Canadian vehicle assembly plants are widening their productivity advantage over factories in the United States, the Toronto Star reported, citing a report by economist Carlos Gomes, an auto analyst with the Bank of Nova Scotia.

Productivity - measured by the number of worker days required to assemble a vehicle - is 3.04 in Canada, compared with 3.27 south of the border, the Toronto Star said.

"This represents a further improvement from Canada's 5% edge in 2000 and 1% advantage in the mid-1990s," Gomes says in the report, according to the newspaper.

Increasing competition from assembly plants in Mexico, where labour costs are lower, and the southern U.S. states - such as Alabama, which has offered hundreds of millions of dollars in incentives to lure vehicle makers to build factories there - represents "significant challenges" for Canada's vehicle industry, Gomes says, according to the Toronto Star.

However, the newspaper noted that Gomes says that the Canadian industry is again recruiting staff and recovering from a two-year downturn.

The Toronto Star quotes Gomes as saying: "Auto manufacturers and parts suppliers in Canada have created 8,500 new jobs so far this year, recouping more than half of all job losses since late 2000. Job creation in the Canadian auto sector this year has matched that of the much larger US industry, where only 7% of all jobs lost since late 2000 have been recovered.”

According to Gomes, year-to-date sales in Canada are 9.8% above last year's record, with full-year 2002 sales likely to exceed 1.6 million units for the first time, the Toronto Star said.