The deafening silence of Canada’s automakers in the face of the escalating trade war with the United States is a sobering reminder that money can’t buy you love.
And, apparently, the more money you spend, the less love you get.
The federal and Ontario governments spent $14-billion to save auto giants General Motors and Chrysler (now Fiat Chrysler Automobiles, or FCA) from collapse in 2009. The two governments are still billions of dollars in the hole on the bailouts.
In the years since, Ottawa has given automakers hundreds of millions of dollars more in grants and loans through its Automotive Innovation Fund to encourage investment in Canada.
It’s now apparent that all that money bought some time, but no vows of eternal love. The infusion of government cash saved roughly 20,000 jobs. Unfortunately, it hasn’t made the automakers any more committed to this country. GM and FCA have lived up to the terms of the bailouts. But in the nearly decade since, they have shrunk their presence in Canada, closing assembly lines and failing to award new vehicle models to their remaining plants.
Now as Canada’s auto and parts industry is facing another existential threat, these same companies have fallen silent. Officials at both General Motors of Canada Co. and FCA Canada Inc. have declined to say anything publicly. Nothing about the U.S. tariffs imposed on steel and aluminum, nor Canada’s move to match them. And not a word about a U.S. investigation that could soon lead to devastating duties on all vehicles and parts.
Citing “proprietary information,” GM declined to release its submission to the federal government, which gave companies until last week to comment on planned retaliation against recently imposed U.S. tariffs on steel and aluminum. FCA similarly will not say if it supports or opposes Canada’s tit-for-tat response, which is likely to make it much more expensive to build cars in both countries. It referred inquiries on the matter to the Canadian Vehicle Manufacturers’ Association, which has also declined to release its submission. The CVMA represents GM and FCA, plus Ford, which did not receive government aid in 2009.
It is not clear whether these companies oppose or support Canada’s right to retaliate against tariffs that were imposed under a dubious U.S. claim of national security. Will they remain mute if U.S. President Donald Trump goes ahead with threatened tariffs on cars and parts, also under the pretense of national security?
The automakers’ silence is sad and cowardly given the long history of cross-border co-operation in the North American automotive sector. There are few better global examples of industries working across borders to create efficient and successful supply chains.
But Canada’s auto sector is now highly vulnerable. Roughly 80 per cent of the vehicles Canada produces are exported to the United States. If the U.S. goes ahead with a 25-per-cent tariff on cars, Canada would suffer a half a percentage-point hit to GDP growth in 2019 and lose as many one in 10 factory jobs, according to a report this week by Toronto-Dominion Bank. As it is, the Canadian economy is likely to grow just 2 per cent next year. In Ontario, where the industry accounts for one in five factory jobs and 40 per cent of exports, auto tariffs could knock as much as 2 per cent off economic growth.
The tariffs could also put a lasting chill on investment in Canada.
“Business investment is the most significantly impacted, creating permanent scarring that reduces Canada’s long-run economic capacity,” according to the report by TD economist Brian DePratto.
Canada deserves a lot more from companies such as GM and Chrysler. They have made a profitable home here for generations. And when their survival was at stake, Ottawa and Ontario were there for the companies and their workers.
More than ever, this country needs powerful multinationals speaking out – loudly – in defence of open borders. What we don’t need is the silent treatment as Mr. Trump builds walls and takes the U.S. down a destructive isolationist path.
It’s naive to think that companies would act against their own economic interest.
But it would be nice if they had the courage to speak the truth about the damage a tariff war would cause to the industry on both sides of the border.
Surely, the billions spent should buy us that.