Mexico-based supplier explains closure of Ontario Nemak plant

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MONTERREY, Mexico — Nemak’s parent company has finally spoken about its plans to shutter its factory in Windsor, Ont., saying the plant is too small and too inefficient to remain open as the company expands elsewhere in the world.

Nemak has purchased two or three large businesses outside of Canada that came with existing plants and capacity, Álvaro Fernández, general director of Alfa, told Automotive News Mexico.

Fernández also cited a drop in demand in China as a reason to close its plant in Windsor. When Nemak announced the pending closure in July, it said the decision came on the back of “the expected withdrawal from an export program by a client in China,” which would lead the plant to use less than 10 percent of its installed capacity by 2020. 

“When the volume of sales…loses a little, it’s time to say which [plants] are the most efficient,” Fernández explained after participating in Expo Pyme 2019, organized by the Chamber of the Transformation Industry of Nuevo León.

Nemak, a producer of engine heads and other structural components, announced in July that it will close the engine block plant in Windsor in mid-2020. About 270 employees currently work at the factory.

“It makes sense to take production to where they are most efficient, regardless of the country; this time it was Canada,”  Fernández said.

Work done at the Windsor plant will move to some other plant Nemak owns, Fernandez said.

Unifor fights back

But the move won’t happen without a fight. In mid-August, Unifor, the union representing workers at Nemak in Windsor, announced it would seek to prevent the plant’s closure.

According to a statement by Unifor, since 2015, Nemak has received “generous” donations from various government sources. The union alleges the company accepted a grant of C$1.5 million ($1.1 million USD) from Ontario, C$1.3 million in tax exemptions from the city of Windsor and C$3 million in federal government funds.

“Nemak is breaking an agreement with the workers to keep this plant open until at least 2022,” John D’Agnolo, Unifor Local 200 president, said in the statement. “Canadians funded this company, Nemak workers built its production process, and Unifor will fight this closure.”

The federal government confirmed to Automotive News Canada that Nemak received a C$3 million investment under the Automotive Supplier Innovation Program (ASIP), a program the current Liberal government inherited from former Prime Minister Stephen Harper’s Conservatives. The program has since been integrated into the Strategic Innovation Fund.

“While the terms of the contribution agreement are commercially confidential, Nemak was deemed to have satisfied the terms of the program,”Department of Innovation, Science & Economic Development spokeswoman Dani Keenan told Automotive News Canada in a statement.

Meanwhile, the City of Windsor says Nemak never accepted one cent of the C$1.3 million it originally requested from the city, despite being approved to do so.

“The city set the money aside but Nemak never accessed any of it so there’s nothing for them to give back,” City of Windsor spokesman Jason Moore told Automotive News Canada in an email “Why they never accessed it would be a question for them.  

“And hopefully there is still a chance that something positive can come at that plant.”

While Fernández lamented the closure of the plant, he said the decision was necessary.

“It is a really very small plant, sometimes we pay close attention to the closure of a plant, and it is still important; there are going to be people who are going to lose their jobs, but it is not a very large plant,” he said.

The federal government is “very disappointed by the news coming from Nemak,” Keenan said.

“While this is a business decision taken by the company, we know that this will be a difficult time for the employees and their families,” she said. “We stand ready to ensure they receive the support and the benefits to which they are entitled.”

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