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| quote: | Originally posted by SuperJimbo
In the examples above (automotive/manufacturing/forestry sectors) don't just think about the Canadian exporters. Consider how difficult it might be for (US) importers to unwind contracts with Canadian companies. Especially if they are multi-year, multi-million or billion dollar contracts. It's just not that simple. Depending on the industry, it could be very difficult to find replacement suppliers, let alone ones that have the skills or expertise reuired AND have excess capacity. These types of structural shifts in the economy and across industries will take years, not days.
Anyway, there are enough sound arguments on both sides to make your head spin. Personally, I am very skeptical when I read the newspaper or listen to people express their opinions about this topic, as almost everyone has a vested interest in one argument or the other, or really just aren't qualified to make a rationale assessment -- present company (i.e. ME) included. |
Besides being canadian and living in a changing economy, what is your vested interest, if you don't mind me asking?
The loonie didn't appreciate from 60 cents overnight...it's been quick, but not that quick. And it's not just limited to auto/forestry/etc either.
From today's globe:
| quote: | High dollar hammers profits
Magna, Manulie and AbitibiBowater lead list of companies blaming currency for reduced earnings
GREG KEENAN , BERTRAND MAROTTE and TARA PERKINS
With a file from reporter John Partridge
November 7, 2007
From food and financial services to forest products and auto parts, the soaring dollar has created upheaval for Canadian businesses in the third quarter.
Magna International Inc., Canada's biggest auto parts maker said yesterday it has closed some Canadian plants and shifted the work to Mexico, the country's largest life insurance company took a $56-million currency hit and losses deepened at a forest industry giant as the dollar neared parity in the three months ended Sept. 30.
That was before it reached the magic level of equality with the U.S. dollar, let alone the eye-popping value of $1.0852 (U.S.) hit yesterday.
Manulife Financial, AbitibiBowater Inc., dairy giant Saputo Inc. and CI Financial also blamed the soaring currency for diminished results in their latest reports.
Magna said the currency's rise has already forced it to shut some operations in Canada and shift work to Mexico and the U.S. There may be more to come, Magna said.
"Certainly some of our Canadian plants have come under pressure and the result so far has been unfortunately a shutdown of some facilities in Canada with a move into other jurisdictions including Mexico, the United States, as well as Asia," Magna's chief financial officer Vince Galifi said during a conference call.
Mr. Galifi would not identify any plants closed, but news releases earlier this year announced the shutdown of a plant in Aurora, Ont., and another in London, Ont.
"As a result of the continued increase in the value of the Canadian dollar relative to the U.S. dollar, our Canadian manufacturing facilities may have greater difficulty competing with facilities located outside Canada," the company said.
Mr. Galifi's comments came as Magna issued a warning about the potential impact of the dollar's rise. The warning came even as Magna reported profit surged more than 65 per cent in the quarter from year-earlier levels.
At Manulife, currency fluctuations lopped $56-million off its third-quarter bottom line, which still came in at $1.07-billion, up 10 per cent from a year ago.
On a conference call, chief executive officer Dominic D'Alessandro said the firm will ask its shareholders again if they would prefer the company switch its reporting currency to the U.S. dollar.
"It's something that could be easily accommodated," Mr. D'Alessandro said. "I'm sure you could program your little machine there, and just multiply all the numbers by 108 over 100 or vice versa, and get all the numbers in U.S. dollars if it's a fixation."
Chief financial officer Peter Rubenovitch acknowledged the dollar is going to make it hard for the firm to meet targets if the strength keeps up.
"I would say, obviously, the [Canadian] dollar-reported earnings can't rise at our target pace if you've got to carry 10- or 15-per-cent change in the exchange rate. But, that's not likely to be a sustainable burden." Mr. D'Alessandro said Manulife had been planning on the dollar being over par "but certainly not $1.08."
The currency swings helped push losses at Abitibi-Consolidated Inc. to more than double those of a year earlier, before one-time items, in the firm's final quarter before it merged with Bowater Inc. to create AbitibiBowater. The combined entity will be North America's largest newsprint producer and a major player in pulp, lumber and commercial paper.
"The results for the quarter are a reflection of the challenging market conditions and impact of the Canadian dollar," said John Weaver, president of the new firm, who added it is going to reassess its operations in a major overhaul and debt-slashing exercise that could include asset sales.
James Rowland of Montreal-based Canadian Paper Analyst said the merged firm's Canadian mills are going to have a tough time in the corporate review given they no longer enjoy the competitive advantage of a low dollar. "A lot of them will be offside on the cost curve," Mr. Rowland said. Quebec-based operations will also be under the gun because of the difficult softwood fibre supply situation in the province, he added. "It's coming down to crunch time and there are going to be some closure announcements," he said. "It's going to be painful for the next year or two."
Profit improved at dairy products maker Saputo Inc., but the strong dollar reduced revenue by $29-million.
CI Financial Income Fund also reported improved results, but pointed out the loonie's climb reduced market returns measured in Canadian dollars.
Although the S&P 500 index and the Dow Jones industrial average rose by 2 and 4.2 per cent, respectively, during the quarter, this translated to losses of 4.2 and 2.2 per cent, respectively, in Canadian dollar terms.
Feeling the pain
How the soaring loonie is having an impact on Canadian companies.
Rona Inc.
The home improvement retailer says the appreciation appears to be encouraging Canadian consumers to delay home renovation projects in favour of travelling abroad.
Sears Canada Inc.
It became the latest retailer to reduce some prices, saying it has cut some of its regular prices on a permanent basis because of the strong dollar.
Calfrac Well Services Ltd.
The company says the strong dollar - as well as uncertainty about Alberta's new royalty regime and low natural gas prices - "will continue to negatively impact drilling levels in the Western Canadian Sedimentary Basin throughout the remainder of the year and, potentially, into 2008."
Noranda Inc.
It reported weaker earnings amid lower zinc recovery, hedging losses, a lower volume of zinc metal sales - and a stronger Canadian dollar. |
slingshot, I think any Alberta slowdown has already started with the announcement of the increased royalties on oil and gas producers in the province. The analyst reports I've read are saying there are a lot of details still to be ironed out, but the general consensus is that it's certainly not going to bring any MORE business into the area...several major producers have stated their intentions to move production outside the province.
I agree the US economy hovering on the brink of a recession due to the housing situation is amplifying the rise of our dollar - all I'm really saying is that I don't believe the net effect is positive unless Canada can loosen its export ties with the US and become a more global exporter.
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