It's auto show season again: when car makers pour on the glitz, the gimmicks, and the free booze to showcase new models for prospective customers and automotive journalists. (Too bad: Only journalists get the free booze.)
The Detroit show -- first and biggest of them all -- celebrated its 100th anniversary this year. But lurking behind the glitter was fear the curtain may be closing on Detroit's century as automotive capital of the world. Will the snappy new products shown in Detroit reverse the massive losses experienced by GM, Ford, and now Chrysler?
GM's resurgence seems encouraging. It snagged honours for both Car and Truck of the Year (the latter with the Canadian-made Silverado), and its plug-in hybrid Volt sedan (which gets 150 miles to the gallon) generated the show's top buzz.
Chrysler and Ford also unveiled cutting-edge designs. Chrysler's new-generation minivan (built in Canada) has stowable swiveling back seats, and even a table. Ford's futuristic Airstream concept would create a whole new vehicle class -- a "people-mover," neither minivan nor SUV. It could conceivably be built here, too, if it gets the go-ahead.
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The industry's quality guru, J.D. Power and Associates, delivered more welcome news: Big Three vehicles are more reliable than European-made cars, and the gap relative to Asian vehicles has almost disappeared.
It will take time, however, for consumer perceptions to catch up to these improvements in design and quality. And for Canadians, it's very risky to trust our most important export industry to the judgments of U.S.-based designers and marketers. (Despite Honda and Toyota's important investments here, the vast majority of our production and jobs depend on the traditional North American manufacturers: GM, Ford and Chrysler.) Indeed, some Big Three survival strategies (like Chrysler's plan to import low-cost vehicles from China) might help their bottom line, but hurt ours. We need insurance, so that the structural shifts battering this industry won't leave our auto communities high and dry.
The Globe and Mail's Greg Keenan recently reported that Ford Canada -- for the first time since 1961 -- produced fewer vehicles than it sold last year. In the good old days, that would have violated the Canada-U.S. auto pact. But the auto pact was overruled by the World Trade Organization (WTO) beginning in 1999, and it's been downhill for Canada's auto sector ever since. In just seven years since, we've squandered a $22-billion auto trade surplus; shockingly, Canada is now a net auto importer.
The auto pact ensured Canada got a healthy share of investment and jobs, as the industry was integrating continentally. Now, we need a new auto pact, to ensure the same thing happens as the industry integrates globally.
Offshore imports to North America have ballooned 150 per cent since 1996 -- reaching 4.5 million vehicles last year, gobbling more than 25 per cent of the continental market. This one-way inflow has hammered the traditional North American manufacturers: Those 4.5-million imports would keep 14 assembly plants running flat out, and create a half-million jobs. Meanwhile, North America exported all of 300,000 vehicles to the rest of the world -- barely enough to keep one plant running. Even when we produce popular vehicles (like the Oshawa-built Buicks that became hot sellers in China), other countries quickly limit our exports (the Buicks are now made in China).
North America is the only major automotive market in the world that imports so much more than it exports. No surprise, then, that every North American auto maker is swimming in red ink.
Just down the street from the exhibition halls, CAW president Buzz Hargrove was proposing to reporters a new North American auto pact to restore some balance to this picture. Companies that sell here, would produce here. The continental deficit would be worked down through a combination of enhanced exports to offshore markets (which, like Japan, China and Korea, are effectively closed to outsiders) and reduced imports. Either way, North America gets investment and jobs proportional to its vehicle purchases. Sensible internal limits would ensure that each NAFTA country retains fair domestic content.
Auto makers would continue to battle each other to the death, and no doubt continue restructuring until the cows come home. But whatever the outcome of the battle of corporate brand names, at least Canada would be assured a fair share of a vital industry.
Jim Stanford is an economist with the Canadian Auto Workers union.
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