NEW TRADE DEAL DIDN’T KILL THE CAR PLANT IN OSHAWA, ONT. BLAME THAT ON A SHIFT IN DEMAND FROM THE SEDAN TO THE ELECTRIC CAR AND CROSSOVERS. IT’S GOING TO TAKE ‘BOLD STEPS’ TO SAVE THE INDUSTRY.
Demand for crossovers, SUVs to drive more changes
General Motors didn’t blame a trade deal or government policies for its decision to eliminate nearly 3,000 jobs at the assembly plant in Oshawa, Ont.
Instead, the culprit was a dramatic drop in consumer demand for cars, a shift that Canada’s entire auto sector must grapple with as it vies to remain competitive in a global industry. These days, consumers want crossovers, sport utility vehicles or trucks — if they’re buying vehicles at all.
In Oshawa, workers built sedans. GM announced Monday it will shutter eight plants — one in Canada, four in the U.S. and three outside North America — by the end of 2019, a global restructuring that will slash 6,700 production jobs and save the company US$6 billion annually. It will invest that cash in electric vehicles and self-driving cars, industries of the future, instead of cars like the Chevy Impala that evoke memories of the past.
Oshawa’s assembly plant will be the largest closure with 2,973 job losses, followed by plants in Ohio and Detroit. The restructuring will also see about 8,000 white-collar workers lose their jobs.
David Paterson, General Motors Canada’s vice-president of corporate affairs, said Oshawa was particularly vulnerable since it made cars and operated at one-third capacity for the past several years. GM chief executive Mary Barra is not prepared to run plants at that capacity when it needs cash to invest in self-driving cars and electric vehicles, Paterson said.
“Right now the auto industry is being massively disrupted and we’re trying to get ahead of that,” he said. “If the company doesn’t take bold steps to move to the new technology, then there won’t be any jobs.”
Dennis DesRosiers, of DesRosiers Automotive Consultants, said the decision was only a matter of time given the drop in production at the plant. Canada has passed its peak for car production, he believes.
GM production in Canada declined from a peak of one million units in 2007 to 330,000 projected for 2018.
“If there is a ‘canary’ out there it has been slowly dying for quite some time,” DesRosiers said.
“At its peak total Canadian production across all companies was over three million units and lately we struggle to get two million units out of our remaining plants,” he said. “I am not saying that Canada will become Australia and eventually lose all its vehicle assembly operations but there is more to come, I just don’t know which plants and when they will disappear.”
DesRosiers said Canada must invest to remain competitive or it will see more closures. He said the workers and the union aren’t to blame, given uncompetitive labour costs were sorted out with the near bankruptcy back when Canada bailed out GM and Chrysler a decade ago. (That left taxpayers on the hook for $3.5 billion.)
Still, he said GM needed to make this tough decision to avoid another bankruptcy like it faced in 2009, when governments bailed out the auto sector.
“Strangely, although this decision is devastating for the workers at the plant and the suppliers feeding the plant it also shows the strength of GM in today’s automotive sector,” DesRosiers said.
The Oshawa plant, which made the Chevrolet Impala, Cadillac XTS and previous generation Silverado and Sierra trucks, contributed six per cent of total Canadian auto production. In Ontario, the auto industry accounts for about 2.5 per cent of the GDP without including spinoff industries, says Doug Porter of BMO.
The news sent workers reeling, with some walking off the job Monday as their union, Unifor Canada, promised to fight for their jobs at the century-old facility.
Joanna Stojkovic, clutching her seven-month-old daughter, put down the phone after her GM worker husband passed on the news.
“Our livelihood is gone. We’re all in limbo right now,” Stojkovic said. “It’s a devastating blow for all of Durham region. GM has been around for a long time.”
Closure has loomed over Oshawa before, Unifor noted, but GM invested $500 million into the plant so it could build trucks as well. It launched the Silverado and Sierra lines in February, but those will also be discontinued.
Martinrea International Inc. is one of the 100 suppliers to the Oshawa plant that will be affected by the closure. Executive chairman Rob Wildeboer said 77 employees will be without work at its Ajax plant come 2020 unless something changes.
Wildeboer said he believes Canada will attract and maintain assembly plants based on overall competitiveness, including taxes and research and development funding. The federal government’s announcement for accelerated depreciation is a good move, he said, but this comes after years of added costs to the sector.
“What the Oshawa closing shows is that there’s work to be done to make us more competitive in advanced manufacturing,” he added.