Social Policy in Ontario

How Canada can win the fight to keep auto jobs

Posted on June 24, 2008 in Debates

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TheStar.com – comment – How Canada can win the fight to keep auto jobs: Hard mileage targets and government help to hit them would spark creation of a green fleet
June 24, 2008. James Laxer

The struggle of workers at General Motors to maintain jobs in Oshawa is a matter of direct concern to every Canadian who doesn’t want this country to be pushed back into its historic role as a hewer of wood and a drawer of water.

Many people appear to have concluded wrongly that General Motors had no real choice in announcing it will shut down its plant in Oshawa because it produces pickup trucks whose sales are plunging as gasoline prices skyrocket.

It’s obvious that we are living through a period in which a vast shift in the kinds of vehicles we will use is underway. The question is where will these vehicles be manufactured – what new vehicles could be built in the Oshawa plant, among others – and will Canadian workers get a decent share of the jobs to manufacture them?

Canadians have been fighting to create and keep jobs in this vital sector for the past hundred years. The production of automobiles in Canada has gone through four phases. A fifth one is now underway, a phase with vital implications for the future of manufacturing in this country.

During the first phase, Canadian carriage makers such as Sam McLaughlin in Oshawa produced automobiles for the Canadian market. By 1904, McLaughlin had figured out that he couldn’t compete with Detroit in the production of auto engines and he began importing Buick engines to be installed in his vehicles. In 1915, he made the same arrangement with Chevrolet.

Phase two came at the end of World War I when McLaughlin sold his two companies to General Motors and General Motors of Canada came into being. With Ford and Chrysler also operating subsidiaries on this side of the border, Canada entered the golden age of branch plant auto production during the 1920s. On the eve of the Great Depression, plants in Canada were producing more than 250,000 cars a year, with more than 100,000 of them being exported, mainly to other countries in the British Empire.

Then came the collapse of the industry during the Great Depression, the shift to the production of military vehicles during World War II and the emergence of the industry in a toughly competitive environment in the 1950s and 1960s.

Phase three began with the signing of the Canada-U.S. Auto Pact in 1965. Under the Auto Pact, auto plants in Canada and the United States could ship their vehicles and parts produced for new vehicles across the border duty free. To compensate for the fact that the Big Three auto manufacturers were U.S.-owned, safeguards were included in the pact to guarantee production of cars and trucks in Canada. As the market for cars and trucks grew in Canada, this had to be matched in the case of cars with at least 60 per cent additional production, and in the case of trucks 50 per cent.

Under the Auto Pact, Canada’s export of autos to the U.S. soared. Problems lay ahead, however. The Canada-U.S. Free Trade Agreement, followed by NAFTA and by rulings of the World Trade Organization, killed the Canadian production guarantees that existed under the Auto Pact.

What kept Canada’s auto industry healthy in the fourth phase during the 1990s and the early years of this decade were the low value of the Canadian dollar, medicare and cheap oil. The low dollar against the U.S. greenback and the fact that medicare spared auto makers from having to pay out vast sums in health plans to workers as was the case in the U.S. made Canada a very profitable place to manufacture autos.

Now that the Canadian dollar and gasoline prices have soared, two of the three supports are gone as we enter the fifth phase in the history of the auto industry in this country.

The critical question is where new investments will go to manufacture more fuel-efficient cars and trucks, as well as hybrid, hydrogen-powered and electric vehicles, and vehicles with lower carbon emissions.

It’s the old Canadian story with a 21st century set of problems. How do Canadians persuade a largely foreign-owned industry that does most of its research and development and product innovation outside Canada to give us a fair share of the jobs? In the past we’ve used British Empire preferences, safeguards under the Auto Pact, and a cheap dollar to stay in the business.

Now we are going to have to do some serious planning. We won’t be able to rely on foreign-owned companies that do their product development elsewhere to dole out assembly jobs to us. We need to produce environmentally friendly, fuel-efficient vehicles in a context in which cities are being transformed by the rising price of energy. That planning has to involve the foreign and domestically owned companies in the auto sector, the CAW and all three levels of government.

The way ahead needs to be through a combination of carrots and sticks. In conjunction with the provinces, Canada should establish hard targets to dramatically improve the gas mileage of the vehicle fleet in Canada. Included in the targets should be the required shift of growing percentages of the fleet to hybrid cars and trucks and zero emission vehicles (ZEVs). ZEVs include electric and hydrogen-powered vehicles. (As an energy carrier, not an energy source, hydrogen relies ultimately on other forms of power generation that also need to be environmentally friendly.) For decades, California has established its own rules on these issues so there’s no reason under NAFTA that Canada can’t.

In partnership with the auto assemblers and auto parts companies, governments should be prepared to pump large amounts of capital into the launch of this new vehicle fleet and into the production of the machinery used to manufacture it. This would be in return for commitments that research and development will be done in this country and that the production jobs will be located here for the long term.

Without such a leap, we will go the way of the dodo.

The market simplicities of the Harper government and its man on the ground in Oshawa, Finance Minister Jim Flaherty, just won’t work.

James Laxer is a professor of political science at York University in Toronto.

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