February 2002

1. Industry Industrie Canada Canada Canada’s Automotive Sector: An Investment Opportunity Aerospace and Automotive Branch Industry Canada February 2002

2. Auto Industry Shipments and Manufacturing Employment (Index: 1990 = 100) $106.9 billion Output Employment 184,000 Source: Statistics Canada The automotive industry is a key sector in Canada… • Canada is the 7th largest auto producing nation in the world. • Canada produced 2.5 million light vehicles, 16% of NAFTA output. • Canadians bought 1.6 million new vehicles. • Auto industry shipments totaled $106.9 billion. Of this, $33.8 billion was parts. • Canada-U.S. auto trade reached $153.9 billion, with a Canadian surplus of $26.0 billion. • The auto industry is concentrated in Ontario and Quebec, and it accounts for 14% of Canada’s manufacturing GDP.

3. CANADA Vancouver Winnipeg Montreal Seattle Toronto Milwaukee Detroit/ Windsor Chicago U.S.A. 800 km Atlanta 480 km Los Angeles Miami MEXICO Mexico City ...and is integrated with the world’s largest vehicle market -- the United States • Through the NAFTA, Canada provides integrated access to a market of nearly 400 million people and annual light vehicle sales of 20 million units. • Nearly half of the North American • population lives within a 10-hour • drive of Toronto. • The NAFTA has facilitated: • border procedures; • movement of personnel; • investment and intellectual property protection. • product certification; and • 90% of Canadian-built vehicles are exported, mainly to the U.S.

4. Canada has world-class auto assembly and parts manufacturing operations…

5. ...but Canada is still looking to increase investment • Annual capital investment in the Canadian auto sector is $2.4 billion and has grown at 9% per year, more than double the U.S. rate. • Canada is looking for expanded assembly capacity and new investment from Tier 1 suppliers.

6. Government committed to future growth of the auto sector in Canada • Federal government has launched a consultation process with the Canadian automotive sector – industry executives, labor and provinces. • Objective: Strengthen investment, production and innovation. • Phase 1 (Jan-May 2002): Stakeholder consultation and discussion paper. • Phase 2 (summer 2002): Automotive Colloquium and ministerial advisory body • Phase 3 (fall 2002): Analysis, recommendations and work plan. • New Industry Minister supports process.

7. Canada’s business climate is among the world’s best… • Canada’s business environment rates as 4th best of 60 countries -- and 3rd among major auto producing nations. • Improved conditions for growth: • budget surplus • tax regime • low inflation • low interest rates • trade policy / market access • innovation policy • programs • December 2001 budget measures for border – critical to auto sector. • Foreign investors have access to supportive governments. World Rank -- Business Environment 2001-2005 Automotive Countries 2nd 4th U.S. U.K. Italy Korea Japan France Mexico Canada Germany Source: Economist Intelligence Unit, Aug 2001, assessment of 70 indicators of business friendliness, infrastructure and competition.

8. Corporate Tax Rates Minimum US federal tax Sources: Pricewaterhouse Cooper, Tax Facts & Figures 2001; and CCH State Tax Handbook …with competitive corporate taxes… • Canada compares well in terms of corporate income taxes with U.S. auto producing regions. • e.g., the combined federal-provincial tax rates in Ontario and Quebec are lower, compared to the minimum U.S. federal rate of 34%. • No restriction on repatriation of profits.

9. …and real advantages in R&D • Strong capabilities in advanced technologies – e.g., fuel cells, light metals, manufacturing processes and plastics. • Skilled personnel and dynamic automotive R&D partnerships. • Automotive education and training infrastructure that includes technical colleges, trade schools and universities. • The most generous tax treatment for R&D in the G-7. • Additional government support through programs, research organizations and the newly launched Innovation Plan.

10. Business Costs Advantage by Type of Operation (Index: US = 100) Source: KPMG, The Competitive Alternatives G-7 Edition (2002) * Index based on initial investment and annual operating costs. Business costs are among the lowest in the G-7 • New 2002 KPMG international business cost comparison study launched Jan. 29. • Canada’s cost advantage over the U.S. is 10% for manufacturing, 11% for auto parts and 33% for R&D. • Companies in Canada have specific cost advantages in: • construction / start up; • labor and benefits; and • many annual operating expenses such as office rents, utilities and corporate income tax.

11. Construction Costs (Index: US = 100) U.S. Canada Land Costs (Index: US = 100) U.S. Canada Office Lease Costs (Index: US = 100) U.S. Canada Source: KPMG, The Competitive Alternatives G-7 edition (2002) Land and construction costs are competitive… • When compared to the U.S.: • construction costs are 19% lower in Canada; • land costs are comparable; and • office lease costs -- including utilities, taxes and insurance -- are 37% less.

12. Wages – Motor Vehicle and Equipment Manufacturing (in US$/hour) 32.40 Statutory and Employer-Sponsored Benefits (% of wages) 8.6% lower 23.59 23.50 19.46 19.47 17.62 15.37 34.2 25.6 Ontario Tennessee Kentucky Michigan S. Carolina Alabama Ohio U.S. Canada Sources: Statistics Canada and US Bureau of Labor Statistics Source: KPMG, The Competitive Alternatives G-7 Edition (2002) Labor savings in Canada are substantial When compared to the U.S. … Benefits are lower, due largely to government-funded health care. Hourly wages are significantly lower.

13. …transportation and energy costs are lower too Annual Transportation and Distribution Costs (Index: US = 100) • Transportation costs in Canada are, on average, 24% lower than those in the U.S. for manufacturing industries. • Electricity costs for industrial users are significantly lower in Canada than in the U.S. A recent study pegged the difference at 30% per annum. U.S. Canada Annual Electricity Costs (Index: US = 100) U.S. Canada Source: KPMG, The Competitive Alternatives G-7 edition (2002)

14. Labor Productivity -- Assembly (in hours per vehicle) 25.9 24.0 U.S. Canada 7.3% better Source: 2001 Harbour Report Canada has a productivity advantage over the U.S. … • Canada has a 7% advantage in assembly hours per vehicle. • Canadian assembly plants have won 10 of the 30 J.D. Power plant quality awards since 1991. • From 1990 to 2000, Canada’s labor productivity grew 12% per annum, compared to 10% in the U.S. (value-added per employee.) Productivity Growth Automotive Assembly 330 280 Index: 1990 = 100 230 180 130 80 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 Sources: Statistics Canada and US Dept. of Commerce

15. Assembly Plant Hours per Vehicle Kansas City 26.52 Ford F-series Oakville 26.12 Pontiac East 26.01 GM pickups Oshawa 21.7 St. Louis 36.8 DaimlerChrysler minivans Windsor 32.1 NUMMI 21.6 Toyota Corolla Cambridge 17.7 Harbour Report 2001 “Our records for safety and productivity place the TMMC team among the industry’s best. And when it comes to quality, vehicles built at our Cambridge facility are among the highest rated vehicles in North America.” Takanori (Tak) Sakaue, President Toyota Motor Manufacturing Canada Inc. U.S. Canada …so it takes less time to make the same vehicle in Canada

16. Management Education 1st 2nd Italy U.S. U.K. Japan France Canada Germany Source: WEF, Global Competitiveness Report 2000 Canada’s workforce is skilled and educated Availability of Skilled Workers 13th 18th • Canada ranks 3rd among auto producing nations based on availability of skilled workers. • Canadian universities and colleges produce more than 25,000 new graduates per year in math, engineering and science. • Canada ranks 2nd among 59 countries based on availability of management education in first-class business schools. Italy U.S. U.K. Japan Korea France Mexico Canada Germany Source: IMD, World Competitiveness Yearbook 2001

17. World Rank - Quality of Life Factors 5th Overall quality of life 11th 20th Cost of living 25th 12th Apartment rent 42nd 8th Personal security 12th 18th Harassment and violence Canada 28th U.S. 13th Pollution problems 21st Source: IMD, World Competitiveness Yearbook 2001 Canada is a great place to live – safe, clean and inexpensive • Among major auto producing nations, Canada: • has the highest quality of life; • has the second lowest cost of living index and the lowest apartment rents; • is among the safest places to live and do business; and • is among the least affected by pollution. • Other Canadian advantages include: • high-quality, low-cost education; • universal health care; • cosmopolitan cities; and • diverse cultural and recreational amenities.

18. In conclusion, when you think automotive, remember to think Canada! • Domestic Auto Sector: • World’s 7th largest auto producer • 15 light vehicle assembly plants and • 550+ parts manufacturers • 16% of NAFTA production (2.5 million units) • 90% exported to U.S. and other markets • Access to Markets: • Integrated NAFTA region • 20 million light vehicles sold in North America • Ties with Asia and Europe • Business Climate: • Top-ranked business environment • Competitive corporate taxes • Low inflation, low interest rates • Best R&D tax benefits in the G-7 • Access to supportive governments • Cost Competitiveness: • Lowest cost manufacturing location in G-7 • Land and construction costs 20% and • 16% less than in US • Labor and benefits also cost less • Transportation, energy and many other operating costs lower than US • Labor and Productivity: • Availability of skilled labor • Auto manufacturing wages 10% lower than US • Employee benefits cost 9% less also • 7% advantage over US in hours/vehicle • 10 JD Power plant quality awards since 1991 • Quality of Life: • Top-rated quality of life • Lowest cost of living in G-7 • Safe, clean and cosmopolitan cities • Diverse cultural and recreational amenities