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Martinrea to close parts plant that supplies GM’s ill-fated Oshawa operation

ERIC ATKINS, TRANSPORTATION REPORTER
TIM SHUFELT, INVESTMENT REPORTER
NOVEMBER 27, 2018 – Globe and Mail

Automotive company Martinrea International Inc. says it plans to close a factory that makes parts for the cars that roll off the General Motors Co. assembly line in Oshawa, Ont., a ripple effect from GM’s announcement that it will shut the plant next year.

GM on Monday said it will close auto plants in Oshawa, Detroit and Lordstown, Ohio, and two U.S. parts factories by December, 2019, as it slashes production capacity and costs in a market shift toward SUVs and crossover vehicles. Detroit-based GM said it is taking the steps to free up money for the development of electric and autonomous vehicles.

Martinrea’s factory in Ajax, Ont., assembles several parts for the Cadillac XTS and the Chevrolet Impala, including suspension modules and engine cradles.

“Those assemblies will not be needed if there’s no product being made in Oshawa,” said Rob Wildeboer, Martinrea’s executive chairman and co-founder of the company, which employs 15,000 people in eight countries.

Martinrea, whose stock price has fallen by 8 per cent since GM’s announcement, said the 77 employees at its Ajax plant face job losses by the end of 2019.

GM’s Oshawa shutdown will eliminate about 3,000 jobs at the facility and disrupt a parts sector that for decades has depended on the factory, which assembles Cadillacs and Chevrolet Impalas and finishes GMC Sierra and Chevrolet Silverado trucks.

Ontario has eight car plants owned by the Detroit Three, Toyota and Honda. The factories have spawned and nourished dozens of companies that employ more than 100,000 people to make everything from seats to cup holders and engine parts.

The parts makers are clustered around the plants they serve – Oshawa, Windsor and the Greater Toronto Area. This is because an auto maker wants its suppliers nearby to ensure a fast, reliable flow of parts to feed the assembly line, which depends on just-in-time deliveries to avoid costly shutdowns due to shortages.

That strategy also allows suppliers to respond quickly to changes in the auto-manufacturing industry.

The presence of the large car makers has ensured Ontario has had a parts sector that relies on innovation and technology to remain competitive. But the loss of auto production means the loss of those jobs and development investments.

“We have some of the global leaders in the parts sector – Linamar, Magna, Martinrea,” said Charlotte Yates, a professor at the University of Guelph who studied the auto sector for 30 years. “All of those companies have built their success on the fact that we have assembly operations in Canada.”

Linamar Corp., a parts maker in Guelph, Ont., said it expected to see “minimal to no impact” from GM’s move to close the three North American assembly plants, including the one in Oshawa. Linamar, with 60 plants worldwide, said most of the power-train components it sells to GM are exported to the United States.

Flavio Volpe, head of the Auto Parts Manufacturers’ Association, said most parts makers have more than one customer, but many factories surrounding the Oshawa plant depend on GM. Any company “that survived the Great Recession was smart enough to know they need to have more than one customer,” Mr. Volpe said in an interview. “That being said, there are dozens of companies in that region whose number one customer is General Motors. We’re probably talking about 10,000 employees. It doesn’t mean all those jobs are at risk.”

Greig Mordue, a professor at Hamilton’s McMaster University and a former auto-industry executive, said the Oshawa plant’s location east of Toronto was not ideal. The congested roads around the city and the distance from Detroit made it tough to move parts in and vehicles out. “It’s just very difficult to get there,” he said.

But the location worked because a cluster of parts suppliers formed that served the Oshawa plant and GM’s Ste-Therese factory near Montreal. The Ste-Therese factory, which made GM Camaros, closed in 2002. That marked the beginning of the end for Oshawa, as GM slowly began pulling away from the region. This has limited the negative impact of the plant’s loss – the Oshawa factory is no longer the buyer it was.

“The reality is Oshawa has become outside of the orbit of a cluster of capabilities,” Prof. Mordue said by phone. “I think we all knew it was unsustainable.”

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