General malaise

It looks as if the implosion of the Canadian manufacturing sector, which began with the North American Free Trade Agreement (NAFTA) two decades ago, will only end when the last factory is shuttered and left to rot.  On Thursday, General Motors announced that it would be ending production of its Camaro sports car at its Oshawa plant, east of Toronto, this coming November. About one thousand jobs will be lost; GM employment in Oshawa, which exceeded 15,000 not much more than a decade ago, will fall to 2600 once the Camaro line closes.

The disturbing thing about this latest closure is that the jobs are not moving to Mexico: the Camaro will, from now on, be assembled at Lansing, Michigan, the very epitome of a US rust belt city. GM is making the move despite the 25 percent decline in the value of the Canadian dollar over the past two years. There could be no clearer indication that the steady collapse of the once-mighty Canadian auto sector is a structural shift, not a cyclical correction.

GM Oshawa's fate matches that of many of Canada's "heritage" auto making facilities. The General's manufacturing plant at Ste-Therese, Quebec, is long gone; the company's powertrain plant in my neighbouring city of St Catharines now employs barely 10 percent as many workers as it did two decades ago.  Chrysler, or Fiat-Chrysler as it now is, withdrew an application for government assistance for its Windsor assembly plant last year, an unusual move that many analysts fear will make it easier for the company to close the plant altogether. Ford has cut back on the number of models it produces at its Oakville assembly plant west of Toronto.

To some extent, these negative developments are offset by expansion of newer auto plants. Even GM is expanding in at least one location, investing heavily in its Ingersoll factory in southwestern Ontario, which opened in the late 1980s as a joint venture with Suzuki.  Perhaps the most successful auto plant in Canada today is Honda's factory at Alliston, Ontario, which manufactures the evergreen Civic model for the entire North American market.  Even these more modern transplant facilities may be vulnerable, however: Toyota recently announced the closure of one of its two assembly plants in southwestern Ontario, with the jobs moving to Mexico.

For now, the auto parts sector seems to be in somewhat better shape, with Magna (now legally relocated to its flamboyant founder Frank Stronach's homeland of Austria but still a major employer in Canada) and Linamar among the major players.  However, given the importance the assembly plants place on just-in-time delivery, it's inevitable that each line closure in Canada will sooner rather than later result in parts making jobs disappearing also.

What of the future? GM is hinting that it might possibly consider making a new model at Oshawa, but will not make a decision until it sees how its contract negotiations with the unions go late this year.  That's quite a shot across the bows. Beyond that, free trade deals in the works with major Asian economies, including the auto powerhouses of Japan and Korea, will put further pressure on the Canadian industry, with little obvious offsetting benefit for Canada. (Hyundai has flatly stated that it will never consider manufacturing cars in Canada).  By rights this should be a huge issue in the upcoming Federal election,  but if the Tories' two-pronged strategy -- sprinkling the stardust of tax cuts while scaring the bejeesus out of the citizenry about terrorism -- is successful, the demise of a major part of the Canadian economy may be largely ignored.