GM’s Oshawa closure to have a ripple effect
Local supply companies predict it won’t be as bad as last downturn
The last General Motors plant in Windsor closed eight years ago, but local automotive suppliers won’t entirely escape the pain of the largest U.S. carmaker announcing Monday that it’s shuttering its Oshawa plant and four others in the U.S.
The company will also close another two plants overseas by the end of 2019 in a series of cuts, which include a 15 per cent chop to salaried staff, bringing the total job losses at GM to nearly 15,000. “I think it’s going to have a ripple effect not just locally, but right across Ontario,” said Tim Galbraith, sales manager for Cavalier Tool and Manufacturing.
“A lot of local companies are part of the supply chain to GM in Oshawa. It’s painful, but it’s not really surprising.”
GM also announced Monday that its Lordstown plant ( Warren, Ohio) and Detroit-Hamtramck assembly plants will be closed. The automaker will also close a pair of transmission plants in White Marsh, Maryland, and Warren, Michigan.
All of the affected plants have become victims of the rapid shift in consumer demand away from cars to trucks and SUVs.
In a news release, the company said the cuts and plant closures will free up $6 billion annually in cash flow to re-invest in its transformation to electric and autonomous vehicles. Galbraith said Cavalier doesn’t supply GM directly, but makes tools and moulds for customers who make parts that are shipped to Oshawa.
“There are going to be obvious consequences for us,” said Galbraith, who added Cavalier has insulated itself against the ups and downs of the industry by limiting automotive business to one-third of the company’s total volume. David Palmer, sales manager for Build-A-Mold, said it’ll take 12 to 18 months for the fallout from Monday ’s announcement to shake out in the industry. Palmer agrees area manufacturers will feel some effects, but nothing compared to the 2008-09 downturn.
That near-death experience for local manufacturers has left them better prepared to ride out the rough times.
“It’s not like GM announced they’re going out of business, they’ve announced they’re restructuring to make sure they have the right product mix going forward,” Palmer said. “They’re investing in research and development and I expect they’ll come back needing tools and molds to make new vehicles. It’s like what happened when we came out of the 2009 downturn, the automakers invested in tools and molds to make new products.” Gene Schilling, director of business development for Reko International Group, called it a disappointing day for Canadian manufacturing. He said with the industry’s just-in-time delivery system, the impact of the closure increases as you get closer to Oshawa. “Oshawa is going to feel more of an impact than Windsor,” Schilling said.
“Windsor companies are also supplying a variety of plants. Many of us are Tier II suppliers, so we don’t supply GM directly. “The majority of Reko’s business is in the U.S. We’ll be affected, but it won’t be too badly.” Monday’s announcement once again brought calls for a national auto strategy and for the need to address the issue of corporate tax rates.
“It’s important we learn some lessons here and have a national auto strategy; something we (industry) have wanted for years,” Galbraith said. “With no co-ordinated plan we won’t be competitive with other countries and the southern U.S.
“When you lose an assembly plant, the feeder plants go with it.” Jonathon Azzopardi, president of the Canadian Association of Mold Makers and Laval Tool, urged the government to also look at how competitive the country’s tax structure is compared to other countries.
The reduction in personal and corporate taxes in the U.S. this year has turned what was once a Canadian competitive advantage into a disadvantage for business. “We’re continuing to push on that,” said Azzopardi, who is also chair of the Automotive Parts Manufacturers’ Association. “We’re losing out to other places because the tax structure is not as attractive here.” Schilling said one thing is certain — the status quo in the Canadian auto industry isn’t an option. “The lesson here is what we’re doing isn’t working,” Schilling said. “Seeing GM leave should raise red flags about where we’re going in Canada.”
The impact among parts suppliers in the London and area, is expected to be minimal with few manufacturers here supplying Oshawa in larger volumes. However, Magna International has three parts plants in St. Thomas and London — Formet, Presstran and Qualtech — which supply GM.
Magna officials Monday were still gauging the impact.
“We aren’t commenting on any potential impact right now. There are still so many moving pieces and things are unknown at this time,” said Tracy Fuerst, communications director, Magna.
In June, Formet celebrated a deal to provide parts for GM trucks assembled in the U.S., the richest deal in its history, that plant officials said at the time will keep about half of its 1,300 workers employed.
Mitigating the impact on suppliers throughout Southwestern Ontario is the fact that production at the Oshawa plant has been decreasing, as car sales slump in favour of crossovers and trucks, said Steve Rodgers, of GS Global Solutions, an automotive consultancy firm.
“The volumes have been falling. I think most suppliers were expecting this,” he said.
GM has said the Impala would not be manufactured after 2019 due to low sales volumes, he said. “It won’t be significant for the Southwestern Ontario environment, but it is devastating for Oshawa.”
Rodgers was former director of the Automotive Parts Manufacturers’ Association and believes few regional suppliers feed the Oshawa plant.
“It is getting tougher and tougher to sell cars,” he said.
Jim Wilkes, an official with Unifor Local 27, representing many parts workers across the city and area, agreed GM Oshawa is not a significant presence here. “This came out of the blue, it was not on our radar. We don’t really know what to expect out of this right now,” said Wilkes.
At the Cami Assembly plant in Ingersoll, Unifor officials say a more than four-week-long strike last year might have paid big dividends. The workers who assembles the Equinox crossover vehicle won some of the toughest plant-closing language in the auto sector, making it costlier to shutter the facility, and Mike Van Boekel, chairperson of Unifor Local 88, wonders whether it saved local jobs.
“It would be very expensive to close the plant right now. It is good insurance. I think it made a difference,” said Van Boekel.
The union was looking for production guarantees in contract talks last year after GM moved production of its Terrain crossover from Cami to Mexico, forcing more than 600 job cuts.
After the strike, the union settled on language that would see GM have to pay $290 million in penalties if it closed the plant and workers with more than 21 years experience would have to be bridged to full pensions
“We are in a strong position going forward, but it is sad day for workers in Oshawa,” Van Boekel said.