Mexico is expected to build about 2.2 million vehicles and Canada is projected to construct two million vehicles, said Dennis DesRosiers, president of DesRosiers Automotive Consultants.

One reason for the change in production is a decrease in sales, Mr. DesRosiers said. When people are not buying vehicles, production winds down as well.

Production in North America in 2000 was 17.7 million units and production this year will be about 13.5 million units, Mr. DesRosiers said.

"Canada is more centred on the U.S. market than Mexico, so Canada takes more of a cyclical hit than Mexico," he said.

Another factor affecting the local industry is wages. The disparity between Mexican and Canadian wages is fueling higher production rates down south, he said. Mexican wages are in the $4.50 per hour range, with lower-tier wages at $2 per hour, the auto analyst said.

In contrast, it costs GM, Ford and Chrysler about $78 an hour to produce in Canada when health and retirement benefits are factored into the hourly wage, Mr. DesRosiers said.

Because of these high labour costs it is difficult for unionized plants in Canada to be profitable when making smaller vehicles, he said.

But despite the financial benefits of producing south of the U.S., there are still problems with production, he said, including concerns about quality of vehicles built there and the difficulty of bringing vehicles through two borders if they are being sold in Canada.

"Mexico isn't necessarily a panacea," he said.

But Mexico has the further advantage of being able to produce smaller vehicles because of low labour costs, he said. As a result, production in Mexico is up eight per cent while Canada, which produces larger vehicles, has a production rate down about 19 per cent, he said.