GM's decision to close Oshawa plant raises fears for future of making cars in Canada

The sudden announcement that General Motors will stopmaking cars in Oshawa, Ont., after next year sent shockwavesthrough the industry on Monday.The impact of GM's move could extend far beyond the borders of the community east of Toronto that has been synonymous with auto manufacturingfor the past 65 years.

Joe McCabe, CEO of Pennsylvania-based consultancy Auto Forecast Solutions, saidthe news caught him slightly by surprise, even if he's had concerns over the plant's future for the past number ofyears.

In its heyday, the Oshawa facilityproduced almost a million cars a year. Multiple shifts of workers used to crank out more than one type of vehicle every day when the plant was operating at full capacity.

Butin recent years, output has been limited to two gas-powered sedans (the Chevrolet Impala andCadillac XTS) along with putting finishing touches on two trucks the GMC Sierra and Chevy Silverado that came up to Canada after being primarily built at a plant in Fort Wayne, Ind.

McCabe saidOshawawas mainly producing"orphan products" vehicletypes that the company doesn't really want to keep making.

It was buried in Canada by the Oshawa news, but GM also announcedit will stop making a number of car models entirely, primarily gas-powered sedans that are no longer selling much and aren't very profitable even when they do.

By the time the changes are fully implemented, GM plans to reduce its global workforce by about 15 per cent. And the company saidthree quarters of its sales will come from just five different types of cars.

It's part of a push by GM to invest inplaces it thinks can make more money electric, autonomous vehicles, and larger trucks and SUVswith high profit margins.

"When you look at a crossover, or an SUV, or a light truck, they are highly profitable vehicles for these manufacturers," McCabe said."It's more beneficial for them from a financial standpoint to build what the consumer wants."

One of the Oshawa plant's biggest selling points was the flexibilityof its assembly line, making it more nimble and attractive as a place to produce future models. While GM could theoretically have rejigged the plant to build different types ofcars, that didn't happen because the company hasenough under-used factories elsewhere.

"There's really no product to retool it for," McCabe said. "They'd just be shipping from another underutilized plant [and] it would leave them with two."

Independent automotive analyst Jon Gabrielsensaidthe Oshawa plant fell victim to forces that are impacting the entire industry.

He notes that the company didn't just drop the axe on Oshawa, but also singled out two assembly plants in Detroit and Ohio, along with two propulsion plants in Maryland and Michigan.

TheDetroit-Hamtramck Assembly plant also makes the Impala, "and they're closing it too,"Gabrielsennotes. The closure of theHamtramckfacilityissignificant because it's GM's last car assembly plant in Detroit a city even more associated with automaking than Oshawa.

"If they had only cut Oshawa I would say we should expect more shoes to fall because that's not enough to realign your footprint," Gabrielsen said. "They think they're done now."

Charlotte Yates,principal investigator at McMasterUniversity'sAutomotive Policy Research Centre, saidthe last round of negotiations with GM's union were the first hint that the Oshawa plant faced trouble. The company refused to commit to a new product for the plant, after moving Chevy Camaro production.

"That suggested [Oshawa]wasn't part of the long term plan," she said.

The loss of GM's presence in Oshawa, if it comes to pass, will reverberate through Canada's entire economy, but the impact will be most acute locally. "That plant is like the centre of a manufacturing ecosystem," she said. "[It's an]anchor of the economy [so] with that gone it's a real disruption."

Reason for optimism?

That's not to suggest the industry in Canada is now doomed.

Oshawa may be the Canadian city most associated with auto making, but manyothers have major parts or assembly plants and their futures aren't looking quite as bleak.

Ford's assembly plant in Oakville, Ont., should be safe, Gabrielsensuggests "because it makes SUVs which Ford is keeping." And GM also runs the CAMIplant in Ingersoll, Ont., where it makesthe Equinox, another SUV.

"That's right in the middle of the type of vehicles that they feel consumers are moving towards for the next five years," he said, calling the plant's future "pretty safe."

Beyond the car companies themselves, Canada is home to a cornucopia of auto parts firms, mostof whom are members of theAuto Parts Manufacturers'Association, led by FlavioVolpe.

GM alone spends $3 billion a year on parts and tools from suppliers across Ontario,Volpesaid,money that supports thousands of jobsbeyondthose working for GM itself.

GM "decidingthere may not be a path forward in the Toronto region is going to be felt across the country," hesaid. Areas of the industry that have gotten the most investment in recent years include anything to do with autonomous vehiclesand electric-powered cars.

Barely two years ago, GM announced plans to hire up to 1,000 engineers at a new facility in Markham, Ont. to work on software that will control self-driving cars.

VolpesaidCanada has the right mix of companies and skilled workers to see more investments like that moves that can filter down to assembly line workers,too.

Regardless of what advanced technology those next generation cars have under the hood, "they still have doors, and windows, and engines and body panels," Volpe said."Somebody's got to make them."

While Canada still has a role to play as a link on the North American automotive supply chain, GabrielsensaidMonday's news from GM should serve as a warning to anyone associated with the industry. Other companies may soon"have to make the same type of decisions which may or may not impact Canada," he said.

For now, his advice to Canadian car workers is blunt: Even if you don't work for GM, "you need to worry."