Canada’s non-subsidized auto companies continue to thrive

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Appeared in the Calgary Herald

When the federal and Ontario governments transferred $14.5 billion in taxpayer cash to GM and Chrysler in 2009, they likely did so with the best of intentions—to preserve jobs, though no doubt southern Ontario votes also figured heavily into the equation. But in a recent analysis from Dennis DesRosier, the automotive analyst noticed that employment in the Canadian automotive sector, despite the bailout and economic recovery, continues to fall.  

DesRosier’s numbers show employment in that industry at 127,352 jobs as of September (the latest month available). That’s down 875 from one year ago (and the sector lost over 36,000 jobs between 2008 and 2009); that’s the lowest it’s been in the 20 years measured by DesRosier. At its peak, in 2001, Canada’s automotive sector employed 198,098 people. That figure was roughly constant until 2005 when it began a steady decline.

That such employment would fall is not surprising, given that automotive sales in North America are down from their pre-recession peaks. What’s noteworthy is the long-term secular decline of some companies and the rise of others, including who produces what in Canada; the trends pre-date the recession.

GM’s in-Canada production dropped to just 243,580 units in 2009; that’s massively down from it best year, in 2000, when the company made almost one million cars and trucks.  As a percentage of Canada’s total automobile production, GM’s share was 32.5 per cent in 2000 and just 16.4 per cent nine years later.

Chrysler’s fall was similar but not as dramatic. At the turn of the millennium, it produced 704,081 cars and trucks in Canada, but that dropped to 314,504 by 2009, or 21.1 per cent of all Canadian production

Ford, the other pillar in what used to be the Big Three, produced 629,646 cars and trucks in Canada in 2000—its best year for Canadian production; it’s lowest year was 2006 with just 196,374 units. Ford rebounded in 2007 and 2008, dropped in 2009 (to 243,580 cars and trucks) but still manufactured more cars and trucks than it did at its mid-decade low. As a percentage, Ford’s biggest “chunk” of all Canadian production was in 2000 at 21.3 percent; in 2009, Ford accounted for 16 per cent of all automotive production in the country.

Of course, automobile production roughly mirrors sales, at least insofar as automobile companies have some plants in the countries in which they sell. As recently as 1997, the “Detroit Three” captured over 70 per cent of all automotive sales in North America, with “import” nameplates at less than 30 per cent. Since then, the positions have almost reversed completely. By 2009, the Detroit Three’s share of North American sales was less than 40 per cent with import nameplates at over 60 per cent.

And that might explain why as weak as auto production employment numbers are in Canada, they would be even worse without “foreign” automakers in the picture. In 2000, Toyota’s share of total Canadian automotive production was just 6.2 per cent; Honda’s portion was 11 per cent. In 2009, Toyota’s share was a record both in percentages and units (21.5 per cent and 319,547 respectively). Over at Honda, its total Canadian production was down from its mid-decade highs but as a percentage of Canada’s total production in 2009, its 17.5 percent share was the second highest Honda has ever recorded.

Or look at this another way: In terms of Canadian automobile production, GM and Chrysler, the two recipients of $14.5 billion in subsidies, accounted for 56.3 per cent of all automobiles built in Canada at the beginning of the decade. Nine years later, those two companies produced just 37.5 per cent of all Canadian-made vehicles. In contrast, the three companies that did not take taxpayer money in 2009, Ford (in an upswing before the recession), along with Toyota and Honda, accounted for 38.5 per cent of Canadian production in 2000, but a whopping 54.9 per cent by 2009.

Defenders of the bailouts to GM and Chrysler long claimed economic Armageddon would arrive had taxpayers not handed over $14.5 billion to two automobile companies. That was a future impossible to foresee; what we do know is that others such as Ford, Toyota and Honda exist, invest in Canada, have significant production and employees here, were either consistently ramping it up (Toyota) or had recovered from previous production lows (Ford). All could have hired more employees and built more automobiles in the event GM or Chrysler ceased to exist.

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