Instant Search Results

  • Home
  • News
  • Diversification key to suppliers surviving GM Oshawa closure

Diversification key to suppliers surviving GM Oshawa closure

Diversification key to suppliers surviving GM Oshawa closure

John Irwin, Automotive News Canada
May 06, 2019

TORONTO — The announcement to close GM’s Oshawa Assembly came overnight, but many of Canada’s auto parts suppliers saw the writing on the wall years ago and have since been finding other sources of revenue. According to industry experts, those efforts will mitigate the impact of the closure.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association (APMA), said suppliers have been expecting the news on Oshawa since about 2009, when GM went through bankruptcy and restructuring, receiving bailouts from the federal and Ontario governments.

“While many of us were surprised by the timing of the Oshawa decision, nobody was surprised that it happened,” Volpe said. “In their restructuring deal, we had got commitments from General Motors for 10 years of production in exchange for restructuring dollars. That 10 years is up at the end of this year, so any suppliers that were heavily dependent on Oshawa will have diversified with some vigour.”

OSHAWA ANXIETY

GM’s announcement in November to end production at Oshawa Assembly by the end of the year has raised concerns about the economic fallout in the region. The plant directly employs about 2,800 workers.

According to the Automotive News Data Center in Detroit, the plant built 66,849 sedans in 2018 and GM planned to do final assembly on about 60,000 pickups a year. For every 100,000 vehicles a plant builds in Ontario, it will need about $1 billion in parts in Ontario, Volpe said.

While Volpe said the economic impact would be “mitigated” by suppliers diversifying, he conceded that many would be “materially impacted” by the end of Oshawa production. Martinrea International Inc., for instance, will shutter a nearby plant in Ajax, Ont., when Oshawa closes.

Martinrea Executive Chairman Rob Wildeboer said that while the Oshawa plant closing is a “negative” for the Ajax plant, his company as a whole has gained business from GM in Canada and worldwide, helping support both its manufacturing and white-collar jobs.

Wildeboer pointed to a plant in Vaughan, Ont., that supplies GM’s CAMI factory in Ingersoll, Ont., which employs 507 people, up from about 200 three years ago.

“And that increase in employment is mainly — not completely, but almost completely — the result of the work we’re doing on the [Chevrolet] Equinox in Ingersoll,” Wildeboer said. “Because GM Ingersoll has given us more work, we’ve managed to, on an overall basis, increase our employment in Ontario based on General Motors over a period of time. So it would be, in a sense, misleading just to look at the negative.”

‘WAKE-UP CALL’ FOR SUPPLIERS

Volpe said suppliers have been diversifying their product mixes for years to better withstand plant closures and consolidation.

“For generations, you could have built a very good business around one specific [automaker] in one plant. Nobody went to business school. Nobody needed to go to business school. The industry was growing, and for decades everyone made more cars than they made before.

“Everyone got caught kind of short 10 to 15 years ago, even before the [financial] crisis, with overcapacity and that new approach to capacity utilization.

“That was a wake-up call for all the suppliers. We lost hundreds then. We didn’t lose hundreds because they moved. We lost hundreds because of consolidation and closure. We’re in a new world now. Everyone’s in business school. You go to work during the day, you’re earning a degree in this stuff.”

Larger suppliers in particular have been able to diversify. Linamar Corp., which last year said it anticipated minimal impact from the Oshawa closure in recent years has acquired agricultural equipment companies Harvestec and MacDon for its business in that industry.

Kristin Dziczek, vice-president of industry, labour and economics at the Center for Automotive Research in Ann Arbor, Mich., said diversification began before 2008-09.

“Many suppliers tried to do that or made moves to do that before the last recession and diversify not just inside auto but outside of auto, too, to try to get some defence work or from some other complementary industries that may not cycle in the same way.”

ALTERNATIVE PLANNING

The Oshawa Assembly Plant builds the Cadillac XTS and Chevrolet Impala sedans, which GM plans to stop producing altogether. The plant also does final assembly off the previous-generation Chevrolet Silverado and GMC Sierra pickup bodies shipped from the Unite States.

“If you watched the product that was being allocated there, and then how it was being twinned in other places and understood the terms of the restructuring agreement with the feds and province, and you were in strategic planning for any one of those suppliers, you were making decisions to make sure you weren’t caught off guard should the inevitable happen,” Volpe said.

He hopes the planned Oshawa closure will force the Ontario and federal governments to “take a real close look at the assembly plants that remain in Canada and work to ensure that the country’s auto manufacturing footpri remains healthy.

Martinrea’s Wildeboer said he is confident that the new United States Mexico-Canada Agreement (USMCA) could help spur new engine plants in North America, giving Ontario suppliers more potential work. The USMCA has yet to be ratified by the three countries.

“There are opportunities to do things with engine plants and I actually think the [USMCA] might get people setting up not necessarily assembly plants but engine plants in North America, which of course is a good thing.”

Click here for original article.

Archives