Auto Sector Continues to Stall
Jun 06, 2008
Last weeks’ announcement by General Motors Canada that it will shut down a pickup truck plant in Oshawa and put 2600 employees out of work has reignited debate about the state of Canada’s floundering automobile manufacturing industry.
GM has said that it is simply responding to declining demand for pickup trucks made at the factory, and has cited current economic realities as the main reason for this. US $4-a-gallon gas prices and a housing crisis that has left consumers with less equity have contributed to reduced sales, and the trucks GM makes in Oshawa have fared poorly (according to GM) because they are bought by individuals and not contractors who need them for work.
Understandably, the Canadian Auto Workers (CAW) is doing everything possible to prevent the closure from happening, and workers have now been protesting at GM’s Oshawa headquarters for several days.
The CAW contends that the closure violates a recently signed collective agreement (which provided millions of dollars in labour cost reductions conceded by the union) that stipulates that the plant will remain open until 2011. GM maintains that the agreement contains a clause that addresses market conditions and that it therefore has not violated it at all.
Other conditions have further compounded the problems facing the Canadian auto industry; the strong Canadian dollar being the primary example. This has reduced demand for exports in the industry and produced widespread streamlining at Detroit’s Big Three automakers – GM, Ford and Chrysler.
It appears now that the federal government is considering getting involved in the situation, promising GM access to the $250 million federal Automotive Innovation Fund that has been designed to assist companies developing fuel-efficient technologies.
Any government assistance is likely misplaced. Short-term, it seems little more than delaying the inevitable. With outsourcing and cheaper manufacturing available in countries like China, supporting the current auto industry in this way might be incredibly costly. More useful would be a national strategy that gets us beyond our current approach of building big cars and trucks that run on gasoline or diesel.
But it’s hard to see how the auto industry, at least in its current incarnation, can survive in the face of global competition. Unfortunately, workers in China will do for $5 an hour the work that is being done by GM and other workers in Canada making seven times that.
And in the wake of the CAW sellout regarding the Magna deal - where the union gave up such fundamental rights as that to strike – the CAW and other unions in Mexico have agreed to major wage concessions with GM and other carmakers to help them cut costs and weather the financial challenges they’re facing. In Canada, the CAW has maintained wage freezes but assembly costs remain dramatically higher compared with US and Mexican plants.
One has to hope that there is a way to save the jobs at stake at the Oshawa plant, and at those plants in Canada that seem certain to follow the same path in the near future. But with such a confluence of poor conditions for the automotive manufacturing sector, it appears that things will continue to worsen for the foreseeable future at least.
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You have to feel for those workers....many of them will be losing their homes.
jimcotton - 2008-06-07 23:42
I agree. You have to feel for those workers. Sadly, while many of the workers who were fired last week blamed the greedy corporate heads of GM, they should have been equally upset with their neighbours, friends, family and the rest of consumers across North America who’ve decided the only vehicle they want is one with a foreign nameplate. It's true, high oil prices have moved people away from large trucks and SUVs. And it’s true, that’s the bread and butter of the “big three”. But what most people don’t know is that’s because of consumers like you and me. Domestic manufacturers shifted to big trucks because that’s where they could make money and that’s what consumers were willing to buy from American manufacturers. Somewhere in the ‘90s, Canadians and Americans decided the only four-door sedan to consider purchasing was from Honda or Toyota. The dismal quality of some American vehicles for many years is certainly a big reason why people made the switch to foreign vehicles years ago. But if you ask anybody who knows the autobusiness, this has changed over the past few years. In fact, last year Ford Motor Co. supplanted Toyota as leader of the pack in J.D. Power and Associates’ annual initial quality rankings. Yet I'm sure most consumers still believe a Camry is by far a superior vehicle to a Fusion and is well-worth the steep premium to buy one. A car purchase, like any other purchase, is based heavily on perceptions of the brand. Car companies like Toyota have worked very hard to shape their brand and it's paying off in spades for them right now. For the big three, it’s working the other way, even when they produce quality cars and trucks, they’re having a hard time convincing buyers. Unfortunately, it’s the workers on the assembly lines in Ontario who are paying the price.
Jeremy - 2008-06-09 15:55