GM, Suzuki Plan Joint Car Venture in Canada

General Motors and Suzuki Motor Co. of Japan announced plans Wednesday to build a $360-million joint-venture car plant in Canada, giving Suzuki duty-free access to the U.S. market but committing the compact-car maker to a Canadian work force and components.

“No vehicle manufacturer today can be an island,” GM Chairman Roger B. Smith said after a traditional Japanese signing ceremony with a temple bell and sips of sake from square wooden bowls.

“We’d rather build it here in Canada, on Canadian soil and with Canadian workers, than we would import it,” Smith said of the small car to be built at a 1.6-million-square-foot plant in Ingersoll, in southwest Ontario.

General Motors of Canada Ltd. and Suzuki will be equal partners in the venture, with the aim of building 120,000 cars and 80,000 four-wheel-drive sport and utility vehicles a year for sale in the United States and Canada.

Suzuki will provide management, design and state-of-the-art production lines in a deal that helps the company circumvent U.S. trade protectionism and car import quotas. It also fills a gap: No small cars are currently built in Canada.

GM contributes its dealership and auto parts network in what Smith termed a partnership “important to the future of the auto industry in three of the world’s greatest industrial nations.”

Expects Overcapacity

GM sees a good market for a small car, based on the Suzuki Sprint and Forsa models, but Smith acknowledged that there would soon be overcapacity in North American markets.

“The market is going to tell us which cars succeed, which plants stay open, which plants close. It’s a very, very tough, competitive race . . . all of us are doing contingency planning,” he told reporters.

The Canadian federal and Ontario provincial governments will provide more than $36 million in start-up assistance, including Suzuki training 200 Canadians in Japan.

Work will begin immediately on the plant, which is scheduled for completion in 1989 and will be modeled after Suzuki’s highly automated Kosai factory. It will employ at least 2,000 members of the Canadian Auto Workers union, whose president, Bob White, agreed to mesh the Canadian and Japanese labor systems.

In an experiment for Canadian workers, Suzuki will manage the plant using Japan’s “team concept” approach, but workers will receive wages and other benefits comparable to GM employees elsewhere in Canada, White said.

In another first, Suzuki pledged to use at least 60% Canadian components within two years, in compliance with the U.S.-Canada Auto Pact of 1965, the first foreign manufacturer to do so. The commitment represents sales of about $144 million a year to the Canadian auto parts industry.

Duty-Free Movement

The pact permits the duty-free movement of cars and parts between the two countries.

Osamu Suzuki, president of the Japanese company, said the Canadian government first suggested the venture two years ago. At first, “I could not believe it was possible,” he said, citing a lack of experience in the North American market.

He said he was impressed by the flexible pact reached with auto workers. “It is my belief that to gain trust from others, you should extend trust to others first,” Suzuki said.

The final decision came three weeks ago after the Canadian government agreed to allow Japanese car makers to increase their exports by 17.6% in the coming year, while putting voluntary restraints on South Korean exports. Suzuki expects to sell 20,000 cars in Canada this year.

The joint venture outstrips Canadian investments planned by three other Asian car makers: Toyota’s plant in Cambridge, Ontario; a South Korean Hyundai plant in Bromont, Quebec, and Honda’s factory in Alliston, Ontario.

AMC-Renault is building a plant in Brampton, Ontario, and General Motors is re-equipping its main Oshawa, Ontario, plant. Because of excess capacity, however, GM may close down a 4,000-worker plant at Ste. Therese, Quebec, next year.

The Canadian auto industry, almost entirely in Ontario on the borders of Michigan and New York, provides about 130,000 jobs and turns out nearly 2 million cars and trucks a year, about 14% of the North American total.

Smith said that GM had already been successful with its U.S. joint venture with Toyota. International cooperation, ending the “not-invented-here syndrome,” will keep markets open, he said.