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The planned shutdown of General Motors' Oshawa plant is a new blow to an already struggling industry, but Canada’s auto sector has not reached the end – yet

Carlos Osorio/Reuters

General Motors' move to close its assembly plant in Oshawa by the end of this year was shocking, but not surprising. The factory makes passenger cars and finishes pickup trucks in a market that wants SUVs and crossovers, and has been running at one-third capacity.

GM said the shutdown in Oshawa and seven other places would save US$6-billion a year as it focused on better-selling vehicles and prepared for an electric fleet of automobiles.

Ontario is home to eight auto assembly plants: two GM, two Toyota, one Honda, two Fiat Chrysler and one Ford. The automotive sector is the country’s second-biggest manufacturing industry, employing 140,000, according to Statistics Canada.

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The loss of the Oshawa plant is a new blow to an industry that has been struggling to maintain its place in a global sector in which it is not much of a research hub, and is no longer a low-cost producer.

The auto industry has slumped in recent years as manufacturers moved output to lower-cost regions, such as Mexico and the Southern United States. Canadian production has fallen to less than two million vehicles a year from more than three million in 1999.

The Oshawa plant turned out 47,500 passenger cars in the first 10 months of 2018, compared with 80,000 in the same period of 2017, and is the province’s smallest assembly plant, according to DesRosiers Automotive Consultants.

A glance at the province’s other assembly plants reveals a mix of popular minivans, muscle cars and Japanese brands, in addition to several vehicles expected to be discontinued, and, in two cases, cars that are also made in Mexico or China.

In the highly integrated North American auto industry, Canada is the assembly line, not the innovator or developer of new products and engineering methods (although some of that is done here). Canada produces more vehicles than it can buy, so it depends on the U.S. consumer, exporting a large majority of cars and trucks.

Greig Mordue, a professor at Hamilton’s McMaster University and a former general manager of Toyota Motor Manufacturing Canada, said the country has retained its role as the factory for the Detroit and Japanese brands in North America despite the ascent of Mexican manufacturing and the erosion of Canada’s status as a low-cost producer aided by a cheap currency.

“We’ve always built more cars than we’ve bought, but we haven’t been engaged in what some characterize as the high-end or high-value portions of the industry. We don’t have a robust automotive [research and development]. We’re not involved in design,” Prof. Mordue said. “Where does that leave Canada? It’s not the big market and it’s not the low-cost alternative, that’s now Mexico’s job. So Canada [has] been groping around trying to find the next way to define itself ever since.”

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As the Unifor union that represents 2,600 Oshawa workers who will lose their jobs by the end of 2019 fights to keep the plant open, GM is instead helping the employees prepare for life without the factory. Half the work force is eligible for a pension, GM says. For the rest, the company said it will provide financial support for retraining and help connect the workers with employers and colleges in the region.

“We have known for two years that the production of the trucks that we have in Oshawa would end at the end of 2019 and the first shift would come off in the summer. We have already been planning. Our suppliers have been planning. They know that that wind-down was taking place,” said David Paterson, a spokesman for GM Canada.

Joe McCabe, an analyst and chief executive of AutoForecast Solutions LLC in Philadelphia, saw the Oshawa shutdown coming, and four years ago issued a report predicting the factory’s demise. He came to that conclusion after careful analysis that included talking with parts makers and contract bidders in the factory’s orbit. Nothing happens overnight in the auto sector: New models, updates or a car’s replacement are planned years in advance; the supply chain of parts makers takes about three years to line up.

Today, when Mr. McCabe looks at the Ontario auto industry, he does not see another plant in the same dire situation as that of Oshawa. However, he does see Brampton.

The Fiat Chrysler Automobiles factory just west of Toronto, which opened in 1986 as an American Motors plant, employs more than 3,500 and makes the Dodge Charger and Challenger, and the Chrysler 300. The Charger and Challenger are popular muscle cars that compete with Ford’s Mustang and GM’s Camaro. But the Chrysler 300, a large sedan that is one of two models left in Chrysler’s catalogue, is expected to be discontinued by the end of 2021, according to Mr. McCabe, press reports and a Unifor union official who asked not to be named because he is not authorized to speak to the media on the matter.

“If I had to pick a list of plants in Canada that would be the most at risk next, then I would put Brampton on top of that list,” said Mr. McCabe, adding he is not predicting the plant will close. Rather, it needs new models and investment, including a new paint shop, if one of its three cars is going to be scrubbed.

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"If they keep [the Challenger and Charger] they either have to move them to another facility or continue humming along at that plant, and I think that plant is going to need something else because it could use more volume. But to get more volume the plant will need more investment,” Mr. McCabe said. “Right now, we don’t have a product in mind that we would put in that facility.”

LouAnn Gosselin, a spokeswoman for Fiat Chrysler, called reports of the 300′s end “rumours and speculation.” Asked if the reports were true, Ms. Gosselin said, "No. We haven’t made any announcements” on the 300’s future.

Spare capacity and uncertainty over current models also cloud the picture at other assembly plants.

  • GM’s plant in Ingersoll, Ont., makes the Chevrolet Equinox, which is also made in Mexico.
  • Ford said in April it will phase out production of passenger cars in North America, except for the Mustang and the Focus Active, raising uncertainty for the company’s Oakville, Ont., plant, which makes Lincolns and the Flex. Oakville also makes the Ford Edge, a car made in China. “We do not discuss future product plans or comment on speculation,” said Matt Drennan-Scace, a spokesman for Ford of Canada.
  • Fiat Chrysler said it will stop making the Dodge Caravan, produced in Windsor, Ont., and has yet to name a replacement product. However, Sergio Marchionne, CEO of FCA until his death in July, said in January, 2018, the Dodge Caravan’s replacement will be another minivan, built on a platform similar to that of the Pacifica, also made in Windsor. He said the commitment to Windsor is “unwavering.”

Auto plants, which cost billions to build and require years of co-ordination with suppliers, labour and other services, are slow to open and slow to close. It’s a glacial pace that has helped preserve thousands of well-paying jobs in Ontario factories.

“Companies don’t just pick up and shut down car assembly plants easily. It takes a long time and everything has to line up in the wrong place for you to want to shut down a car plant. It happens because the market falls out and there’s a lower-cost alternative somewhere else," Prof. Mordue said.

“That’s why Canada’s not the cheapest place to build cars any more, but it doesn’t mean our auto industry is going to disappear immediately. Canada hasn’t been the low-cost alternative for 25 years now, but we’ve lost a third of our capacity, not 100 per cent,” he said. “Those who think that the end of auto manufacturing is close at hand in Canada are probably overly pessimistic. But I would say we are moving into our late middle age.”

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Ontario’s auto assembly lines

Fiat Chrysler – Brampton

Vehicles: Dodge Challenger and Charger, Chrysler 300

Employees: 3,600

Year-to-Oct production: 159,000, down 16 per cent from year-ago period (Jan-Oct).

Fiat Chrysler – Windsor

Vehicles: Pacifica, Pacifica Hybrid and Dodge Grand Caravan

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Employees: 6,100

Year to October production: 263,000, up 9 per cent from year-ago period.

Ford – Oakville

Vehicles: Edge, Flex, Lincoln MKX, Lincoln MK

Employees: 4,600

Year-to-Oct production: 192,000, down 10 per cent from year-ago period.

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General Motors – Ingersoll

Vehicles: Chevrolet Equinox

Employees: 2,800

Year-to-October production: 173,000, down 32 per cent from year-ago period.*

*GMC Terrain production ended in 2017

General Motors – Oshawa

Vehicles: Cadillac XTS, Chevrolet Impala, Chevrolet Silverado and GMC Sierra.

Employees: 3,000

Year-to-October production: production 101,000, up 20 per cent from year-ago period.*

*2017 figures include discontinued Buick Regal but do not include Chevrolet Silverado and GMC Sierra

Honda – Alliston

Vehicles: Honda CR-V, Civic, four-cylinder engines

Employees: 4,200

Year-to-Oct production: 365,000, up 1 per cent from year-ago period.

Toyota – Cambridge and Woodstock

Vehicles: Corolla, Rav 4, Lexus RX350, RX450h

Employees 8,000-plus total at both plants

Year-to-Oct production: 438,000, down 10 per cent from year-ago period.

Sources: Eric Atkins, DesRosiers Automotive Consultants Ltd., Ward’s Automotive Reports, Japan Automobile Manufacturers Association of Canada, company reports

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