Canadians will likely see their wages increase as a result of the cost-saving measures announced by Canadian auto maker GM, according to a new report by the Canadian Automobile Association.
The association released the study on Tuesday.
The new figures, released in response to a CBC News query, indicate that GM’s annual profit margin for Canada, which includes Canada and the United States, will increase by 6.5 per cent this year, or about $2.5 billion.
The increase is largely driven by an increase in Canada’s cost of production, said Robert J. Johnson, president of the Canadian auto industry group.
The organization estimates that Canada will earn $6.3 billion from the increased earnings, compared with $5.8 billion in 2016.
The cost of manufacturing in Canada is estimated to be $3.3 trillion, while the cost of raw materials in Canada and Mexico is estimated at $1.9 trillion and $1 trillion, respectively.
In addition, the group said it expects Canada to receive $3 billion more in dividends and interest payments in 2018 than in 2016 because of the lower cost of capital.
While GM will probably see its profits increase, the Canadian Association expects it to still be well below its level in the United Kingdom, the second-largest auto market, which it attributes to the lower price of oil.
The association’s president, David Goulston, said in an interview that it’s not surprising that GM will be more profitable in Canada than it is in the U.S. because the cost structure is similar.
“What we’ve seen in the past few years is that there’s been a lot of consolidation, a lot more cost control, a little bit more cost cutting,” said Goulson.
“The Canadian auto market is more like the United Auto Workers union model than it was in the 1990s.”
Goulston said that the new figures from the association are good news for Canadian workers, but it also raises questions about how Canada will pay for the higher wages.
He pointed out that the average Canadian family is $28,000 in debt, and he said that many Canadians won’t have enough money to make ends meet in the future.
“We’re not going to have that kind of disposable income,” he said.
“So how are we going to be able to provide for that?
We’re not talking about just the government; we’re talking about the entire economy.”
According to the Canadian Auto Association, Canadian auto companies produce around 80 per cent of the world’s vehicles, and Canada has the second largest market for auto parts after the United State.
The auto industry, which employs about 8.4 million people in Canada, has been losing workers since the late 1990s.
The U.K. is the largest single source of new jobs created since the 2008 global financial crisis.