Export Development Canada is making a $525-million loan to Volkswagen AG in a bid to get the German auto maker to boost its Canadian supply base as it expands in Mexico and the Southern U.S.
The loan doesn’t have any specific strings attached to it, but EDC asks that Volkswagen be receptive to pitches from qualified Canadian companies that the Crown corporation will help to identify.
“They commit to meet Canadian suppliers, to share their procurement needs with Canadian suppliers and we introduce the Canadian suppliers to them,” said Carl Burlock, EDC’s senior vice-president for financing and investment.
“This really reduces the sales lead time for smaller Canadian companies.”
Volkswagen purchased $85 million worth of parts from Canadian suppliers last year, according to Flavio Volpe, president of the Automotive Parts Manufacturers’ Association (APMA).
“Any further formal link between Canada and Volkswagen just helps to solidify that relationship,” Volpe said.
There has been plenty of hand-wringing about how quickly Mexico’s auto industry is growing while Canada’s shrinks, but Volpe said new plants in Mexico are creating business opportunities for Canadian-based suppliers.
APMA estimates that there are 55 Canadian auto-parts companies with 110 facilities currently operating in Mexico.