For decades, the Oshawa, Ont., operations of General Motors Co. were one of the brightest jewels in the auto maker’s crown, churning out some of the company’s most important cars and trucks.
But amid the fiercest competition ever in the global automotive industry, fears are growing that the glory days of General Motors of Canada Ltd. are long passed as the company faces major financial challenges and uncertainty about future production.
GM Canada faces billions of dollars worth of liabilities later this decade, most of which will come due as vehicle production declines in Oshawa.
Pension costs are scheduled to soar, interest-free loans from governments will hit their repayment date and payments on a note issued to finance health care costs start kicking in as production commitments the company made to the federal and Ontario governments in 2009 expire.
The financial challenges loom as GM Canada scales back production in Oshawa starting next year with the planned closing of one of its two assembly plants. The shift of Chevrolet Camaro production out of the remaining Oshawa plant in 2015 and what many industry players see as reluctance by GM Co. to allocate new vehicles to that plant have stoked fears about the future of its operations in Canada’s Motor City, which for decades have been one of the engines of the Canadian economy.
The two plants employ about 3,600 people and sustain thousands more jobs at auto parts producers nearby and throughout Ontario’s manufacturing heartland.
While the payments GM Canada will face and the clouds over Oshawa are company issues, they also reflect lingering problems from the crisis of 2008-09.
Although GM Co. and the auto industry have recovered, the new reality is that auto makers are engaged in a relentless drive to cut costs in all markets around the world. That has contributed to an increasing sense of vulnerability for the industry in Canada, where the rise in the value of the Canadian dollar has sent manufacturing costs higher.
Canada’s share of new automotive investment in North America fell to 5 per cent between 2010 and 2012 after years of double-digit levels.
The restructuring of GM Co. through Chapter 11 bankruptcy eliminated tens of thousands of workers and tens of billions of dollars of costs and has combined with a recovery in the U.S. vehicle market to restore the company to profitability.
But the payments coming due for GM Canada in the latter half of the decade are so onerous that Brian Rutherford, president of a salaried retirees group, Genmo Salaried Pension Organization, believes the company could be forced to file for bankruptcy protection to reduce its legacy costs.
Mr. Rutherford’s deepest fear is that the end of the line for Oshawa and the rest of GM Canada’s operations will come later this decade after the expiry of a commitment GM Co. made to produce 16 per cent of its North American vehicles in Canada through 2016.
He’s a 31-year veteran of the company whose group is suing the auto maker for $500-million after benefits for salaried retirees were cut during the recession that helped send GM Co. into Chapter 11 bankruptcy protection in 2009.
Any suggestion that GM Canada will file for bankruptcy protection is “irresponsible speculation,” GM Canada president Kevin Williams said in an e-mail response to questions.
“We are focused on building a profitable business which has long-term viability, which is in the best interest of all of GM’s stakeholders, including shareholders, employees, retirees, dealers and suppliers.”
Mr. Rutherford’s view is not shared by others with a big stake in GM’s future, such as Canadian Auto Workers president Ken Lewenza, whose union represents thousands of production and skilled trades workers at the Oshawa plants, an engine and transmission manufacturing factory in St. Catharines, Ont., and the Cami Automotive Inc. vehicle plant in Ingersoll, Ont.Report Typo/Error