WINDSOR, Ontario -- Chrysler Group shocked many Canadians when it abandoned potential government help to overhaul its assembly plants here.
Chrysler will stay, for now anyway, but CEO Sergio Marchionne's dire warnings about Ontario's "competitiveness" left many questioning the long-term fate of building vehicles in Canada.
That debate should be considered a canary in a coal mine not only for Canada, but for the unionized heartland of the United States as well.
Widening differences in labor, electricity, regulations, transportation, government assistance -- all the contributors to the final cost of producing an automobile -- have tipped the balance in what one analyst says has been a decade-old border battle.
But it's not the border you think.
"In the last decade, the automotive sector has been in a civil war -- it's Canada and the U.S. Midwest versus the U.S. South and Mexico," says Dennis DesRosiers, an automotive consultant in Toronto.
"And at this point," DesRosiers says, "the South is winning."
According to the Center for Automotive Research in Ann Arbor, Mich., automakers announced investments of over $51 billion in their automotive factories in North America from 2010 through 2013. That figure includes $5.2 billion invested by Chrysler.
Of that $51 billion, only $2 billion has gone to Canada. The majority has gone to expand automotive manufacturing in the southern United States and, to a greater extent, Mexico, where Japanese and German automakers are planning an additional $10 billion factory spending spree by 2020.
Mexico's manufacturing advantages are vast and varied: low labor costs; access to the largest worldwide automotive markets through free trade agreements; cheap currency; and, in mid-Mexico, the site of most recent automotive expansion, nearby direct access to two oceans.
Drug-related violence in Mexico remains a deep concern for automakers, but one that has so far not overshadowed their enthusiasm for the United States' southern neighbor.
The Chrysler-Canada controversy provides a window into the pressures that governments throughout the U.S.-Canada Rust Belt will feel as automakers weigh future production site decisions.
While Mexican auto manufacturing has grown, Canada's domestic industry has waned. Five car companies -- the Detroit 3, Toyota and Honda -- build cars in Canada, and the country is home to three of the largest 100 global auto suppliers: Magna International, Linamar Corp. and Martinrea International.
In 2004 Canada built 2.9 million vehicles, the vast majority for export, and was the world's fourth-largest auto-producing country. Last year Canada built 2.1 million vehicles -- 10th-highest in the world.
More worrisome for Canadians is corporate investment in its automotive manufacturing sector, according to a report compiled by the Canadian Automotive Partnership Council. In a report last November, the council said capital spending in the Canadian automotive industry last year was half the level it was in the 1990s and 2000s.
The council includes the five automakers that build light vehicles in Canada, as well as suppliers and Unifor, the union representing Canadian auto workers. It issued a dire report in November concerned that the nation's auto manufacturing sector was withering away.
It isn't that companies are anti-Canada, said Rob Wildeboer, executive chairman of Martinrea and a member of the council. "They're making business decisions in terms of where it makes sense to deploy their capital. Over the long term, the lack of capital spending is not sustainable" to maintain a Canadian auto industry.