Manufacturing industry in stage of crisis

By Buzz Hargrove for Sun Media

May 26, 2008

Ontario has had more than its share of bad economic news lately. With an overvalued Canadian dollar, a recession in the U.S. (our most important market), and a flood of one-way imports from offshore producers, our manufacturing industry is in crisis.

In the political arena, of course, opposition politicians make hay out of negative news - blaming everything on the government of the day, with vague claims about "bad economic management."

This silly game might be amusing to watch, if real lives weren't hanging in the balance. After all, the provincial government actually has very little ability to influence global trends like exchange rates, recessions, and trade deficits.

The recent debates at Queen's Park over Ontario's auto investment strategy are a case in point.

Using rhetoric that sounded eerily similar, Conservative legislative leader Bob Runciman and NDP chief Howard Hampton lambasted the provincial government for supporting GM's recent investments in Oshawa, St. Catharines, and Ingersoll - even though GM has since announced job losses (including the closure of a factory in Windsor). It's corporate welfare, they fumed, complaining that Queen's Park failed to extract job guarantees.

Ontario's auto policy (which, until 2006, was matched by a similar federal strategy) leveraged over $7 billion in badly-needed auto investments. Every automaker in the province received support for major projects, that helped make Ontario the leading automotive jurisdiction in North America. Now some jobs are being eliminated, due to the U.S. downturn and other factors. Does that mean the whole policy was a mistake? Hardly. But that doesn't deter the politicians.

Ontario, to its credit, did win commitments from supported companies to maintain and expand specific facilities. But their overall job numbers inevitably depend on the state of the vehicle market. Just do the math.

General Motors spends upwards of $20 billion each and every year to purchase labour, parts, capital, and services for the roughly 800,000 vehicles it assembles in Ontario annually. If those vehicles aren't selling, production must decline too - and quickly, or else the company will incur huge losses on wasted input costs.

Because of the U.S. recession (which has hammered sales of GM's Ontario-made pickup trucks) and the flood of offshore imports (which is killing all North American automakers, who are frozen out of Japan, Korea, and other offshore markets), GM's sales are falling. And so, inevitably, must its employment.

Does anyone possibly believe the Ontario government could force GM, through a one-time $235 million investment, to keep spending $20 billion per year making vehicles that it cannot sell? Get real.

Ontario's auto industry faces some incredibly challenging times ahead. But it is still our economic engine. It directly employs 130,000 Ontarians - and hundreds of thousands more through spin-off jobs. It generates tens of billions of dollars in family incomes, and billions in taxes.

We should indeed have an informed, open-minded discussion in Ontario about the challenges facing the auto sector (and all manufacturing, for that matter), and how we can preserve a fair share of high-productivity, high-wage jobs despite the pressures of globalization.

But the attacks of Runciman and Hampton on Ontario's auto strategy are anything but informed. They are an attempt to make cheap political points, at the expense of the tens of thousands of hard-working autoworkers in Ontario who quite rightly fear for their future. Myself and my members are deeply offended.

The one major auto stakeholder missing in action is the federal government a which continues to pocket the lion's share of automotive tax revenues, but refuses to play any role in ensuring the industry's future.

If Runciman and Hampton truly want to point fingers, they should aim them at Ottawa. But then that wouldn't fit into their partisan political sniping - which, sadly, trumps Ontario's real economic interests.

Buzz Hargrove is president of the Canadian Auto Workers union.