IT WAS ONCE SAID THAT CARS WILL DRIVE THEMSELVES,TAKE A LOOK

The Liberal government in Ottawa is facing a host of demands based on promises it made during the election campaign. The auto industry will have to make a strong case to get heard above the clamour.

Karl Mondon / Tribune News Service

Expect to see more Google self-driving cars, like this one in Mountain View, Calif., on the roads in 2016, part of a technological wave crashing over the conventional auto industry.

In a utopian world, Canadian auto workers would get huge raises, governments would lavish money on the industry, and cars would drive themselves as they met fuel efficiency and emissions standards effortlessly.

Then there’s reality.

Contract talks in 2016 between the Detroit Three automakers and their 28,000 workers in Canada are expected to be tough, and pivotal to keeping assembly plants open here.

The Liberal government in Ottawa is facing a host of demands based on promises it made during the election campaign. The auto industry will have to make a strong case to get heard above the clamour.

And, as for cars that drive themselves, well, they could be in the showroom by 2020, at least in Japan, but it will likely be years before they replace all 26 million cars currently on the road in Canada.

Still, it promises to be an eventful year ahead — with at least one unexpected surprise if history is any guide.

Here are look at five things that could change the face of the Canadian auto industry, starting in 2016.

Union negotiations: Contract talks between 28,000 members of Unifor and the Detroit Three automakers in Ontario are set to shape how many of the remaining 10 assembly plants here continue to operate. U.S. talks this year closed the gap between Canadian and U.S. workers, raising wages south of the border while the Canadian dollar lowered labour costs in Canada.

But with all three major automakers looking at plants that need major new investments, Unifor National President Jerry Dias has signalled the focus will be on winning new product commitments for Canada.

General Motors has said it won’t announce a replacement for the Camaro at its Oshawa plant until it signs a new labour agreement. Fiat Chrysler’s assembly plant in Brampton is badly in need of new investment. And two Ford plants in Windsor that build V-8 engines for larger commercial vehicles, pickup trucks and muscle cars need new product mandates after 2017.

Assembly plants are seen as crucial to maintaining an auto industry in Canada; they acts as hubs, attracting parts makers and other suppliers. But Canada has been losing out in the global competition for new investment to other lower-cost jurisdictions, particularly Mexico and the southern U.S.

Bill Pugliano

Contract talks between 28,000 members of Unifor and the Detroit Three automakers in Ontario are set to shape how many of the remaining 10 assembly plants here continue to operate.

Trade agreements: The Trans-Pacific Partnership, signed but not yet ratified by its 12 member nations, is the just the latest in a series of deals that could transform Canada’s auto industry, as multinational automakers develop increasingly global supply chains.

Canada can’t afford to be left out of such deals, advocates say, noting the auto industry is already highly integrated with two other major signatories, the U.S. and Mexico.

The pact would remove a 6.1 per cent tariff on vehicles imported into Canada much faster than they will fall in the U.S., making imports from Japan more competitive, critics note.

The domestic content required on vehicles that can come in duty free would fall to 45 per cent from 62.5 per cent, potentially biting into the local auto parts market.

Unifor has warned that the TPP could lead to a loss of 20,000 auto-related jobs in Canada.

Advocates say the deal could spell lower prices for consumers if industry savings are passed along.

The proposed deal has already sparked some intense lobbying for changes to the final wording.

PAUL HANDLEY

The Trans-Pacific Partnership is the latest in a series of deals that could transform Canada’s auto industry.

Technology: Self-driving cars, ride sharing apps, and tighter fuel efficiency and emissions standards are all driving a higher level of technological investment by the auto industry, as is a growing challenge from tech giants Google Inc. and Apple.

In the past, regulation and consumer demand were moving in opposition directions, says Flavio Volpe, president of the Automotive Parts Manufacturers Association. Consumers want faster, plusher, bigger cars, while regulators were driven by climate change and safety concerns. But the two desires appear to be converging, and technology is the enabler, he says.

Intelligent cars that sense the world around them are more fuel efficient and safer. Ontario could be a winner in this scenario if the right conditions foster investment in auto innovation, Volpe says.

The province is already home to one of the biggest tech players in the auto industry, Blackberry’s QNX, while more than 100 other local firms are playing in the sector.

The province has announced it will allow testing of self-driving cars on public roads starting in 2016.

Expect to see industry press for more government investment in things like electric recharging stations and intelligent infrastructure that promotes Ontario as place to conduct research and development.

Ratul Debnath

QNX is one of Canada's superstars in the fast-growing auto technology industry. The Waterloo-based firm, owned by BlackBerry, makes the technology behind digital dashboards.

‎A National Auto Strategy: With a Liberal government in Ottawa, there will be renewed industry pressure for a long-overdue National Auto Strategy.

Labour organizations and automakers agree that the country needs a new approach, including better co-ordination between the federal and provincial governments — a “one-stop” shop to attract and maintain industry investment.

While the province of Ontario provides grants as incentives, the previous Conservative government in Ottawa offered the industry repayable loans, which were taxable.

Last year, the State of Tennessee gave a single auto marker, Volkswagen, $600 million. By comparison, in the dying days of the fall election campaign then Conservative Leader Stephen Harper promised to extend an existing auto industry fund by $1 billion over 10 years, starting in 2017/18, with some of the money coming out as grants.

The Liberals have made supportive comments about the auto sector, but offered no specific commitments.

Much will be riding on the recommendations of Canada’s new auto industry czar Ray Tanguay. The retired chairman and chief executive officer of Toyota Motor Manufacturing Canada was appointed in June to advise both government and business on how Canada can resume winning its fair share of industry investment.

Tanguay’s report could be out by the end of 2015 or early in 2016.

Geoff Robins

As Canada's new auto industry czar, Ray Tanguay, right, is expected to issue a report on how the country can recapture its fair share of auto industry investment. He's seen here in his former role as chairman of Toyota Motor Manufacturing Canada.

The unexpected: If 2015 is any indication, the industry is likely headed for more than one surprise.

Will it be a sudden deceleration in sales? Or perhaps a mega-merger between car makers?

“Something unexpected will crop up. It always does,” says Tony Faria, co-director, office of automotive and vehicle research, at the University of Windsor. “What I hope doesn’t come up in 2016 is a sudden downturn in auto industry sales.”

The highly cyclical industry has so far defied its normal pattern of six to seven years of strong sales followed by a two- to three-year trough, he noted.

Profits have been plump as consumers switch to larger, more profitable, vehicles and automakers reap the benefits of deep cost-cutting after the 2009 recession.

But the industry also faced an unprecedented number of safety recalls in 2015 and a growing challenge from tech giants. Capping the year was the breathtaking admission by Volkswagen AG that it had installed software that deliberately tricked emissions tests.

The accelerating demand for costly investments in new technology is one reason Fiat Chrysler chief executive officer Sergio Marchionne’s is calling for a mega-merger with General Motors. GM has demurred.

“As big as Fiat Chrysler is — it builds and sells 4 million vehicles a year, globally — Sergio says it’s not big enough to meet all the emissions standards, safety standards and be competitive with all the new technology that’s coming,” Faria says.

Stay tuned. Anything could happen.

BRENDAN MCDERMID

Fiat Chrysler chief executive Sergio Marchionne has called for a merger with GM, saying automakers need to be big to survive. GM has so far expressed no interest.

Canada’s auto industry by the numbers

Direct Employment: 120,000.

Total Employment (counting “spin-off” jobs): over 400,000.

Total Shipments: $56 billion (assembly)/ $27 billion (parts).

Total GDP: $17 billion value-added.

Exports: $66 billion (second-most important export industry).

Productivity: $210,000 per worker per year (assembly).

Average Annual Incomes: $72,000 (assembly), $55,000 (parts).

Sources: Unifor, Statistics Canada, Industry Canada