2010 Chevrolet CamaroGM
Automodular Corp. plans to close its plant in Oshawa, Ont., putting 100 people out of work, after General Motors of Canada Ltd. cancelled its contracts with the supplier of auto parts and assembly line services.
GM's decision to award Automodular's contracts to a U.S. supplier followed a written demand last month telling the supplier to cut its prices in half or risk losing the business, Automodular president and chief executive officer Michael Blair said Wednesday.
"Everybody can cut their prices if they want to, but there's an economic limit," he said. "We didn't."
The job cuts by Automodular reflect the increasing financial pressure on Canadian auto parts companies, which face demands from their auto maker customers for lower costs as car assemblers such as GM, Ford and Chrysler drive down their operating costs to remain competitive in an industry that came near collapse during last year's recession.
In addition, the rising Canadian dollar makes it more attractive for GM and other car makers operating in Canada to buy parts and services from U.S. suppliers.
Automodular, based in Ajax, Ont., said it intends to sue GM Canada for cancelling the agreement in the middle of the contract, Mr. Blair said.
But GM Canada spokesman Tony LaRocca said the contract included a provision that Automodular needed to remain competitive, which the supplier did not meet.
"With this particular supplier we've been working for the better part of the last two years to try and help them understand that they're not cost competitive and to try and improve upon that," Mr. LaRocca said. "But even after all of that they remain very uncompetitive, so it's brought us to this point of resourcing the business."
Troy, Mich.-based Inteva Products, which acquired some business from General Motors Co.'s former Delphi parts unit, will take over the contracts, Mr. LaRocca said.
The cancelled contracts - to supply parts and services for the assembly of the Camaro muscle car at GM's Oshawa plant - account for about 20 per cent of Automodular's overall business, Mr. Blair said. The company will continue to supply GM's plant in Lordstown, Ohio, as well as Ford Motor Co. of Canada Ltd.'s plant in Oakville, Ont. Its Oshawa operations will shut down on Sept. 21.
The loss of the contracts will result in an after-tax loss of $7-million this year, Automodular said.
GM Canada has been cutting its Canadian operations since before the global recession battered the company and the auto industry as a whole. Last year, the company closed a truck plant in Oshawa, putting about 2,600 people out of work, and it will close a transmission plant in Windsor, Ont., this year, affecting another 1,400 jobs.
GM has also moved to close about one-third of its Canadian dealerships as part of a massive restructuring that saw it file for bankruptcy protection in the U.S. and struggle through the economic downturn with the help of billions of dollars in aid from the U.S., Canadian and Ontario governments.
However, the auto maker builds some of its most popular vehicles at its Canadian operations and it has been rehiring hundreds of workers in recent months to meet growing demand.
In October, the company said it would add a third shift at its Cami Automotive Inc. plant in Ingersoll, Ont., re-hiring about 350 workers. Then, late last year, GM said it would invest another $90-million to increase capacity at Cami, resulting in the recall of another 280 workers.
And in November the company said it would add a second shift in Oshawa in 2011 to support production of the new Buick Regal and Camaro convertible, bringing back 700 workers.
Finally, GM said it would recall more than 700 workers - 600 at its Oshawa plant and another 100 at Cami - to meet growing demand for its Chevrolet Equinox and GMC Terrain crossovers.
Automodular returned to profitability in its most recent quarter, earning of $2.1-million, or 8 cents a share, compared with a loss of $10.3-million, or 40 cents a share, in the fourth quarter of 2008. Revenue for the quarter was $22.8-million, up from $16.4-million in the year-ago period.
The company currently has four plants and employs about 650 people.