Not long ago, Canada was, according to ex-GM CEO Dan Akerson, the most expensive place in the world to build a car. A strong Canadian dollar meant that the cars and crossovers built at GM’s plants in Oshawa and Ingersoll, Ontario, weren’t as profitable as those built in the US or Mexico, where labor costs were significantly lower.
But even a newly weakened Canadian dollar isn’t going to save Oshawa.
TTAC has been predicting the end of Oshawa for nearly two years, The Globe and Mail (Canada’s newspaper of record), has come around to this notion, citing similar logic as our previous reports – namely, that all of Oshawa’s product can be built at other factories, or is being moved away from Oshawa entirely.
While some products, like the Chevrolet Camaro, are being moved due to a change in architecture (the next-gen Camaro will be built in the same factory as its platform-mate, the Cadillac ATS), others are being moved due to labor costs (the popular Theta crossovers will be produced in Mexico and Tennessee) or contractual obligations (the next-generation Buick Regal is almost certainly being built at an under-utilized Opel factory in Germany). In the case of the W-Body Chevrolet Impala (sold as a fleet only vehicle) its lifespan is coming to an end, and with it, a dedicated assembly plant, the ancient Oshawa Consolidated Line, which has already been given one stay of execution.
The Oshawa Flex Line, on the other hand, is a modern assembly plant that can build everything from the Camaro to the new Impala to the Equinox CUV all on one line. But even that won’t be enough to save it from closing, not when every single product can be made cheaper in Mexico, in the Southern United States or at the UAW’s lower, two-tier wage scale. If it were not for the Vitality Commitment signed by GM, (which promised to maintain 16 percent of vehicle production in Canada in exchange for bailout funds), the plant would probably be closed by now.
Instead, the earliest GM can depart is 2016, and the plant’s closure will be a devastating blow to a town that is as invested in General Motors as Green Bay is the Packers. According to The Globe and Mail, 3,600 jobs would be lost from the Oshawa plants- good, full-time jobs that are badly needed in a region that is economically limping along after years of a rout in manufacturing.
But discussion of a moribund auto industry for Ontario is a bit of a stretch. Chrysler, Ford, Honda and Toyota have all made significant commitments to Canadian manufacturing in the same window of time that GM has continuously cut product from Oshawa. The weaker Canadian dollar and strong auto sales both in Canada and the United States will only help.
Did anyone else see the article about a Canadian city/Providence(w/e) doing displacement taxing starting in 2016?
A country full of people voting in politicians that are going to hurt consumers can’t expect to keep producers providing jobs. I feel bad for the individuals losing there jobs, but along with more specific reasoning for this shutdown I can’t feel sorry for the politics that have caused it.
No, I haven’t heard of any Canadian province moving to tax by vehicle engine displacement.
So let me get this straight – based on nothing at all you apply inductive reasoning to chide the citizens of a country as being deserving of what they get?
I also haven’t heard of this and I live in the province most likely to do this (and it’s still not likely to do this).
But yes, thanks for making a general (and wildly inaccurate) statement about 35 million people based off of an article you saw once somewhere about some place. Won’t someone please give us a 30% sales and income tax hike??!?
I was going to type up a response basically saying how the city voted for it yadda yadda
Until I noticed how I worded my original post which does in fact say “A country full of…”.
My apologies.
>> Did anyone else see the article about a Canadian city/Providence(w/e) doing displacement taxing starting in 2016?
Well spotted, as the news was mostly hidden by stories about the death of a former hockey player.
It’s in Quebec (where else) where this will happen:
http://montrealgazette.com/business/local-business/personal-finance/taxpayers-hit-again-by-quebecs-economic-update
Quote: “(…) if you like power under the hood, you’ll pay more for the privilege. Vehicles with engines of four litres or more will cost you an extra $50 to $200 at the time of purchase and heightened annual registration fees, starting in 2016. Vehicles with engines of seven or more litres will get the worst of it, with their annual fee jumping from $162 to $376.20.”
IIRCBritish Columbia added a luxury tax to vehicles priced over 32K in the 90’s. It backfired miserably. Instead of buying 1/2 ton and 3/4 ton pickups everyone bought 1 ton pickups because they were exempt.
The US government did the same, trying to soak rich people buying yachts. Rich people stopped buying yachts, the well-paid artisans who built them got laid off, and the tax collections dropped by 50%.
This is the result you get when countries are being run by professional politicians who never had a real job or know how an economy works.
What could possibly be the logic behind that? It seems they’re trying to encourage forced induction, but the article doesn’t suggest any reason.
“Currency debasement is war by other means.”
–Someone famous
Try using this format:
“Many of the quotes attributed to me on the internet are erroneous.” – Abraham Lincoln 1863
BTW the favorites for such quotes are Lincoln, Gandhi, Churchill, Bismarck, and Yogi Berra.
Just a few points:
1) If GM is going to close Oshawa then what about Ingersoll (the former CAMI plant). Will it too be living on borrowed time?
2) When Ford, Chrysler, Toyota and Honda can profitably manufacture autos in Ontario, why can’t GM? Is that an indictment of their organizational inefficiency?
3) As the Oshawa plant has consistently won awards for quality is its closure and movement of production to plants with lesser quality standards (for example Mexico) an indication that GM places slightly lower production costs ahead of quality and future warranty and re-call costs?
Indeed…why can’t GM keep building the more expensive, high-profit-margin vehicles there that demand a better level of quality? Cadillacs and Buicks would seem to be good candidates.
When they already have excess capacity at other cheaper facilities, it makes sense to abandon the more expensive ones first. There isn’t any reason why any GM facility can’t produce similar quality vehicles to Oshawa.
Is it actually les expensive to build a Buick in Germany and ship it to North America?
As for the quality issue. There are many intrinsic problems. For example the workforce in Oshawa would have a higher educational level than most other GM North America plants and probably much higher education and skill levels than those in Mexico.
@Arther Dailey
Probably not. But it is likely more expensive to have highly paid Germans be underutilized, and it is HUGELY more expensive to close a plant in Germany than it is to close one in Canada – if you can close one in Germany at all. Thus Russelsheim wins and Oshawa loses.
Overseas shipping is CHEAP when you do it a boatload at a time anyway.
Education levels of line workers doesn’t really have much of an effect on quality. There are some very high quality products come out of Mexican assembly plants, while we know that better educated American and Canadian workers are capable of producing some real sh1t if there is no control. That’s the beauty of modern manufacturing, portability. It just has to be managed correctly.
“Is it actually les expensive to build a Buick in Germany and ship it to North America?”
It is if the cars are already being built there for the Euro/Global market and they don’t end up selling very many of them in NA (they don’t, maybe 22k this year).
You’d think lower warranty costs would somehow be factored into the calculations here, but perhaps GM took the easy way out and ‘assumed’ they could magically bring other facilities up to Oshawa standards. Given the healthcare cost penalty in the US, the other factors would have to be pretty compelling to drive a move.
Truckducken….Just another reason, why you won’t see Oshawa shut down.
With the oil sands currently in the ditch, the feds are starting to sweat. Ontario is in huge financial trouble. Even UNIFOR is slowly coming to grips with the GM Oshawa situation.
GM Canada has the both levels of government, and the Union right where they want them.
That Flex is not going to close. However the price to stay open, is going to be tough to swallow.
Speaking of swallowing….I may need to dine on some Crow, and the end of all this. I’ll have to ask the B&B for some of their recipies.
“If GM is going to close Oshawa then what about Ingersoll (the former CAMI plant). Will it too be living on borrowed time?”
Almost assuredly. Ingersoll was living on borrowed time since Suzuki bailed on it, and it’s only the popularity of the Theta crossovers that have kept it humming
“When Ford, Chrysler, Toyota and Honda can profitably manufacture autos in Ontario, why can’t GM? Is that an indictment of their organizational inefficiency?”
No, it’s that GM is not good at planning, and even worse at holding members of upper management accountable for strategic mistakes. Admittedly, bankruptcy didn’t help matters, but GM is not great at planning more than a couple of years into the future, which is why you see these pennywise/pound-foolish decisions with some regularity.
There’s traditionally been very little incentive for GM management to stick to a decision, as the rising stars were often shuffled into new roles with regularity, and their failings allowed to stick to whomever was going to assume their prior role.
Bankruptcy made this even muddier, but the principle still stands: who would you hold accountable for the investment in Oshawa Flex?
This is depressingly common in a lot of companies where managers are more concerned about reputation management and politicking than performance. And GM was (is?) famous for that kind of foolishness.
@Psar…. ..Very accurate, and dead on analysis sir.
CAMI ( Ingersol) is good for at least ten years ( just got the commitment a few months ago). the regal is going to Germany as the German Goverment opened its wallet to get production there ( on top of the high cost of closing plants there).
The St. Catharines Powertrain plant is diversifying which plants it sells to ( though thre is still no announced product replacing the gen I high feature V6, so there are still questions about it, we are still going strong with three shifts, while none of the other ( supposedly cheaper) plants making the product have ever ( from what I understand) run three shifts). From even the managament it is acknowledged that not only do we build the highest quality products, but we build them more efficiently ( I.e. Fewer man hours per worker per engine).
At this point Korea has higher costs than Canada ( but stronger Unions) the U.S. apparently has more of a three tear wage structure now, and for labour costs I. north America no one touches the Mexicans. I have to say that considering the quality of parts still coming from Mexico for our plant that there may not be as much savings producing product there as people may think ( there are still noticble differences in quality vs parts that are made elsewhere).
None of this means that production in Canada is guaranteed to continue, one of the reasons is due to the high costs of electricity in Ontario, it is just about the highest expense manufactures have here, not the labour as some people think.
The UNIFOR local here seems to understand that their line in the sand for the 2016 contract cannot be to high up if they want to keep production here in St. Catharines, that said I have a feeling the lworkers with around 30 years in ( all of them besides the approx 200 that have been hired on in the last year) may not be too pleased with the terms of that contract, but from an informal survey, most of them will be retiring eithe at that time or before ( some are hoping to get a buy out package to do so, but I don’t know they are going to get it). I am hopefuls that I will still have a job after 2016, but am realistic enough to realize the GM will do what is best for it ( at least in the short term, maybe not best in the long term due to quality etc.).
Also hurting our chances is the fact tha GM’s market share in Canada is way worse than in the states.
“When Ford, Chrysler, Toyota and Honda can profitably manufacture autos in Ontario, why can’t GM? Is that an indictment of their organizational inefficiency?”
Ford is going to be down to one model assembled in Canada once the Flex and MkT die. I wouldn’t bet on their V8 engine plants surviving over Romeo engine either.
They just pumped $1 billion into the plant. I wouldn’t be surprised to see another CD5 vehicle built there in future.
I would expect one as well. I don’t have the foggiest as what it will be though. An MkT replacement would make sense, but I would think that would be built with the next Explorer in Chicago. Maybe sedans?
I’ll pour out a little Canadian Club for my Canadian homies when the last Flex comes off the line.
GM has lost considerable market share over the past several years, so it presumably doesn’t need all of the production capacity its built over the years.
So, while Chrysler is faced with adding capacity, GM is having to consolidate. Which in GM’s case means there must inevitably be losers.
“Instead, the earliest GM can depart is 2016, and the plant’s closure will be a devastating blow to a town that is as invested in General Motors as Green Bay is the Packers.”
Actually, it’d probably be a LOT worse, as football teams don’t usually have a huge impact on the labor market in an area. But I’d say the high-buck car dealers and realtors would be SOL.
Ontario gets all those other manufacturers and Wisconsin can’t score a single one after Janesville and Kenosha crapped out? Outrage. Walker sux.
It’s Paul Ryan’s fault, somehow.
FreedMike…Yes it will be a devastating blow. A knock out?? Maybe, but I doubt it.
Oshawa has been gradually turning into a bedroom community for the rest of Toronto. It will be tough, but yes probably not the end of the world.
Right. The 407 coming through, and the University can’t hurt us either.
“Right. The 407 coming through, and the University can’t hurt us either.”
The 407 will be a big help, sort of. It’ll further entrench Oshawa as a bedroom city for people who can’t afford to live in, eg, Markham/Richmond Hill.
That will, in the short term, help the rougher parts of Oshawa. If you want to buy cheap-but-nice homes in south Oshawa with the intent of watching it become a kind of commuter Parkdale, go for it.
In the long term, when GTA property values crash (and they will, once the demographic pig moves through the housing python) it’ll get kind of ugly.
I’m personally worried to see what the 407 does to Peterborough when it hits the 115. Not only will it bedroomize an autonomous city, Peterborough is currently the only medium-sized city in southern Ontario whose exits off a major highway aren’t a low-density commercial wasteland (like, eg, Barrie). I can see that changing for the worse.
“when GTA property values crash”
I don’t have a crystal ball, and I’ve never met anyone who did (some claimed to, though).
I will note that the GTA has been experiencing net inbound migration of 70,000-100,000 people per year for many years. This influx creates demand for 45,000-70,000 new housing units every year.
We came back to Toronto in 2003, and bought in 2002 in anticipation of that. Ever since, the bears have been telling me that housing prices are due to drop in “the next year or so”. It’s bound to happen eventually, but hasn’t yet.
The prices for Row Homes on HGTV’s “Love it or List it” are huge, almost NYC levels. They don’t say it loud enough, but the show is in GTA.
Ditto: Oshawa is more of a bedroom community for GTA commuters than an independent entity. It’s up in the air as to how bad it will hurt. But it will hurt; cities as far as Lindsay and Peterborough will be limping from this.
Oshawa has more soul than, say, Whitby and certainly more than Ajax and Pickering, but GM isn’t the reason it stays afloat anymore.
It will be interesting to see if Oshawa can pull a St. Catharines and diversify/recover. I kind of doubt it; Durham doesn’t really have Niagara’s psychological distance from Toronto, nor it’s tourism backbone, to fall back on.
Let me read the Globe article and I will make another comment
As I see it, the consolidated is history. As Derek mentioned the line itself is ancient by todays standards. It was created in late 2007 when they cobbled together the former Plant# 1 and Plant # 2.
I worked at Oshawa GM from Sept 1972 – Dec 2008. In my years I’ve witnessed, plants being torn out, and plants put back together. I was there when they unbolted the A plant and shipped it to Quebec, where they put it back together again. I’ve seen a paint shop built from scratch. A witnessed the same paint shop, getting ripped out. I’ve seen massive tooling change overs, and small change overs. Even rolling change overs. I watched as one of the largest transfer presses in the world got installed. I was there when they moth balled it. Now its been cannibalized, to keep the other giant presses running.
Never, ever, in all the projects I’ve witnessed, was anything like the Flex plant project.
Back in 2008 my primary job was the shipping of truck body panels, from the Stamping plant to the Truck plant. I did the paperwork, the other two guys drove the lift trucks. During 2008 there was many down weeks in the truck plant. As a consequence I didn’t have a whole lot of work to do. So with time on my hands, I would don my hard hat, and my prescription safety glasses, safety vest, and go exploring the construction zone.
They had pulled the old plant down to the studs..Seeing what they were installing was mind bogling. Miles of wires, high tech equipment stacked everywhere. Flat bed tractor trailers, loaded, with state of the art robotics. An army of workers, and engineers. Huge back hoes, loaders, cement trucks lined up outside. For the most part it was a 24/7 operation.
Ha! Send ’em right into the sh-tter just like the American worker. Nanananana! Naaaaa! Naaaaaa!
The TTAC comment eating monster ate the rest of my comment. Anyway this is my prediction. The cost of tearing Flex out, and moving it would be staggering. Keeping in mind that Flex has its own contiguous Stamping plant. Moving a stamping press is like moving an apartment building. Last count I think there is still eight transfer presses.
GM Canada is playing their cards close. They love all this doom, and gloom. GM as of today, is neither confirming or denying all the rumours. GM Canada is looking for both levels of governments, to put some more cash on the table. “The cash on the table” will be contingent on Unifor agreeing to mirror the UAW agreement.
GM will be in be in Oshawa, {albeit a smaller GM} for long past 2019.
You heard it here first.
That’s good commentary you don’t find much of elsewhere, Mikey. And ‘good’ even if you were delivering news of shuttering.
My family has historically been very satisfied with Oshawa cars, the last being a Regal GS.
The currency valuation thing reminds me of my investment strategy: Buy High, Get Scared, Sell Low.
Which is why I’m in a fixed fund right now.
Anyway, I wonder if GM could build a Cadillac model or two on the Flex Line – that, along with “New York” marketing would at least give the buyer the understanding that the inflated Caddy MSRP these days supports North American jobs.
Great, then Canadians should boycott GM and the dreck they now turn out. Pathetic that they were quick to accept handouts from Canada and Ontario when they were on the brink.
The UAW is putting enormous pressure on GM to “bring the jobs back home.”
GM was willing to make empty promises to anyone who was willing to give them money to keep them alive, and the UAW employed.
Still, it’s Canada – a sovereign country. I’m sure they listened to the endless shpiel of the benefits of bailing out GM and keeping Canadians employed.
Well, who didn’t see this coming? Now it’s here. Sad.
Check out GM’s market share in Canada, its one of the reasons this story keeps coming up.
I didn’t know they had color film when Carole King was young.
Each negative was hand-tinted by underpaid immigrants in sweatshops.
Replace ‘negative’ with ‘exterior body panel’ and this could describe the Canadian auto industry.
I keed!
Sweating on the negs *would* explain the grainy prints.
Hmmm……how many billions has been pumped into the Canadian auto industry since the GFC? How much money from the taxpayer went into the union pensions and health funds?
Wasn’t it last year or so the Ontario government was going to dump hundreds of millions into this plant?
Maybe we should just let these unproductive factories fall over. Why waste valuable resources? When are we going to learn?
Use the money not spent on viable and profitable industry.
Big Al from Oz…..Union pension funds? Doesn’t exist . A Company run, Hourly and a separate salary fund does. The Company no longer funds ANY health care for the hourly retirees. The salary retirees won there health care back in a law suit. The salary retirees were| “grand fathered”
Someone as informed as yourself would know that the Ontario Government give GM a pass on pension contributions, way back in 1990. After all, GM was too big to fail. The Union brought this to the attention of at least 6 different successive governments, after that. It was all swept under the rug.
The Ontario government has not now, or in the recent past “dumped” ANY money into the Oshawa plant.
“we” Should just let these unproductive factories fall over. “We”… Are the people from Oz paying taxes in Canada now? You say the factories are unproductive. You know that, how?
Stick to ranting about trucks, and chicken taxes. Leave Canadians and our affairs out of it all eh.
I may be wrong, but I understand that Oshawa is also the Canadian H.Q. I wonder if that will be moved to Ingersoll (or maybee St-Kitts)?
@Pig_Iron…Yes they built it on a beautiful location, in the second marsh. It really is a beautiful building, overlooking Lake Ontario. I’m not sure of the actual numbers, but their is still a fair number of salary people employed.
Perhaps Big Al can inform us how the closure of all auto manufacturing in Australia will help their economy?
It appears that the Canadian Auto Workers made a huge mistake listening to their then President Bob White (and his ego) and separating from the UAW. Ever since the UAW has focused on protecting jobs in the USA, often at the expense of jobs in Canada.