GM strike hovers over sluggish year for Canadian auto production
Elder Farombi Stephen
Oct. 09, 2019
It’s shaping up to be a slow year for Canada’s automotive sector, thanks to sluggish sales in the first three quarters combined with an expected decline in major manufacturing investments and a potential production dip from the prolonged General Motors Co. strike in the United States.
While the strike by 49,000 United Auto Workers, now in its fourth week, has only had a small impact on overall Canadian output so far, it could ding Canada’s gross domestic product if assembly lines remain at a standstill for the rest of the year, according to a TD Economics report released Wednesday.
“Should the strike persist for the next few months, we estimate that it could reduce Canadian GDP by as much as 0.3-0.4 percentage points,” TD Economics stated.
The labour action over wages and health care comes at a transitional time for GM, which planned to cut production at several North American facilities to invest instead in electric and automated cars.
Thanks to the continent’s interwoven supply chains, the strike has resulted in stoppages at GM’s Ontario plants in Oshawa and St. Catharines, leading to temporary layoffs for about half of the company’s 5,900 hourly employees in Canada. Its plant in Ingersoll, Ont. remains open, but that can’t last if the strike continues.
“With inventories starting to dwindle, production will be forced to stop over the coming weeks,” TD Economics reported.
Since Oshawa, one of the plants slated for closure, was already preparing to stop vehicle production in December, a prolonged strike could speed up the timing.
“It is assumed that any production lost at this facility – roughly one-third of fourth-quarter GM production – would not be recouped,” the TD Economics report stated.
Overall Canadian auto production is down about six per cent year to date and vehicle sales fell about 3.8 per cent in the first nine months, according to the report, which expects total vehicle sales to hover around two million through 2020.
Capital expenditures in the automotive manufacturing sector are also expected to fall in 2019, according to a new report from DesRosiers Automotive Consultants.
Total capital spending is expected to fall to $2.12 billion from $2.87 billion in 2018 and from the pre-recession peak of $4.17 billion in 2007, according to DesRosiers. New spending will drop to $1.26 billion for motor vehicle assembly, $782.7 million for motor vehicle parts and accessories and $76.3 million for the truck body and trailer industry.
Earlier this month, DesRosiers also reported a drop in light vehicle sales. After a bit of hope for a rebound in August, September sales fell 3.7 per cent, with GM posting the largest decrease in volume.
GM is losing between US$80 million and US$100 million each day of the strike, according to analyst estimates from J.P Morgan and Citi, while workers must get by on US$250 per week from the union.