The CAW is asking the federal and provincial governments to retain their shares of General Motors, which the governments received after providing financial aid to the company during the 2009 auto crisis.
By Geoff Zochodne/The Oshawa Express
The Canadian auto manufacturing industry is in the midst of its best year since 2002, states the latest report from the Conference Board of Canada. Things are going so well, the Canadian Auto Workers union (CAW) is asking the provincial and federal governments to restrain themselves from selling their shares in General Motors.
A study done by the conference board is projecting Canadian automakers to post $1.35 billion in pre-tax profits – a level last reached when the Canadian dollar fell to a record low of U.S. $0.62 in 2002.
“Pent-up” demand in the U.S. for Canadian-made vehicles is projected to continue into 2014 too, keeping sales high. General Motors’ U.S. sales in November were their highest in the month since 2007, says the company, with 186,505 vehicles delivered; Canadian sales dropped 3.2 per cent compared to November 2011, though the 17,372 vehicles delivered purport to be a much, much smaller impact on the company. The board is anticipating 1.72 million Canadian vehicles sales as well, which would make them the highest in a decade.
Scotiabank produced a similar report to the conference board’s, claiming record-high profits of $61.4 billion for the world’s five largest automakers.
"This is clearly not the time to sell the government's shares," says CAW President Ken Lewenza in a release.
The provincial and federal governments contributed over $10 billion in financial aid to the company during the automotive crisis of 2009, receiving a 12.5 per cent stake in the company in return.
Ontario New Democratic Party Leader Andrea Horwath, visiting Oshawa, says she was in favour of helping GM at that time, but wants to see the provincial government wring more “bang for your buck” out of investors when it does intercede in the private sector. Horwath, speaking to the Greater Oshawa Chamber of Commerce, noted Oshawa has taken hits to its manufacturing sector, including its General Motors operations.
“Let’s make sure when we are providing money to companies or when we’re providing help to companies that in return we have commitments, ironclad commitments, to jobs,” says Horwath. “And that has not been the way the Liberals have dealt with things in Ontario. Many a company received benefits of tax dollars and then closed up shop and walked away. We can’t do things like that, it’s not a responsible way to deal with tax dollars.”
Notwithstanding profits, the conference board’s autumn industrial outlook says the latest round of negotiations between General Motors helped reduce costs in the company’s Canadian operations, but obstacles to future investments remain.
“Without additional ways to lower their operating costs, labour-cost savings alone will not be enough to drive major new investments,” reads the report.
The study says the strengthened dollar has “eroded Canada’s cost-competitiveness” and increased the lure of auto companies to build plants in Mexico and the U.S. Labour and legacy costs remain a concern as well, notes the report.
The new four-year contract negotiated between GM and the CAW this summer pushed back the scheduled closure of the Oshawa consolidated line until 2014. Yet the 1,500 jobs lost when it eventually closes will offset the 1,600 new jobs negotiated by the union from Ford and GM, claims the conference board.
“With little employment growth and no new major investments announced, the outlook for the Canadian automotive industry is weak once the post-recession sales rebound in the U.S. is complete.”
Production at General Motors rose by 3.1 per cent this year. The manufacturing of passenger cars was down 3.2 per cent though, due to “lower output of Chevrolet Camaro and Impala models,” says the report. Both models are produced at GM’s Oshawa plants.
Scotiabank’s projections were cheerier, though they included international operations, not just Canadian. For the bank, the high profits bode well for the future.
"Our leading indicators point to ongoing gains in global car sales amid a slow, but enduring economic expansion," says Carlos Gomes, Scotiabank's senior economist and auto industry specialist in a press release.
And despite tough times in Western Europe, Gomes says, “most indicators, especially from the world's two largest economies, point to some recent acceleration in the pace of economic activity, a development which is supportive of further gains in vehicle sales and earnings over the coming year.”
Those rosy prospects have the CAW asking the federal and provincial governments to hold their shares in General Motors.
"The enormous personal and corporate tax revenues paid by a revitalized auto industry and the tens of thousands of auto assembly and parts workers in Canada, mean that this investment has already paid dividends for Ontario workers and taxpayers,” says Lewenza.
“The government did step up to the plate, both federally and provincially, to help the Big Three when the recession hit, and I think that was the right thing to do,” says Horwath. “Having said that, we have to get something back for that investment, if you will.”
The CAW’s auto policy document, called "Re-thinking Canada's Auto Industry: A Policy Vision to Escape the Race to the Bottom" insisted the government retain its shares, and even examine the possibility of creating a state-owned manufacturing company.
“Whether it likes it or not, the Ontario government is clearly in the auto business, and has to be,” muses Lewenza. “This industry's presence in Ontario is too important to Ontario's economic and fiscal health for government not to play a central role.”