General Motors Co. is closing down its Oshawa, Ont., plant in what was once the heart of the Canadian auto industry, part of a broad and costly restructuring as it prepares for the sputtering of the fossil-fuel economy.
GM, a company built on the rise of the internal-combustion engine, is retooling its operations in a strategic shift away from traditional vehicles. Almost 3,000 people will lose their jobs at the Oshawa plant just east of Toronto by December, 2019, as the Detroit-based automaker eliminates older, poorly selling vehicles, such as the Chevrolet Impala sedan, from its lineup and doubles its investment in cleaner energy options and automation while making smaller SUVs, crossovers and trucks.
The Oshawa shutdown is part of a global restructuring GM announced on Monday that will eliminate nearly 15,000 positions and end production at five North American factories – in Michigan, Ohio and Maryland, in addition to Oshawa – as the car maker looks to cut billions in costs in response to changing customer demand. And the company will pare back its capital spending in coming years, while doubling its investment in self-driving and electric technology.
“This industry is changing very rapidly. We want to make sure we’re well positioned,” GM chief executive officer Mary Barra said at a Detroit press conference on Monday. “We think it is appropriate to do it at this time while the company is strong and the economy is strong.”
News of the impending plant closing sparked a protest walkout by Oshawa factory employees and calls from union leaders for elected officials to take action to save high-paying manufacturing jobs.
Prime Minister Justin Trudeau told the House of Commons that he telephoned Ms. Barra on Sunday evening to express how “disappointed” he was with the decision to close down the Oshawa plant.
Mr. Trudeau said he spoke on Monday with Ontario Premier Doug Ford and they both agreed: “We will do everything we can to support [GM auto workers] in these difficult times,” he said.
Mr. Ford said he spoke with a senior executive at GM on Sunday afternoon and was told there was nothing the province can do.
“The answer was, ‘No, there’s nothing.’ Basically the ship has already left the dock,” he said. “We’re disappointed in GM. We supported GM as everyone remembers, years ago, when they were in trouble.”
The federal and Ontario governments contributed a combined $13.7-billion to GM as well as Chrysler in 2009. Ottawa contributed $7.23-billion to GM, while the province’s share was $3.6-billion. Most of that government assistance was in the form of loans that were then converted into government-owned shares in the two private companies.
GM said on Monday the affected factories are in Oshawa, Detroit and Warren, Ohio, as well as parts plants in Maryland and Michigan. It also said it will end operations at two plants outside North America next year, in addition to a previously announced shutdown in South Korea.
GM said the restructuring will cost about US$3.5-billion and save US$6-billion a year. GM’s share price on the New York Stock Exchange rose by 4.4 per cent by the end of Monday’s trading.
GM’s Oshawa plant assembles the Chevrolet Impala and Cadillac XTS and finishes Chevrolet Silverado and GMC Sierra trucks. The company’s other Ontario operations include the Cami factory in Ingersoll and an engine and transmission plant in St. Catharines, which are unaffected.
Jerry Dias, head of the Unifor union that represents about 2,500 employees in Oshawa, said he does not accept that the company has planned no autos for the factory beyond December, 2019, and vowed to fight for the jobs.
“I don’t know how General Motors expects that Canadians are going to continue to support them as a country when they clearly have no intention of treating us a nation who has workers with any respect,” he said at a meeting with union members in Oshawa.
GM said the money it saves by reducing production capacity and closing plants will allow it to accelerate the development of electric and self-driving cars. GM will launch 20 such models in the next three years, and envisions a future with “zero crashes, zero emissions and zero congestion,” Ms. Barra said.
“From a fuel-economy standpoint, we believe in an all-electric future,” she said.
GM spends about 75 per cent of its engineering resources on traditional vehicles powered by internal combustion engines. That share will probably be directed toward green vehicles within two years, company spokesman David Paterson said.
Last fall, GM laid out its strategy to expand its presence in the market for electric cars, saying it would introduce two new models within 18 months. At the time, the company said it did not expect jobs to be lost in the move to electric vehicles.
Auto consultant Dennis DesRosiers said GM’s North American market share has shrunk to the low teens from mid-30s around 2000.
But he said the moves announced on Monday demonstrate GM’s ability to make bold moves based on analyses of the market. “In the past GM didn’t make these tough decisions ... and the lack of decisive action ultimately led them to declare bankruptcy in the U.S. back in 2009,” he said.
Charlotte Yates, a professor at the University of Guelph who has studied the auto industry for 30 years, said the impact of the plant’s shutdown on Oshawa, the auto sector and the broader economy is significant, but the move comes as no surprise. GM has not made any significant investments to update its Oshawa operations to produce smaller, greener vehicles, she said.
“It’s clear that they’ve developed a strategy for the future and Oshawa is not part of that,” Prof. Yates said by phone. “Its time was limited.”
The automotive industry is Canada’s second-largest, contributing $18-billion to gross domestic product and $87-billion in exports. The sector employs 126,000 people directly and about 500,000 indirectly.
Prof. Yates said the spillover effects of the Oshawa shutdown will be felt throughout the economy – from the parts makers that supply the assembly line to the restaurants and insurance companies and other businesses that depend on the employees.
Federal Innovation Minister Navdeep Bains said he was “deeply disappointed” in GM’s Oshawa closing but added that it was unlikely Ottawa or the Ontario government would be able to convince GM to change its mind and build zero-emission vehicles at the Oshawa plant.
“At this stage the company has made a decision on overall global restructuring,” Mr. Bains said.
The GM announcement comes shortly after the renegotiation of the North American free-trade agreement, which was welcomed by the Canadian auto sector. The proposed United States-Mexico-Canada Agreement boosts regional content of tariff-free automobiles to 75 per cent and requires 40 per cent of a car be made by workers earning at least US$16 an hour, shifts that favour Canadian and U.S. plants over those in Mexico and overseas.
However, Canadian negotiators failed to get the United States to lift Section 232 tariffs on imported steel and aluminum. GM, Ford Motor Co. and other manufacturers have warned the U.S. tariffs on metals and foreign autos will drive up prices and lead to layoffs.
In the United States, President Donald Trump reacted strongly to GM’s planned closings, especially in Ohio.
“They better damn well open a new plant there very quickly,” Mr. Trump said in an interview with The Wall Street Journal on Monday. “I love Ohio,” he said. "I told them, ‘You’re playing around with the wrong person.’ ”
With reports from Bill Curry, Laura Stone and Josh O’Kane