The Canadian Auto Sector is in Great Shape, Except for that Looming Existential Crisis
TORONTO — The Canadian auto sector is the healthiest it’s been in years, yet its future has never been more uncertain.
It’s the odd contradiction of an industry that has reclaimed its position as Canada’s largest exporter while also facing the potential closure of some of its biggest assembly plants.
The industry, largely based in southern Ontario, is admittedly a shadow of its former self. In 2008, Mexico surpassed Canada to become the second-largest North American producer of light vehicles. Total industry employment has fallen by about one-third since 2001.
Today, several auto assembly plants face murky futures. The most immediate threat is at General Motors of Canada’s operations in Oshawa, Ont., where one assembly line will be shut down in 2017 and the other has no products slated for it beyond 2019. Unifor, the union that represents hourly workers at the Canadian operations of GM, Ford and Fiat Chrysler, is also worried about the future of Ford’s engine plant in Windsor, Ont., and Fiat Chrysler’s assembly plant in Brampton, Ont.
The union is trying to secure the future of all three plants in ongoing labour negotiations.
It’s a nerve-wracking time to be a Canadian autoworker. But, ironically, it’s also a good time to be looking for work.
The Canadian auto sector has rebounded strongly since the 2008-09 recession as a result of record North American sales and production.
Employment in the industry as a whole grew in excess of 3.5 per cent through June of this year versus 2015, and the sector’s share of overall manufacturing activity is at its highest level since 2003, according to Carlos Gomes, senior economist and auto industry specialist at Scotiabank.
“The key point here is that we’re continuing to see relatively strong demand, not only in North America but on a global basis, with volumes continuing to move to record highs,” Gomes said in an interview, adding that the lower loonie has also helped make the industry more competitive.
The key point here is that we’re continuing to see relatively strong demand…
Nearly 2,000 new workers have been hired at Canadian assembly plants in recent months, due to the launch of the new Chrysler Pacifica minivan in Windsor, Ont., as well as strong demand for crossover vehicles like the Ford Edge, built in Oakville, Ont. In total, 1.38 million motor vehicles were produced in Canada in the first half of the year, up from 1.25 million in the same period of 2015, according to Ward’s Automotive Reports.
The auto parts sector has been performing even better, with employment growing five per cent between early 2015 and early 2016. Auto parts shipments posted double-digit gains in the past two years and the average North America-built vehicle now contains nearly US$1,600 worth of Canadian-made parts, up from US$1,437 in 2013, according to Scotiabank.
But parts suppliers — particularly small ones that are dependent on one or two plants — are also most at risk if there’s a strike or if a plant closes for good, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
For example, Volpe estimates that GM’s Oshawa assembly plant spends $500 million to $600 million annually on locally produced parts.
Canadian parts suppliers are more diversified than they used to be, but a shutdown, whether it’s temporary or permanent, still won’t be easy for the sector to weather, Volpe said.
“I think everybody learned lessons in 2008-09 to make sure your customer support is diversified to the extent that you don’t get felled by one plant, but that doesn’t mean it doesn’t hurt,” Volpe said in an interview. “It’s unfortunate we’re coming to such a high-stress crossroads.”