More pain to come for hurting auto sector

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.

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 postwar era — suggest the government’s buoyant views on the economy are overdone. What’s good for General Motors is clearly not good for Canada.

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. — DENNIS Des ROSIERS

WE ARE DEVELOPING A PLAN THAT WILL FOCUS ON NEW INITIATIVES.