Chrysler Group LLC says traffic delays at the Canada-U.S. border are driving up costs for the world’s seventh-largest carmaker, which sends 2,000 finished cars and trucks a day across an 83-year-old bridge linking Detroit to Windsor, Ontario.
Canadian Prime Minister Stephen Harper wants to change that, announcing an investment of at least $550 million to build a bridge to speed shipments across the busiest commercial border crossing in the world’s biggest trade relationship.
“The name of the game with respect to our manufacturing operations is just-in-time inventory, not just-in-case inventory delivery,” said Reid Bigland, chief executive officer of the Canadian unit of Chrysler, majority owned by Fiat SpA (F), in a telephone interview.
While the Canadian government has spent much of the last decade lamenting the country’s reliance on the U.S. economy and seeking stronger trade links with Asia, the proposed bridge shows cross-border business is increasing.
Canada’s exports to the U.S. rose in the first quarter to their highest level in three years, with the U.S. accounting for 73 percent of total shipments. That share touched a record 85 percent in 2001.
The span would supplement the Ambassador Bridge, which has connected the two cities since 1929. More than C$130 billion ($127 billion) in shipments and 8,000 trucks cross the Detroit-Windsor border each day, according to Canadian government data.
The crossing carries 25 percent of truck commerce between the U.S. and Canada and more than 7 million vehicles a year, according to the Public Border Operators Association.
Delays in sending shipments across the existing bridge have added “unnecessary costs” for automakers, Bigland said.
Sales to the U.S. by Linamar Corp. (LNR), a parts maker based in Guelph, Ontario, increased 29 percent last year to C$188 million. While U.S. revenue has increased, some automakers have cited bottlenecks at the crossing as a drawback to sourcing supplies in Ontario, said Mark Stoddart, chief technology officer and executive vice president of marketing at Linamar.
“We have had customers indicate to us that the bridge issue is a concern that they have in sourcing Linamar,” Stoddart said by phone.
Harper, who has urged the construction of pipelines to ship oil and gas to Asia, called the bridge the “most important piece of international infrastructure that this government will complete while I’m prime minister.”
“We are prepared to do everything in our power to make it happen on the Michigan side,” he told reporters at a news conference June 15 in Windsor.
Trade has been a diminishing source of growth for Canada for more than a decade, becoming an outright drag since 2005, as a rising dollar and cheap imports from China prompted Canadians to buy more goods from abroad.
President Barack Obama and Harper in December agreed to take steps to speed the flow of goods and people across the border in a bid to counter weakening trade ties.
Border regulations cost Canadian businesses about C$16 billion annually, the Canadian government estimates.
Harper has said exporting more to China became a “national priority,” after Obama rejected Calgary-based TransCanada Corp. (TRP)’s $7 billion Keystone XL pipeline to ship Canadian oil to U.S. refineries on the Gulf of Mexico.
Canada was invited to join nine nations, including the U.S., negotiating a Pacific-region trade agreement, Harper said June 19. The Trans-Pacific Partnership agreement “will enhance trade in the Asia-Pacific region and will provide greater economic opportunity for Canadians,” Harper said in a statement.
Economic ties between China and Canada remain lopsided. Canada’s trade deficit with China was C$152.11 billion from 2007 to 2011, according to Industry Canada data.
“Diversification means you sell more to others,” said John Manley, president of the Canadian Council of Chief Executives in a phone interview. “It doesn’t mean you sell less to your biggest customer.”
The complete bridge project, including customs plazas on either side of the border, is estimated to cost C$3.5 billion to C$4 billion, Transport Canada spokesman Patrick Charette said in an e-mail. Canada has committed as much as $550 million to pay for infrastructure on the Michigan side of the bridge, and costs for other parts of the project are “‘still being refined,’’ Charette said. Michigan isn’t providing any funding.
Tolls collected on the Canadian side will be paid to the private company that will design, build and operate the bridge. Part of the tolls will help the Canadian government recoup its investment, Charette said.
Michigan has ‘‘gone through many difficult years,’’ Governor Rick Snyder told reporters June 15. ‘‘We aren’t in a position to do this. They’re reaching out to help us,” he said of Canada.
Manuel Moroun, the billionaire owner and operator of the Ambassador Bridge, has opposed a publicly financed competitor. Canadian officials and Snyder have been championing construction of a second bridge amid resistance from some Michigan lawmakers and Moroun, 85, who wants to build his own adjoining six-lane span.
“Beyond a press event, the governor needs to make his best case for his government bridge,” said Mickey Blashfield, head of government relations for Detroit International Bridge Co., the company that runs the Ambassador Bridge.
Moroun has lobbied lawmakers and funded television ads labeling a publicly funded bridge a boondoggle. Moroun bought the controlling interest in the bridge company in 1979, outbidding Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A)
“This is a battle that’s been won. It’s not the war. We’re faced with a very powerful, wealthy entrenched interest that will do everything legally and politically possible to block the new crossing,” said Perrin Beatty, president of the Canadian Chamber of Commerce in a phone interview June 15.
The new bridge may create more crossing capacity than the region needs in the near term, Fitch Ratings said in a research note June 18. Traffic patterns on most U.S. cross-border bridges have been declining since 2000, the credit-rating company said. Still, it “may position the region for increased trade traffic over the medium and long term,” it said.
Construction will provide about 12,000 jobs annually for each of the four years it will take for the structure to be built, the Center for Automotive Research said in a study released June 14.
The Michigan Manufacturers Association in Lansing, the Consulate General of Canada in Detroit and the Detroit Regional Chamber helped fund the study, according to the Ann Arbor, Michigan-based researcher.
“Any ease of moving goods from one place to the other only decreases cost and makes us more competitive in North America, so that’s the way we look at it,” said Mark Reuss, President of GM North America, a unit of General Motors Co. (GM)
The four-lane Ambassador was completed in 1929 by banker Joseph Bower. At 7,490 feet (2,283 meters), it was the world’s longest suspension bridge at the time, according to the bridge’s website.
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