November 15, 2007 -- Martinrea International Inc. executives said yesterday they will shift work from Canadian plants to factories in the U.S. and Mexico due to the strong Canadian dollar.

But the president of the union at Martinrea's Kitchener plant said the facility is not in imminent danger.

Since purchasing 13 plants, including the former Budd Canada plant, from ThyssenKrupp AG last year, Martinrea has been able to improve margins, chief executive officer Fred Jaekel told investors on a conference call yesterday.

Martinrea has returned about $67 million of outsourced work to the former ThyssenKrupp plants and shuffled production among plants, Jaekel said.

But the loonie's recent frenzied rise has forced Martinrea to look outside Canada to stay competitive.

"We are likely to see a contracting of our Canadian operations," Jaekel said. "Some work will move south, or business from our customers that may previously have been awarded to Canadian plants will be awarded to plants south of the border."

Martinrea's last annual report lists 16 plants in the U.S., 15 in Ontario, four in Mexico and one in England.

The Vaughan-based company is ramping up a new stamping plant in Mexico and is likely to add an assembly plant in the country in the near future, Jaekel said. Martinrea is also expanding a factory in Mississippi.

Martinrea's Canadian employees are doing their best to improve productivity, he said. But "facilities which have no work will close, and plants which have less work may have to be consolidated," he said.

For now, Martinrea's Kitchener Frame Ltd. plant on Homer Watson Boulevard is safe from closure or consolidation because of its size, said Mike Devine, president of Canadian Auto Workers, Local 1451.

Kitchener Frame makes frames for the Chevrolet Trailblazer, GMC Envoy and Cadillac CTS, SRX and STS. No U.S. Martinrea plant can duplicate the factory's volume, Devine said.

"They don't have a U.S. plant large enough to handle the frame," he said. "We're not in current jeopardy."

Jaekel told analysts he does see a future for the Canadian auto parts industry, provided the Canadian dollar does not continue gaining aggressively.

"In the long term, there will still be assembly plants and lots of auto parts in Canada," he said. "In our view, Canadian plants will be competitive in producing parts and assemblies for Canadian assembly plants, except in cases where there is a huge disparity in exchange rates."

Most of the parts Kitchener Frame produces are shipped to the U.S.

Devine said he is confident Martinrea is doing what it can to pursue new business for the plant, which employs about 800 people.

mwalcoff@therecord.com

Source: Kitchener-Waterloo Record