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John Irwin, Automotive News Canada
May 27, 2019
TORONTO — General Motors’ $170-million plan to turn its Oshawa, Ont., assembly plant into a parts operation signals a new business model for the automaker and gives the factory a renewed lease on life.
“Getting that kind of money is more than a stay of execution and does allow them to live to fight another day,” said Kristin Dziczek, vice-president of industry, labour and economics at the Center for Automotive Research in Ann Arbor, Mich. “That’s better than closing.”
GM plans to convert Oshawa Assembly into a plant producing parts for vehicles such as the GMC Acadia, Chevrolet Traverse and Equinox crossovers. The plant also will do stamping for GM’s CAMI Assembly plant in Ingersoll, Ont., and the automaker is in talks to perform similar work for suppliers including Magna International Inc. and Martinrea International Inc.
The Oshawa site will also become home to a test track for vehicles with autonomous and other advanced technologies.
MORE THAN MANUFACTURER
GM said in November it would stop allocating production to Oshawa.
“We are now so much more than a vehicle manufacturing facility,” GM Canada President Travis Hester said during a May 8 news conference held with Unifor President Jerry Dias.
“We are integrated into the future of our business, the future of our development and into an entire business model for parts manufacturing and accessory, aftermarket parts and component sets that will sustain us for at least 10 years.”
Building parts for other companies represents a major shift in the way GM does business, especially since it spun off its parts division to create Delphi Corp., more than 20 years ago. Automotive consultant Ron Harbour said building up Oshawa’s stamping operations gives GM a return on investment on the plant’s pricey machinery.
“The issue there is that [stamping] takes a lot of capital investment,” said Harbour, senior vice-president of automotive and manufacturing at Oliver Wyman, a U.S.-based global consulting firm. “Those presses are really expensive. The presses that most [automakers] have are large enough to build multiple parts and large parts like body sides and hoods.
“That kind of capacity hasn’t been plentiful in the supply base, so they probably said, ‘Look, we have a stamping plant here, and we could use it.’”
FEW JOBS SAVED
But the new strategy, which resulted from negotiations between union and management, will save only 300 of the 2,600 hourly jobs that will disappear when vehicle assembly ends in December. Unifor expects the number of workers to grow to 500 within three years as GM adds more business at the plant.
At its peak, the Oshawa plant was one of the largest auto factories in Canada and employed about 23,000 people.
About half of the plant’s hourly workers will be eligible for retirement packages, while others will be able to transfer to another GM Canada location. The rest will be searching for new jobs, as will workers at many of the suppliers that make parts at Oshawa.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association (APMA), said keeping the plant operating provides stability to the auto sector and keeps hope alive for new-vehicle assembly for Oshawa.
“If you’re a large supplier who has got a big future regardless of General Motors in Oshawa, at least your planning people will continue to keep General Motors Oshawa on a list of potential customers,” Volpe said. “Maybe not [in] three years, five years, 10 years. But you keep your eye on it.
“It’s no consolation if you lost volume.
But if you’re a supplier who has got a lot of business in Ontario, especially on this end of the highway in the [Greater Toronto Area], a full closure by General Motors might have given you pause for thought on your other customers in Ontario.”
While Unifor looks to one day return vehicle assembly to Oshawa, the union faces major hurdles, including declining new-vehicle sales and excess capacity within GM’s plants, said Dziczek of the Center for Automotive Research.
Oshawa and two assembly plants in the United States were unallocated in 2018 to reduce GM’s capacity, she said. Yet underused plants remain.
“You do need to see a whole heck of a lot of new product and upswing in demand for whatever GM might be building for them to be able to need that plant,” she said.
“[GM] had a million units of underutilized capacity in 2018, and they might have hot stuff on the shelves that they’re going to put into plants. But is it enough to bring production up by one million units? I don’t know.”
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