One of the painful lessons for governments as General Motors Co. prepares to end a century of car-making in Oshawa, Ont., is that money doesn’t buy enduring love.
It gets you what you paid for.
In GM’s case, the billions of dollars sunk into the company’s Canadian assembly plants over the decades by Ottawa and the governments of Ontario and Quebec secured investments and, in some cases, production commitments.
The money bought time. But it did not come with promises to keep jobs or specific plants in Canada forever.
Given the generous government support, many would argue that GM has a moral obligation to this country.
What is beyond dispute is it has legal obligations. And the Detroit-based automaker has largely lived up to the various loan and subsidies it received, including the nearly $14-billion bailout by Ottawa and Ontario in 2009 that saved GM and Chrysler from collapse.
“The undertakings that we got were basically on production and [research and development] investments,” said Paul Boothe, one of Ottawa’s lead negotiators in the bailout. “Those agreements have all run their course now. So the company is free to go.”
Mr. Boothe, who recently retired as professor and director of the Lawrence National Centre for Policy and Management at the Ivey Business School, University of Western Ontario, said the government specifically avoided holding GM to job pledges because doing so would have made the company even less competitive. He said the government’s focus at the time wasn’t just saving GM and Chrysler, but to ensure a future for the entire industry, including thousands of parts suppliers across Canada.
Remember when GM assembled Camaro sports cars in Sainte-Thérèse, Que.? GM closed the factory in 2002, in spite of the federal and Quebec governments giving it a $220-million in interest-free loans to build a new paint plant – the last of many government incentives. The company paid the money back in 2017, on time and in full.
The other lesson of Monday’s decision is that giving GM more money to keep Oshawa open would be futile.
The problems exposed by GM’s near-death experience in 2009 have been playing out for a more than a decade – well before Donald Trump and the renegotiation of the North American free-trade deal. Throughout the industry, assembly of vehicles has been steadily migrating to the southern U.S., Mexico and offshore, lured by generous tax breaks, cheaper workers and more favourable labour laws. Canada’s share of vehicle assembly and new investment has been declining for years. Since 2006, 16 new vehicle assembly plants have opened in North America – not one of them in Canada.
Other problems are specific to GM, which has been losing ground to other global automakers.
And Oshawa faces a logistics problem in an era when parts and partially assembled vehicles are constantly in motion, and being moved across borders. It is located at the northern extremity of GM’s vast North American network of assembly plants and suppliers. It’s even outside the Canadian auto sector’s main cluster in Southwestern Ontario.
GM has been putting Band-Aid fixes on a plant that required billions of dollars in new investment to secure a mandate to build a new model. The aging plant makes the Chevrolet Impala and the Cadillac XTS plus does final assembly of Silverado trucks and Chevrolet Equinox sport-utility vehicles.
There have been signs for years that Oshawa was not central to the car maker’s long-term plans. The company had repeatedly failed to designate a new model for the plant to build.
GM’s other operations in Ontario appear more viable longer-term, in part because of government investment, Mr. Boothe pointed out. The government-sponsored restructuring helped GM take full ownership of the CAMI plant in Ingersoll, which makes the Equinox, secure a new engine model for its plant in St. Catharines, and invest in R&D facilities in Oshawa and Markham.
With the Oshawa plant almost certain to cease production next year, the problem that should preoccupy governments is whether it’s a harbinger for what’s left of Canada’s auto sector.
GM chief executive Mary Barra said the five plant closings announced on Monday, including Oshawa, are part of the company’s efforts to deal with the disruption caused by the shift to electric cars, self-driving vehicles and ride-sharing.
Unfortunately, Canada’s auto sector is not particularly well positioned to capitalize on any of these trends.