Archive for the ‘recession’ Category

Last week’s threat by Chrysler to close Canadian plants if it doesn’t win big concessions from the CAW is possibly one the most troubling announcements since the beginning of the auto industry meltdown.

Tom LaSorda, Chrysler president, said the company needs to lower its labour costs by about 25%, reducing wages from the current estimated to $75/hour to $55/ hour. LaSorda also said the company would require $2.3 billion USD in government bailout funds for Chrysler to continue manufacturing in Canada.

Currently, Chrysler directly employs an estimated 10,000 people in Canada. This number does not factor in the parts suppliers, dealerships and distribution centres who deal with the auto giant. The withdrawal of Chrysler would possibly force some parts companies and distributors to close entirely. And since suppliers usually sell parts to more than one auto maker, it would send other car makers clambering to find parts, eventually slowing production lines to a halt.

Some argue that over the long term, the loss of Chrysler might not be the worst thing to happen and prove advantageous for Ford and GM. The two remaining companies could theoretically pick up the slack for Chrysler in their absence.

Many are shaking their heads, calling it an idle threat. Shutting down operations in Canada would cost millions of dollars, not to mention a lot of time. While the auto industry as a whole would likely endure such a move, the move could potentially have severe impacts and pose countless problems across the board. Chrysler would have to shift production lines from Windsor and re-open their US minivan plant, should the current Windsor plant (where approximately 4,000 Canadians are employed) face closure. This would be an extremely costly endeavour.

And what of the effect this would have on the CAW, the very people Chrysler is demanding the concessions from?

Pundits and industry analysts say the threat is very real and not to be taken lightly, as Chrysler could very well transfer Canadian production to plants in the U.S. in a matter of months.

But historically, Chrysler has also made similar threats before (to varying degrees), and yet, are still here. CAW president Ken Lewenza has also recently asserted that Chrysler will not pull out just yet, anyway, as they have a three-year collective agreement with terms that prevent them from selling or closing plants for the duration of the agreement.

Readers: what are your thoughts?

The current economic recession has proven to hit even harder than many economists anticipated. An estimated 129,000 Canadians lost their jobs in January alone, of which Statistics Canada reports that Ontario workers lost a staggering 71,000. Alberta, once a thriving, profitable province, is even feeling the blow, having recently announced another 15,000 jobs lost. Forecasters predict a loss of yet another 250,000 manufacturing jobs over the next five years if the Canadian manufacturing sector follows similar trends occurring within the developed industrialized nations.

For several industries, there is little to no chance of a significant sales increase in the near future. With businesses grasping at straws to stay afloat in this downturn, it is more critical than ever to find a way to increase revenue.

Canada is internationally heralded as a leader in R&D funding for domestic-owned small to medium sized enterprises. The SR&ED program (Scientific Research & Experimental Development) is one avenue that businesses, especially manufacturers, can pursue to improve their bottom line. The goal of the federal SR&ED program is to encourage experimentation and technological advancements within Canadian companies, and this is of particular benefit in the recovery of our economy.

“Companies need to sit back and assess their individual circumstances. It’s time for a second look at the SR&ED process, whether you’ve claimed previously or not.” says Ajay Sinha, VP Operations with Northbridge Consultants. “That old adage is true – knowledge is power. In regards to capitalizing on the benefits of SR&ED, it is worthwhile to seek assistance from a reputable SR&ED consultant.” Sinha is reminding clients that the CRA has hired more auditing staff and made many revisions to the T661 and filing process. He emphasizes that navigating the maze of technicalities correctly is imperative to maximize the size of your claim, and increase the rate of approval to enlarge the dollar amount of returns or tax credits. “It’s a sink or swim situation.”

Sinha mentions that “For those who have had a negative experience or have been disappointed with the results, it is often due to qualifying activities that have been overlooked, and thus not claimed for, resulting in a much smaller return, or in some cases, rejection of the claim.”

Many companies use their SR&ED returns of offset incurred development costs. Alternatively, funds can be invested in new equipment and materials, new hires, or even facility expansion. Sinha adds “We also teach our clients how to track their future eligible activities to make documentation for claims easier and more substantial. This promotes repeated success with the program in the future. The extra resources to put towards the advancement of technology also give Canadians that edge above competitors internationally.”

On Friday, March 6th 2009, Northbridge Consultants will be holding another free breakfast seminar, to provide a useful information sessoin on the SR&ED program.  The seminar will be held at the Waterloo Inn Conference Hotel.  Details can be found at http://www.northbridgeconsultants.com/sr&ed-news-events.php

For more information, email info@northbridgeconsultants.com or call us at (519) 623-2486.