How Ontario may escape GM Oshawa’s fate
Ability to shift which models are being built essential, experts say
If General Motors can shut down production at its iconic Oshawa assembly plant, what hope is there for the rest of Ontario’s automotive industry?
As 2,500 workers at the plant pondered an uncertain future after GM announced Mondaythat it’s shutting down Oshawa production next December, industry experts suggest the broader outlook isn’t all doom and gloom. In its Monday announcement, GM said shutting down production in Oshawa and four U.S. plants would save $6 billion (U.S.), and allow the company to double spending in its electric and autonomous vehicle programs over the next two years. In recent months, other auto manufacturers have also announced billions of dollars in EV spending. Fiat-Chrysler alone says it needs to invest $9 billion in EV production. Toyota says it will invest $13 billion by 2030.
Ontario’s eight other assembly plants have a solid mix of hot-selling SUVs, trucks and large cars. And if consumer tastes shift, the assembly lines at those plants — which currently employ almost 30,000 people in total — could start churning out other vehicles, thanks to a flexible approach to manufacturing.
“Any plant can be retooled in Ontario,” said Dino Chiodo, national automotive director for Unifor, the union representing GM workers in Oshawa and at several other auto plants. (A different Unifor local represents most employees at the Star.)
Chiodo estimated that retooling a plant would usually cost anywhere between $250 million and $500 million. It’s a process that takes about a year.
“For an electric vehicle, it would cost more. You’d have to set it up so that you have the capability to do EVs and gas cars. Because nobody is turning an all gas-car plant into an all-EV plant,” Chiodo said. Electric vehicle sales simply aren’t high enough to justify an all-EV plant in Ontario, he explained.
“In the short and medium term, the demand just isn’t there. Twenty years from now, I guess we can get there,” Chiodo said.
As a group, the assembly plants in Ontario are some of the most flexible on the planet, said long-time auto industry analyst Dennis DesRosiers.
“They’re as flexible as you’re gonna get,” DesRosiers said. “You can produce an SUV, a large car and a small car on the same line.”
Most of those lines could theoretically also be retooled to produce electric vehicles, he added.
Still, being able to produce different types of vehicles is no guarantee a plant will survive, DesRosiers argued. Those plants need to be the right size in order for it to make sense to spend the money on retooling. That, ultimately, not a lack of flexibility, is what hurt Oshawa, a million-square-foot facility.
“They’re very flexible, but so what?” he asked.
Even if GM’s Oshawa plant were revamped to produce electric vehicles, there’d be little point, DesRosiers said. Electric vehicles are a niche product and will be for the foreseeable future, he predicted. A millionsquare-foot facility needs to be producing several hundred thousand vehicles a year to make business sense; there are roughly 160,000 electric vehicles sold in North America each year, he estimated.
“There would be no point in retooling Oshawa for electric vehicles because it’s just too big a plant for that. They’d need to be producing 400,000 to 500,000 vehicles a year to be competitive,” DesRosiers said.
At its peak in 2003, the Oshawa plant produced almost a million vehicles a year. In 2017, it produced a relatively paltry 118,000.
Nor, suggested DesRosiers, would retooling to produce electric vehicles make much sense at any plant in Ontario, or anywhere else in North Amer- ica for that matter.
“EVs are roughly 1 per cent of the market,” DesRosiers said.
Retooling for autonomous vehicles — another category GM touted as the future — simply wouldn’t be necessary, he said. And that’s not just because it’s still an experimental category.
“You could build an autonomous vehicle at any plant. It’s the same manufacturing process, because it’s basically the same vehicle. An electric vehicle is a different process. It’s a different engine. It’s usually lighter materials. It’s also smaller,” DesRosiers said.
The best hope for plants, though, is for demand to continue for currently hot categories such as SUVs and crossovers, similar to those produced at the GM-owned CAMI facility in Ingersoll, Ont.
“CAMI is in the hottest segment in the market,” Desrosiers said.
If flexible manufacturing and the right product mix are key to keeping auto assembly plants — and jobs — alive, so, too, is some political will, Chiodo said. Unlike Australia, which no longer has an auto assembly industry, he’s hopeful there’s a future for Ontario.
“I think there is, especially if we get politicians insisting ‘If you want to sell here, you have to build here,’ ” Chiodo said.
And if governmental action — or financial assistance — doesn’t work, there’s always self-interest, DesRosiers said.
“I can’t envision a manufacturer pulling out entirely. Can you imagine the headlines? It would be devastating from a PR point of view, and that would hit their market share. I really don’t think they’d do it,” DesRosiers said.