Cheap labor lures Canadian manufacturers

America’s improved competitiveness in the past decade is attracting Canadian manufacturers in search of lower labor costs to the United States.

Companies are taking advantage of increased productivity and slower growth in labor costs to bring back production or to locate new plants in the United States.

Labor disputes are behind decisions by two corporations to consider moving their Canadian operations south of the border. Navistar International Corp. shuttered its Chatham, Ontario, plant last year after the Canadian Auto Workers Union would not agree to wage and work-rule concessions. The same could happen with Caterpillar Inc., which is at an impasse in its talks with the union seeking wage cuts to keep it competitive in the global marketplace, company officials told the Wall Street Journal. Without a labor pact, the company could move some production to U.S. plants.

Company officials say their labor costs producing rail equipment at its LaGrange, Ill., plant are half of what they are at the locomotive-assembly plant in London, Ontario. Some of the Canadian work could go to the Caterpillar plant in Muncie, Ind.

But Caterpillar is not alone. Electrolux AB cited the need to maintain competitiveness with plans to close its Quebec plant and move production of its ovens, ranges and cooktops to a new facility in Memphis, Tenn. State tax and loan incentives coupled with lower labor costs caused Siemen AG to move its Hamilton, Ontario, operations to Charlotte, N.C., so it could be closer to customers. That was also one reason Bridgestone Corp. of Japan is spending $1.1 billion to construct a new plant in South Carolina.

According to the Journal, U.S. labor costs per unit have declined 13 percent from 2000 to 2010, compared to an 18 percent rise in Canada. U.S. productivity is on the rise due to new, more automated equipment that requires fewer workers to produce the same amount of goods. However, U.S. compensation costs for manufacturing workers have also grown much slower than in Canada.

The weaker dollar and lower energy costs due to shale-gas production are also factors in the southward migration.

The moves do not reverse the jobs lost to outsourcing over the past two or three decades, but as Daniel Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation, said, “Manufacturing in the United States is more and more attractive.”