Ottawa’s rosy views can’t save the car
TRUDEAU, FORD OFFER THOUGHTS, PRAYERS, BUT LITTLE ELSE CONCRETE IN FACE OF GM’S STUNNING ANNOUNCEMENT
It doesn’t seem that long ago that the Liberal government was telling Canadians the economy is strong and the middle class is making progress. That’s because it was last Wednesday, in the fall fiscal update.
Bill Morneau, the finance minister, was remarkably upbeat, claiming the government had struck the “appropriate balance” between prudence and spending; that a return to budgetary balance was merely “a question of timing.”
But the news from GM Monday that it plans to close five North American auto plants, including one in Oshawa, Ont., with the loss of 14,000 jobs across the continent, shows how quickly the best-laid schemes of mice and men go awry.
The mood across Ontario mirrored the weather — bleak and misty. There was another parallel between the elements and the closure — this country’s politicians could do nothing about either of them.
Justin Trudeau offered the equivalent of thoughts and prayers: “Our thoughts go out to the workers,” he said. Doug Ford, the Ontario premier, sounded resigned to the loss of thousands of jobs: “The ship has already left the dock,” he said.
Their comments stood in stark contrast to Donald Trump’s, who reacted to the closure of four plants in the U.S., the consequence of sagging sedan sales. The president thundered that he’d been tough on GM chief executive, Mary Barra, that the U.S. had done a lot for her company and if its cars weren’t selling, it needed to replace them with cars that did. He said he had no doubt that “in the not-too-distant future, (GM) will put something else in” the Ohio car plant, adding, “they’d better put something else in.”
The Canadians offered a stereotypically meek response, the equivalent of a quiescent shrug, amid promises to help support the affected workers.
Navdeep Bains, the shellshocked economic development minister, said the government only found out about the closure announcement on Sunday, even though he spoke to GM about the future of the Oshawa plant at the World Economic Forum two years ago. Could this really have come as a shock, given those discussions?
Bains appeared as forlorn and helpless as the poor guys on the production line, who’d just been told they were surplus to requirements. The only sense that the ship of state is not entirely rudderless came in a cryptic line thrown out by Trudeau during question period. “As we look to the future, we are developing a plan that will focus on new initiatives…,” he said before his microphone was cut off.
What that plan might look like, should it even exist, remains a mystery, but the government just last week stuck another $800 million into its “strategic innovation fund” to support “innovative investments” across the country.
An article in the Toronto Star suggested the government look at nationalizing GM Canada, deeming the prospect of the country having its own automaker “a compelling proposition.”
That sounds like the worst public policy idea since Prohibition. We tried this once and lost $3.7 billion.
GM is not shuttering these plants simply to goose the share price — though it did rise nearly five per cent, thanks to the industrial carnage unleashed on the five affected communities. The moves were taken in response to what GM called “changing customer preferences” and a decline in demand for the small and mid-size cars made at those plants. It would not be a good use of taxpayers’ money to buy the plant and keep producing cars that people no longer want.
But is it possible to persuade GM, or more likely, another manufacturer to fill the void? Perhaps that was what Trudeau was hinting at.
That might be a tough sell. Liberal governments in Ontario and Ottawa have not been overly concerned about competitiveness and investment, at least not until Morneau’s Damascene conversion in last week’s fiscal update.
Rising personal and small business taxes, soaring electricity rates, the introduction of a higher minimum wage, more onerous environmental laws and the prospect of a carbon tax have all contributed to weaker capital spending in recent years.
But the Ford government is trying to undo some of the damage to Ontario’s reputation as a place to invest, and the recent fiscal update strives to reduce the marginal effective tax rate to competitive global levels.
This announcement should be put into context. The skies were ominous, but they weren’t falling. The Bank of Canada expects business investment to perform well: investment intentions are strong, corporate profits are high and Canada is proving successful at attracting foreign investment in knowledge industries, software design and tech services.
But that progress is uneven. The oil industry is in crisis, stymied by lack of pipelines. Meanwhile, Texan producers in the Permian basin have just announced they will produce two million more barrels a day, thanks to three pipelines due to come online in the next two years.
Fears of retrenchment in the oil and auto sectors — two of the major drivers of Canadian growth in the post-war era — suggest the government’s buoyant views on the economy are overdone. What’s good for General Motors is clearly not good for Canada.
NAVDEEP BAINS APPEARED AS HELPLESS AS THE POOR GUYS ON THE PRODUCTION LINE.