Corporate welfare fails again
‘Government investments’ go same route as GM
Ontario Premier Doug Ford has greeted news of GM’s departure from Oshawa with a bluntness that’s as in keeping with his character as it is politically unusual. In question period Monday, he called it “absolutely devastating” — not just for workers on the assembly line, he conceded, but also for GM’s supplier base and all the service industries that rely on its employees.
He declined opposition leader Andrea Horwath’s offer to explain what he would do to stop it, however.
“I talked to the president of GM last night,” he said. “The first thing I said was, ‘What can we do? What do we have to do?’" He said, “The ship has already left the dock.” Ford focused instead on measures he would support to help those affected — the usual package of extended EI benefits, retraining and the like.
This doesn’t wash with Horwath’s NDP, naturally. “A real leader wouldn’t let GM cut and run after receiving so much public money,” Ottawa MPP and Leap Manifesto enthusiast Joel Harden tweeted. “This plant can be a place where we build the electrified transport of the future, but Ford is just giving up.”
“We know that electric vehicles and autonomous vehicles will be at the heart of the auto industry moving forward,” Horwath chimed in. “Let’s make the investments that need to be made. Let’s convince GM now that the vehicles of tomorrow will be built right here in Oshawa and in Ontario.”
There’s that word: “investments.” That’s what Canadians — Ontarians and Quebecers, certainly — have been trained to expect in these situations: An elaborate mating dance culminating in a greasy press conference where corporate leaders hail bold new provincial and federal “investments” in the company and its workers and its world-beating widgets. Critics are assailed as uncaring and testily reminded that every jurisdiction subsidizes the widget industry.
Traditionally, this is later followed by outrage when it emerges the company has used taxpayers’ bold investment to pay lavish bonuses or dividends. In the fullest version, the company just pulls up stakes and leaves town anyway — sometimes having fulfilled its stated obligations, sometimes not, but always leaving a bad taste and a per-employee subsidy rate that makes no sense in hindsight.
If the company is Bombardier, it might extract lavish subsidies from government for an airplane project on the theory that Canada needs an aerospace industry, then turn around and sell the project to a foreign competitor for basically nothing.
Indeed, it’s bizarre that the NDP view in general, and Harden’s good-money-after-bad proposal specifically, still has so much currency beyond its direct short-term beneficiaries. Auto sector employment was down 20 per cent from the beginning of this century even before the financial crisis. The GM and Chrysler bailouts didn’t stop it from plummeting another 20 per cent from 2008 to 2010. It has since rebounded, but not close to 2008 levels.
It’s one thing if a government is facing a huge chunk of an entire economic sector put out of work overnight, on the eve of a massive recession. We’re talking here about 2,500 jobs that GM is so determined not to employ that they’ll turn down the public teat. There are many people and things to blame — some logically, some not. But you would think further “investment” in GM, at this point, would be a non-starter.
Indeed, this would be a pretty good time for a conservative leader who doesn’t like corporate welfare to point out all the folly that led us here and chart a way forward. In theory, Ford could be such a leader. He says he’s against corporate welfare. And yet, 24 hours after the GM bombshell, he found himself in London handing out $34.5 million to Maple Leaf Foods. The feds are chipping in $28 million as well for a huge new meat processing plant, the total cost of which is $660 million.
The need for this is very difficult to quantify. Maple Leaf is profitable. It had $875 million in revenue in the third quarter of this year. It can’t move its Canadian poultry processing to Kentucky or Guadalajara. And the kicker is, after closing three other plants and consolidating its operations, Maple Leaf is actually shedding 300 jobs!
“(CEO Michael) McCain said he ‘deeply’ regrets the impact on existing employees,” The Canadian Press reported, “but the plant will allow it to earn an extra $105 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) annually by delivering higher margin valuedadded air-chilled, tray-packed boneless and ground poultry.”
Well, that’s splendid. What has it got to do with the Canadian taxpayer?
Ford was never hugely credible as an enemy of corporate welfare: In the next breath he would talk up tax incentive packages to lure companies to Ontario. But his Liberal predecessors saw “investing” in private businesses, both profitable and unprofitable, as an inherent public good. We might reasonably have hoped for better than that — better than actually subsidizing job losses.