Decline in auto manufacturing employment in Canada

Cahier spécial : A policy vision to escape the race to the bottom


To Hell and Back – Canada’s Auto Industry After the Crisis


Auto Industry - fig.1Canada ranked as the 4th largest auto producing jurisdiction in the world – an
astounding achievement for a country of our size.

Within a decade, however, we had fallen right out of the top ten, surpassed by numerous countries, rich and poor alike: by Korea and Mexico, France and Brazil, and (of course) by China and India.

Figure 1 illustrates the decline in auto manufacturing employment in Canada over the past decade. Following strong growth in both assembly and independent parts production in the 1990s, employment peaked and began to decline slowly.

In the parts sector, meanwhile, almost 40,000 jobs have been lost since the industry’s peak in 2003, most between 2005 and 2009.

Very few of the jobs lost up to 2009 have been won back. On the assembly side, only a small share of jobs (about 2000) has returned; on the parts side, meanwhile, hardly any jobs have been regained. In total, about 100,000 Canadians are presently directly employed in auto manufacturing – down by over 50,000 (or one-third) since the turn of the century. Another 13,000 Canadians work in the manufacture of truck and bus bodies.

These direct figures, of course, only tell part of the story of the employment impacts of this industry. Economic studies now suggest that for every job in a major auto facility (like vehicle or powertrain assembly operations), a total of ten jobs are supported throughout the regional and national economy. Considering indirect and spin-off effects (that are described fully in Part III of this paper), therefore, the true number of Canadians owing their employment to automotive manufacturing is closer to 400,000.

Canada’s decline between 2007 and 2010 in vehicle assembly was just under 20 percent. That was considerably less severe than the decline in U.S. motor vehicle output in the same time.

Industrialized countries experienced a decline

Auto Industry - industrialized countriesMexico, however, managed to increase its production, on the power of an accelerating migration of investment by automakers to take advantage:

·         of that country’s ultra-low labour costs and

·         unfettered access to the rest of the North American market.

Most other industrialized countries experienced a decline in production in line with Canada’s during this time, including most of Western Europe, Japan, and Russia. Germany and Korea represent exceptions to this trend. On the strength of outbound exports and strong, pro-active government support in both jurisdictions, the decline in German assembly output was relatively small (only 5 percent between 2007 and 2010) – while Korea’s production actually expanded.

In the emerging economies (including Brazil, India, and China), output continued to grow – more than doubling, incredibly, in China between 2007 and 2010.

Preventing plant closures

In Germany, a country where labour costs are higher than Canada’s, no assembly plant has closed since the end of the Second World War. These jurisdictions recognize that the permanent closure of an assembly plant will impose an enormous, ongoing cost on the national economy, and hence take extraordinary measures to preserve these “keystone” facilities.

Preventing plant closures in Europe is further assisted by the fact that worker representatives are legally entitled (under EU labour laws) to play a role in key management decisions, as well as by Europe’s stronger employment protection rules (which make it extremely expensive, as much as 500 million euros in severance and adjustment costs, for a company to close a large factory).

La cogestion allemande a fait ses preuves

S'il est un aspect du modèle allemand dont la France gagnerait à s'inspirer, c'est bien celui de la gouvernance des entreprises. Les salariés y sont étroitement associés.

Il est en revanche très peu question d'un des aspects les plus intéressants de ce modèle : la forte spécificité de sa gouvernance des entreprises. Elle se caractérise en effet par un niveau d'association des salariés aux décisions beaucoup plus important qu'ailleurs.

Les salariés au conseil de surveillance

Mais c'est surtout la présence de représentants des salariés dans les instances dirigeantes des grandes entreprises qui est la spécificité la plus marquante de la Mitbestimmung. En Allemagne, toutes les grandes entreprises sont dotées, d'une part, d'un conseil de surveillance et, d'autre part, d'un directoire (nommé par ce conseil et lui rendant compte), qui rassemble les dirigeants assurant la gestion opérationnelle de l'entreprise

Cette implication contribue manifestement à expliquer les succès industriels allemands. La crise actuelle confirme, s'il en était besoin, la faillite de la corporate governance à l'anglo-saxonne.

Ce poids institutionnel des représentants des salariés, tant sur le terrain via les comités d'établissement qu'au niveau stratégique dans les conseils de surveillance, oblige les directions à se comporter d'une façon beaucoup moins autoritaire que dans les entreprises du monde anglo-saxon ou latin.

Les dirigeants doivent bien davantage tenir compte des intérêts spécifiques des salariés.

On en a vu en particulier les effets lors de la crise de 2008-2009 : du fait de cette contrainte, les entreprises allemandes n'ont quasiment pas licencié durant la phase aiguë de la crise, bien que la récession ait été quasiment deux fois plus prononcée en Allemagne qu'en France.

Ce qui a permis par la suite à l'économie allemande de repartir plus facilement puisque le pouvoir d'achat des salariés a été maintenu ; tandis que les entreprises n'ont pas eu besoin d'embaucher et de former de nouveaux salariés quand les affaires ont repris.(1)

The result is a much higher degree of stability
in the physical manufacturing footprint.

For example, Ford Motor Co. has not closed a West European vehicle assembly plant since ceasing assembly at its Dagenham, U.K. plant in 2002 (and that complex was then re-tooled to produce more engines, instead).

During the same time, however, the company closed nine of its North American assembly plants (including two in Canada). Stronger employment protection rules clearly help to explain why a company like Ford has downsized so much more dramatically in North America than in Europe.  Plant closures are also very rare in Japan and Korea.

In this regard, the greater “flexibility” of employment and investment relationships in Canada (whereby manufacturers can easily close facilities, regardless of the resulting costs imposed on workers, communities, and even governments) means that our economy has endured a proportionately more painful contraction in its auto manufacturing footprint than if there was more structural protection for crucial assembly plants (and the network of components suppliers which each assembly plant supports). Even temporarily idling a plant during a cyclical downturn is vastly preferable to closing it permanently; at least idling maintains the option of reopening the facility when market conditions recover.

Government intervention

Auto Industry - Goverment intervention

Alors quand vous me parlez des bienfaits du libre-échange, ce n'est qu'une simple fumisterie, car les pays manipulent littéralement le marché : injecte, finance, subventionne, impose des tarifs ou ajoutent des réglementations excessives pour favoriser leurs propres industries.


 

Tables des matières

1.       A policy vision to escape the race to the bottom

Summary :

Global pressures on the industry are more severe all the time

Impacts of a Canadian dollar

we must adopt a new approach

2.       Decline in auto manufacturing employment in Canada

To Hell and Back – Canada’s Auto Industry After the Crisis

Industrialized countries experienced a decline

Preventing plant closures

Government intervention

3.       Automotive trade deficit reached an all-time record of $15.6 billion

Auto  Industry - Free Trade

Canada-U.S. Auto Pact

World Trade Organization

Trade Balance

Mexico

4.       CANADIAN Petro-Dollar

CANADIAN Petro-Dollar

5.       Race to the bottom

Race to the bottom

Donc, à qui profite la mondialisation ?

Les gagnants

6.       Productivity, Investment and Technology

Productivity, Investment and Technology

Productivity

Investment and Technology

7.       Center of gravity is clearly shifting south

Re-thinking Canada’s : A New Policy Vision

And it won’t stop there

We do not accept this grim scenario as natural, efficient, or inevitable.

8.       Free trade theories failures

Re-think Trade Policy

With every other trading partner

Optimistic predictions of the free trade theories failures

Canadian trade negotiators have a responsibility

9.       The Bank’s power to bring down the dollar is unquestioned

Intervene to Reduce the Canadian Dollar Exchange Rate (1)

Canadian dollar r far above value

Theory freely floating exchange failures

Bank of Canada interventions.

10.    Restrict foreign resource takeovers

Intervene to Reduce the Canadian Dollar Exchange Rate (2)

Slowing down resource developments (especially in the oil sands)

Preventing foreign takeovers of Canadian resource assets

11.    Canada back is a lack of political creativity

Conclusion

Willingness by policymakers to play an active role.