Canada’s beleaguered auto sector

Having been hit by its worst downturn since the Great Depression, Canada’s auto sector has been demonstrating signs of a recovery in recent months. In a report released in December, the Conference Board of Canada predicts a return to modest profits in 2010, following a disastrous year in which the Canadian industry suffered losses of $2.3 billion. However the report takes pains to point out that any recovery will be gradual and uncertain, with employment levels remaining well below their 2006 levels for years to come.

Some facts & figures

Beginnings: Canada’s first major automobile industry saw the light of day in Walkerville, now part of Windsor, in 1904, just one year after Henry Ford started production in Detroit. Windsor businessman Gordon M McGregor, intrigued by Ford’s invention, convinced some fellow entrepreneurs to invest in The Ford Motor Company of Canada.  Within months the new company produced its first car, the Model C, with rights to sell to all parts of the British Empire except Great Britain. Canada was the world’s 2nd biggest auto manufacturer between 1918 to 1923.

Importance to national economy: The automobile industry has traditionally been the biggest player in Canada’s manufacturing sector, accounting for about 14% of all Canadian manufacturing (compared to 7% in the USA.). In Ontario the auto sector  represents 26% of all manufacturing and 5% of the province’s overall economy. In 2007 Canada accounted for 16.7% of North American vehicle production and produced 2.6 million units.

Putting Canadians to work: At its 1999 peak, the sector directly employed about 160,000 Canadians, who worked in about 1,300 plants across the country. An additional 300,000 were working in automobile distribution and other spin-off industries. The personal income of those directly employed within the sector amounted to $80 billion. They paid $2.2 billion in income tax, and $430 million in municipal taxes.

Export-dependent: In 2007 Canada was the world’s third biggest exporter of automobiles, after the USA and Japan, with 84% of Canadian-made vehicles destined for export, mostly to the USA. Exports accounted for $70.5 billion from the sector’s total $96.7 billion revenue.

Plummeting sales: Despite a small increase in December, overall 2009 sales of new vehicles were down 10.7% compared to 2008, with four of the five top companies - GM, Chrysler, Honda and Toyota – reporting sharp drops in sales.

Employment levels at historic low: The DesRosiers Automotive Consultants group reports that number of Canadian employed in the assembly sector of the industry is now lower than it was in 1965, the year the Canada-US Auto Pact was established. Overall, the auto manufacturing sector  - including both auto-parts and vehicle assembly - has shed 57,000 jobs since the beginning of the decade, and 27,000 in the last year alone.

Canadian bailout: Together the federal government and Ontario provincial government contributed $14.5 billion in public funds to bailing out General Motors and Chrysler.

The ingredients: The average North American vehicle weighs about 4,000 pounds and contains about 2,600 pounds of steel and plastic. Before the downturn, Canada’s auto sector consumed:
•    14% of Canada’s iron foundry production
•    15% of all domestic steel shipments, representing over 100,000 jobs in Canada’s steel industry
•    11 % of its rubber products
•    7% of its machine-shop products
•    9% of its wire goods
•    14% of its processed aluminum
•    6% of its carpet and textile products
•    9% of its glass products
•    15% of all domestic steel shipments, representing over 100,000 jobs in Canada’s steel.

Sources:
1/ Government of Canada, Invest in Canada program
2/ The Economist, August 01, 2009
3/ Auto Industry on the Brink, Canadian Autoworkers
4/ Dennis DesRosiers Automotive Consulants
5/ The Canadian Encyclopedia