General Motors’ decision to shutter its flagship Oshawa, Ont. plant in 2019 is poised to have broad ripple effects across Canada’s auto industry.
The plant’s closing will put more than 2,500 employees out of work, but the blow to the Canadian auto-sector workforce is far larger. The move could compromise the jobs of as many as 15,000 Canadians working for auto-parts suppliers, Flavio Volpe, president of the Automotive Parts Manufacturers Association told Global News.
A total loss of around 17,500 positions would wipe out around 14 per cent of Canada’s 125,000 auto-industry jobs.
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At the local level, the impact would be even more severe. Every job at the Oshawa plant is tied to seven spin-off jobs in the community, Unifor, Canada’s largest private-sector union, told Global News.
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Canada’s auto manufacturers support 400,000 service and dealership jobs, according to industry statistics provided by the federal government.
GM formally announced its decision to shut down its Oshawa facility on Monday as part of a global restructuring plan that will also see closures in Michigan — including its Detroit-Hamtramck assembly plant — Warren, Ohio and White Marsh, Maryland. The company said two additional plants outside North America will cease operations by the end of 2019. A facility in Gunsan, Korea was previously slated to be closed.
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The GM assembly facility in Oshawa, just east of Toronto, builds the Chevrolet Impala and Cadillac XTS. The plant also finishes the Chevrolet Silverado and GMC Sierra trucks, the result of a $500 million transformation that made it the only assembly line in North America capable of building both cars and trucks.
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Its closure will leave GM with one assembly facility in Canada, located in Ingersoll, Ont., which produces the Chevrolet Equinox SUV. The auto maker also has an engine and transmissions plant in St. Catharines, Ont.
Currently, Ford, GM, Fiat Chrysler Automobiles (FCA), Toyota and Honda have a total of eight assembly plants based in Canada, all of which are located in Ontario. Automotive suppliers and research and development operations are based all over the country.
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GM accounts for around 16 per cent of Canada’s cars and light trucks production so far this year and 15 per cent of in-country sales, according to data from the Canadian Vehicle Manufacturers’ Association. Last year, the industry built just under 2.2 million vehicles.
What does the Oshawa plant closure mean for the auto industry?
The end of Oshawa’s assembly plant is a symptom of the challenges faced by both GM and Canada’s auto industry, said William Mitchell of the University of Toronto’s Rotman School of Management.
Cars, like the Impala and Cadillac models produced at the Oshawa plant, are decidedly out of favour with North American consumers, who continue to gravitate toward SUVs and light trucks, Mitchell said.
But the plan to close the Oshawa facility instead of continuing to retrofit it to produce more trucks also speaks about GM’s struggles in a highly competitive market, he added.
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GM has presented the end of production in Oshawa as part of a global bid to save US$6 billion (CAD $8 billion) and shift focus to electric and autonomous vehicles.
But “the truth is, [GM] is in financial difficulties and it needs to cut back,” Mitchell told Global News.
The decision also reflects a 20-year trend of gradually declining vehicle production in both Canada and the U.S., with manufacturing moving to lower-cost jurisdictions like Mexico.
“If you have fewer vehicles being produced in the region [i.e. Canada and the U.S.], someone is going to have to shut down,” he said.
That reallocation is continuing despite provisions in the United States, Mexico, Canada agreement (USMCA) that would favour the U.S. and Canada over Mexico. The deal, which is set to replace NAFTA, sets the rules whereby a percentage of a vehicle’s value must be produced by workers earning at least US $16/hour (CAD $21/hour). The measure is broadly believed to disincentivize production in Mexico.
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While that may keep other U.S. automakers from leaving Canada in favour of Mexico, it’s not enough to guarantee a bright future to traditional vehicles manufacturing in this country, Mitchell said.
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“The future of our economy is not in auto production,” he added.
The size of the sector appears destined to shrink, and whatever the future the industry does have in Canada has much more to do with engineers and coders than with assembly-line workers.
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Canada, a leader in artificial intelligence (AI) research, has been attracting significant investments from the likes of Uber, Google and old-economy auto-industry giants like Ford. GM itself announced in mid-2016 that it would expand its tech-focused engineering workforce in Canada to approximately 1,000 positions over the the span of five years.
A recent report by Canada’s Information and Communications Technology Council (ICTC) estimates that autonomous vehicles will create 34,000 jobs over the next few years.
And those would be high-paying jobs, Mitchell said. The issue, though, is that those new positions likely won’t be accessible to laid-off manufacturing workers, nor will they be as many as the jobs lost.
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“We take out 2,500 [assembly-line] jobs and, if we’re lucky, we get 1,000 jobs back through artificial intelligence.”