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GM’s Plan to Close Oshawa Plant Is Setback for Canada’s Auto Sector

GM’s Plan to Close Oshawa Plant Is Setback for Canada’s Auto Sector

By Kim Mackrael and Paul Vieira, The Wall Street Journal
Nov. 26, 2018

General Motors Co.’s decision to shut down its manufacturing operations in Oshawa, Ontario deals a blow to Canada’s government, which believed it had secured a new lifeline for the country’s auto sector through the revised North American Free Trade Agreement.

Canadian lawmakers from all levels of government and partisan stripes said Monday the closure would hurt the local community in Oshawa, just east of Toronto, and the national economy. The federal legislature will hold an emergency debate Monday night on how Canada should respond to GM’s move. GM said Monday it will close the Oshawa factory along with vehicle-assembly plants in Michigan and Ohio, leading to a cut of 14,500 jobs, as the car maker tries to adjust to shrinking demand for passenger cars.

On his official Twitter account, Canadian Prime Minister Justin Trudeau said his government would do everything it can to help affected families. The Oshawa shutdown will result in about 2,800 lost jobs. The prime minister said he spoke with GM Chief Executive Mary Barra on Sunday “to express my deep disappointment in the closure.”

GM Oshawa employees walked off the job Monday in protest. Leadership from auto union Unifor said work would resume Tuesday. Some workers appeared shaken when speaking to local media Monday morning. One woman said her heart was pumping so fast it felt like it would pop out of her chest. One longtime GM employee said he feared older workers like himself won’t find new work once GM leaves Oshawa, a city of nearly 160,000 just off the shore of Lake Ontario.

Unifor President Jerry Dias said the union does not accept GM’s decision to shut down the plant and would fight to make sure it stays open. He said GM committed in 2016 to keep the plant open until September 2020.

“They are not closing our damn plant without one hell of a fight,” Mr. Dias told a packed crowd of workers at Unifor’s Local 222 hall in Oshawa.

Mr. Dias was a high-profile player in Canada’s effort to renegotiate Nafta, advising the government’s negotiators. The revised Nafta, agreed to in late September, ushered in optimism for the Canadian auto sector. The deal contained provisions requiring more work be done by higher-wage workers, which would help the domestic industry after years of losing work to lower-cost Mexico. The deal also offered Canada’s auto sector some protection from U.S. national-security tariffs, so long as exports of light-duty vehicles don’t surpass a relatively generous threshold.

Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said it’s possible uncertainty over Nafta’s fate contributed to the company’s decision. He said the federal Liberal government, which faces re-election in less than a year, and the provincial government in Ontario should be talking about ways to keep the plant operating.

“These are not irreversible decisions,” Mr. Volpe said.

Like the U.S., Canada has witnessed thousands of manufacturing jobs and motor-vehicle assembly capacity shift to Mexico. Canada is among the most expensive countries in the world to build cars and the highest-cost market for car assembly in the North American free trade zone. Analysts note that at its peak, Canadian auto production surpassed three million vehicles. Last year, production hit roughly two million vehicles.

Canada’s motor-vehicle and parts industry accounts for just under 1% of the country’s economic output, down from 1.8% in 1999, according to BMO Capital Markets.

GM was already scaling back production at the Oshawa manufacturing operation, with the town gradually losing its stature as a key hub of Canada’s auto sector. The GM Oshawa plant currently accounts for nearly 6% of total vehicle production in Canada, versus 13% five years ago, according to data compiled by Bank of Nova Scotia’s economics team. The Oshawa plant produces the Cadillac XTS and Chevrolet Impala, and finishes the Chevrolet Silverado and GMC Sierra trucks.

Roughly three decades ago, the Oshawa plant employed about 17,000 workers. Now, there are roughly 2,800 unionized and salaried workers at the plant.

“The writing has been on the wall for quite some time so it was a matter of when, not whether [GM] would make this move,” said Dennis DesRosiers, head of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ontario.

Write to Kim Mackrael at kim.mackrael@wsj.com and Paul Vieira at paul.vieira@wsj.com

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