Sea-Doo Maker Expands in Mexico as Trump Eases Nafta Rhetoric

(Bloomberg) -- Canada's BRP Inc. is charging ahead with expanding Mexican output of its Sea-Doo watercraft and other sport vehicles, encouraged by U.S. President Donald Trump's relaxed rhetoric over the North American Free Trade Agreement.

“We were a little bit worried when President Trump came to power, given that he took some pretty drastic positions during the campaign,” Chief Executive Officer Jose Boisjoli said in an interview. “Now we're starting to see a timetable. We have a better idea in terms of the schedule, and the tone has softened a bit.” 

His view reflects increased confidence in the future of regional integration. After Trump was elected, Boisjoli expressed concern about BRP's future in Mexico, telling analysts in March that he would be “ready to act” if the 23-year-old trade pact was torn up. The president's statements since have become more constructive, Boisjoli said after the company's annual meeting on Thursday.

The former snowmobile unit of Bombardier Inc. is shifting work to Mexico in a bid to lower costs. The Latin American country now accounts for about 3,600 of BRP's global workforce of 8,700 people. The Valcourt, Quebec-based company has about 2,500 in its home country.

Trump last month notified Congress that he intends to start renegotiating Nafta, which binds the U.S., Canada and Mexico. U.S. Commerce Secretary Wilbur Ross said Wednesday that the strongest chance for overhauling the trade deal is before Mexican presidential elections next year. During the campaign, Trump called Nafta “the worst trade deal maybe ever signed anywhere.”

‘More Comfortable'

BRP, which also makes Spyder motorcycles, Can-Am off-road vehicles and Ski-Doo snowmobiles, is investing about C$25 million ($18 million) to expand the capacity of two Mexican plants by about 20 percent, Boisjoli said. The company will install new equipment at two facilities by April and hire about 100 employees, he said.

“The industry is going well and we're winning market share, so we felt it was a good time to expand capacity,” he said. Regarding international trade, “we are much more comfortable with the situation than we were six months ago.”

BRP's shares surged 31 percent this year through Thursday, while Canada's benchmark S&P/TSX Composite Index climbed 1.2 percent. The stock was little changed at C$36.99 at 11:40 a.m. in Toronto.

Any changes to Nafta probably wouldn't be implemented for at least two years after agreement, giving manufacturers ample time to adapt, Boisjoli said. Three-way talks among Canada, Mexico and the U.S., instead of bilateral negotiations, increase the chances of success, he said.

Even so, BRP -- which operates factories in Canada, Mexico, Austria, the U.S. and Finland -- isn't taking anything for granted.

“We are used to opening plants and moving things around,” Boisjoli said. “We remain vigilant and we will be ready for anything.”

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson