts maker, Magna International Inc., is among the most protected with about 48 per cent of the Aurora, Ontario-based company’s North American plants and equipment located in the United States already, the data show.

Magna is the top supplier to General Motors Co., Ford Motor Co., and Fiat Chrysler Automobiles. On the company’s quarterly earnings call Nov. 10, CEO Don Walker acknowledged that NAFTA uncertainty means a company contemplating big investments over the long term is probably on hold or going to be “biased to invest more in the U.S.” until there’s an outcome. He added Magna hasn’t made any such adjustments itself.

Martinrea International surged almost 10 percent on Wednesday, the biggest jump in a year, after the Vaughan, Ontario, manufacturer beat earnings estimates and commented extensively on NAFTA. About 41 percent of Martinrea’s North American fixed assets are in the United States, according to Bloomberg data.

Executive Chairman and co-founder Robert Wildeboer said in a conference call on Nov. 15 that “our relative footprint is very well positioned even if the rules of origin rules were tightened or even if there was no NAFTA.”

Canada’s second-biggest parts maker, Linamar Corp., has more to worry about in the event that a 50 percent U.S.-content requirement becomes reality. Only about 27 percent of its North American fixed assets are concentrated in the United States, the data show.

CEO Linda Hasenfratz, who sits on the Canadian government’s NAFTA advisory council, came out swinging against such a proposal in the opening statement of her earnings call last week. “There is no chance that country-specific content will be agreed to by Canada or Mexico,” she said. “So there is no sense in evaluating that scenario.”

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