Can the Motor Car Lead Us to Recovery?

BEVERLEY OWEN August 15 1932

Can the Motor Car Lead Us to Recovery?

BEVERLEY OWEN August 15 1932

Can the Motor Car Lead Us to Recovery?



A CERTAIN MR. BROWN told his friend Smithers that he intended to buy a motor car. At which Smithers remarked that Brown had chosen a tough time for the transaction.

"You know your own business best, Brown,” he said archly. "I only wish I had the nerve to replace my old car.” “Nerve? What do you mean, nerve?” retorted Brown. “If 1 can swing the deal, then you certainly can. Besides, you have a car to trade in. 1 haven’t.”

“It’s not the money part of it,” explained Smithers. “I’m considering appearances. When people all around are struggling to make ends meet, fellows scrounging for bare necessities, it takes nerve to blossom out in a new car. I’d be accused of bad taste.”

"Go on,” said Brown indulgently. “Rub it in.”

“I’m only telling you how it affects me,” went on Smithers. “Near my place there’s a man 1 know fairly well with a wife and three youngsters and he's just lost his job. Now, wouldn’t I feel nice and philanthropic passing him in a new bus when he can’t afford a tram fare? Then, down at our office w'e’ve had to let out several people. Suppose I rolled past one of those chaps. It wouldn’t be reasonable, of course, but he’d say that the car was paid for out of what was saved by ousting him from his job. And the fellow across tl» street who has charge of a relief fund would think l should have given much more than I did. No, sir. It just isn’t decent. A lot of people look at it the same way. I’m >oing to wait until business picks up.” Brown smiled sympathetically. You’ve got an utterly wrong slant. Smithers.” he said, ch ideas are just a fatuous reversal of keeping up with the ses. To be decent you think you have to lag back with

the Smiths. That principle leads to only one thing-stagnation. People w ho are able to buy the things they require should do so. I’m‘going to buy a car because I need one. I’m fortunate enough to have the first payment, and I’m not frightened of the balance Every dollar spent helps—” “To keep the wheels of industry turning,” broke in Smithers. “That’s an old song. I agree it’s sound. But an automobile is such a big, ostentatious object—on exhibition for the w'hole neighborhood, and it fairly talks money. You can say what you like about a car being a necessity. It is to me because I’m used to having one. But unfortunately those who can’t afford them insist on regarding a car as a luxury. Besides.” he added quickly, “if I did buy a new automobile, where would the profit arising from its production go? I understand these Canadian plants are subsidiaries of American concerns. Such being the case, it seems the profit would go plump into the New York mail bag to help the Americans pull their chestnuts out of the fire.

I wouldn't mind that in normal times, but as things are, we’ve got to look after ourselves.”

Brown laughed.

“You’re letting superficial notions run away with your judgment. Smithers,” he said. “You haven’t taken the time to find what the position is, or to consider what place the Canadian motor industry holds in the economic structure of the country. Have you the slightest idea,” he pressed vigorously, “of how far-reaching wrould be the effect if you went to a dealer today, turned in your old car and drove away in a new one?”

Smithers looked doubtful, so Brown proceeded to enlighten him at length. First of all, he put a crimp in Smithers’ complaint about American control by pointing out a few facts, as follows:

The capital employed in Canadian motor car plants today is about $98.000.000. In 1930 it was $101.024,288. and in 1928 $113,400,279. It is tiue that a majority of the stock

of the ten important Canadian companies is held by parent concerns in the United States. But that statement by itself is misleading. A great many Canadians hold stock in those American corporations in addition to having a direct interest in the Canadian subsidiary plants; in fact it is easily conceivable that the total amount of Canadian money invested in the motor car industry in general on this continent exceeds the amount invested in Canadian motor-car enterprises. So, while the larger share of profit arising from the sale of a Canadian-made car goes to pay dividends to American investors, that amount is offset by the Canadian investors’ share, plus the financial return to Canadians out of the purchase of cars by Americans in their own country.

Material and Labor Significant

THE capitalization aspect of the industry is important and is a subject in itself, but the more significant side is the material and labor involved in producing a car. Of every automobile and truck that rolls out of a Canadian factory, at least fifty per cent of content must be of Canadian or Empire origin if it is to benefit from tariff and excise concessions. Actually, the average percentage is higher. In some cases it is much higher.

Certain parts of every Canadian-made car have to be imported because it is impossible to produce them in Canada on an economical basis. It is entirely a matter of quantity, and until the Canadian export and domestic business in automobiles is increased sufficiently to warrant domestic fabrication, the industry will have to continue bringing them in from outside. The Canadian market is not big enough to carry the cost of limited production, and by the importations the Canadian motor car buyer saves money through the sharing of expense for such items with the large production in the United States.

Because the motor car has a great variety of constituent

elements, and is itself a consumer of natural products and is extensively used, it has become a potent factor in general business conditions. It is doubtful if there is any other article, the purchase of which has such an immediate and direct effect on so many forms of producing activity and on the welfare of so many people right across the country. The indirect and ultimate effects seemingly have no limit. The buying of any item of merchandise, or the turning over of a dollar in any form of transaction starts a chain of repercussions, but when an automobile is purchased this chain becomes a very long one.

If Smithers turned in his present obsolete car and bought a new model, apart from the activity he would start in a particular assembly and finishing plant, he would cause wheels to turn in part-making factories and foundries from the Atlantic to the Pacific. He would give a measure of employment to miners in Quebec, Ontario, Nova Scotia, Manitoba, Alberta and British Columbia; to steel workers in Ontario and Quebec; to lumberjacks in New Brunswick, Quebec, Ontario and British Columbia; to tire-makers and textile workers in Ontario and Quebec. He would provide freight in the form of raw materials and parts for railwaymen to handle; in short, there is hardly a basic or intermediate industry in the country that would not benefit to some degree.

Feeding the assembly and finishing plants of the industry at Oshawa, W indsor, East Windsor, Walkerville, Toronto, St. Catharines and Tilbury in Ontario, and Regina, Saskatchewan, are more than 600 companies located in seventy cities and towns throughout the country, making a wide variety of products which are absorbed entirely or in large degree in the manufacture of an automobile.

Auxiliary enterprises that depend upon the automobile industry for their prosperity are to be found in the Border Cities, Brantford, Brampton, Brockville, Belleville. Cobourg, Chatham, Peterborough, Galt, Guelph, Hamilton,

Ingersoll, Belmont, Kitchener, Lindsay, Listowel, London, Newmarket, Niagara Falls, Oshawa, Ottawa, Owen Sound, Preston, Renfrew, St. Catharines, St. Thomas, Sault Ste. Marie, Toronto, W'aterloo, Walkerville, Wallaceburg, Welland and Wroodstock, Ontario; Farnham, Gananoque. Montreal, Valleyfield and Quebec City, Quebec; Calgary, Alberta; Regina, Saskatchewan; Fraser Mills and Vancouver, British Columbia; Winnipeg, Manitoba; Saint John, New Brunswick.

How to Keep Men Employed

UNDER ordinary conditions in Canada, the textile mills sell more than $3,000,000 worth of upholstering cloth and other fabrics, and more than one-third of the total refined rubber production of the country is consumed. $10,000,000 worth of iron and steel is used, and 2,500,000 square feet of plate glass. More than 18,000,000 board feet of lumber is absorbed, and an enormous quantity of paint and lacquer. Makers of electrical equipment enjoy a steady market, also the manufacturers of lamps and wheels. A wide variety of foundry products are essential motor car elements, and the forging shops forni another important adjunct, while a number of plants specialize in springs, axles, storage batteries, dye castings, body hardware and brake-lining. All of the assembly and parts industries buy big shipments of nickel, copper, lead, zinc, pig iron, wool and pulp and paper.

Other items produced by Canadian factories for the automobile industry are copper sheets for radiators, wheel jacks and malleable castings, cotton pads and batting, thread, sheet aluminum, jute pads, leather, upholstering whipcord, wire cable, curtain fasteners, glue, friction tape, asbestos yarn, webbing, fibre washers, carpets, alemite fittings and silicate.

All these diversified industries would feel the effect as

soon as Smithers drove off in his new car, because that car would have to be replaced immediately on the dealer’s floor. In 1930 the material supplied by Canadian and Empire producers for the Canadian automobile industry in round figures was valued at more than $66,000,000, according to Government estimate, and for the same year the total value of the products of the assembly and finishing plants was placed at more than $121,000,000.

Considering all the ramifications and angles of labor ami material involved in the production of the finished motor car, Smithers’ purchase, it has been reckoned, would be the equivalent of eighty-seven days of employment for one workman; or, putting it in a more graphic way, if one visualize., a short street lined with eighty-seven workmen’s homes, representing a cross-section of the country’s producing activities, out of Smithers’ transaction arises the means of maintaining that entire community for twentyfour hours.

This is not guesswork. The calculation is based on statistics placed before the Tariff Advisory Board in December, 1929, by a Federal Government economist, Professor J. A. Coote. He was dealing with the motor vehicle production of the previous year, which totalled 242,054 units. Of these. 79,388 were exported, leaving 162,666 for sale within Canada. The analysis by Professor Coote shows that this volume of production entailed an expenditure for Canadian labor of no less than $74,394,825. Dealing with domestic sales only, the purchase of a car in 1928 represented a labor outlay df $457.96.

No relative figures are available for the two following years, but, judged by fluctuations in factory shipments, the Canadian Automobile Chamber of Commerce has estimated that in 1929 labor was paid $501.62 on account of each domestic purchase of a car, and in 1930, $433.19. The latter figure holds good approximately today. Only a Continued on page k2

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proportionate share of these labor figures, of course, was reflected in the payrolls of the carbuilding industry itself.

So, by trading in his old car for a new one, Smithers, in effect, would disburse $433.19 throughout many channels of industry and productivity. And we have to consider the purchasing power of that money as it is turned over and over again in the endless process of trade and commerce. It equals roughly $5 a day for a workman over eightyseven days, and it must be remembered that the ordinary earnings of skilled and ùhskilled men, as well as women and boys, are averaged to produce the result.

The vast importance of the automotive industry may not be gauged only by labor or the material used in the production of motor vehicles. On its own account it pays big sums annually in taxes, import duties,

; insurance and rents. The purchase of raw materials necessary to the upkeep of plants is in itself enough to keep a variety of fairly large sister industries in operation in different parts of the country. Large sums are paid for power, light, telephones and other public services, and scores of professional men, lawyers, architects and engineers are maintained. According to Professor Coote’s I computation, the expenditure of the industry in 1928 for freight charges on material, duties, loading and shipping, export boxing and taxes and insurance reached the total of $21,608,339. The amount paid out on account of such overhead items in any one year, of course, depends entirely on the volume of production and sales.

A Spending Generator

AND then on top of these vast sums of 4k money that seep through the economic fabric of the country because of the operations of the automotive industry, the motor car itself generates a huge volume of spending in all directions. Every car that is produced, sold and goes on the road adds to the total. Hundreds of millions of gallons of gasoline are consumed each year, and the money thus spent permeates industrial and merchandizing channels. To meet the demand for motor car supplies, for oil and servicing, an endless chain of stations and depots has grown up in every city and town and throughout the countryside, and a livelihood for thousands of people has been created. Their welfare and prosperity depend on the automobile industry, and every new car purchased means so much in the pocket of each individual so engaged.

Through the agency of the motor car, meals are bought and lodgings paid for. homes are built and schools supported. .Each new car means work for bankers and

bank clerks, insurance men and their employees, stenographers and salesmen: and more business for every kind of merchant, tradesman and artisan. It is estimated that under normal operating and sales conditions, the transportation companies of Canada reap a revenue of more than $5.000,000 annually ' from the motor car industry, not only on account of deliveries of materials but through shipments of the finished cars, which to a large extent are made by rail. Revenues for the railways are further , enhanced by passenger and Pullman fares because of the constant movement of executives, sales organizers and other personnel from zone to zone in connection with the ! industry’s activities.

Thus it is that the pulse of the motor industry is felt in the arteries of trade and ; production wherever Canadians live and labor; and the strength of its pulse in the ¡ last analysis depends entirely on the willing! ness and capacity of Canadians to buy its ¡ products.

Comparison of the production and | employment figures of the ten large pro! during units of the automotive industry for 1929 with those of 1930 and 1931. as furnished by the Dominion Bureau of Statistics, gives a vivid indication of the need of stimulation of motor car sales, and of the effect such stimulation would have on the economic welfare of the country.

The plants of these companies have a combined annual capacity of 385,390 vehicles, and the output of 1929, totalling 262,625 cars and trucks, was the top performance. In 1930 production dropped to 153.572, and in 1931 it fell dismally to 82,614.

Between 1929 and 1931 there was a decline in the production of motor vehicles of 180. -111, or more than the entire output of 1930.

Now, in 1929 the combined industries employed 20,112 persons, and paid in salaries and wages the sum of $32.025,389. In 1930. only 14,688 persons were on the payrolls and they drew $22,487.542. a drop of $9,537,847. The figures for 1931 are not yet available, but approximation is Simple when we note that production last year was a little less than a third of 1929. By the process of simple division, we arrive roughly at the figure of $11,000,000. With an allowance made for error either way in this deduction, we find that the slump in wages within two years amounted to about $21,000.000. Whereas in 1919 the industry carried on at sixty-eight pier cent of capacity employment, in 1931 the percentage was twenty-one.

When one pictures the effect on any community of the free circulation of even $1,000.000, it is almost devastating to reflect on the consequences of this huge decline in

the total wages paid by such a major enterprise as the motor car industry ; and it is the more disturbing when one begins to trace the lines of its ramifications and classify the subsidiary, intermediate and primary industries, including the railways, many of which look to it for sheer existence and others for a large measure of their business, and then consider the big army of individuals, professional people, merchants and proprietors of small establishments whose welfare is indirectly but nevertheless seriously affected.

It is true that this very decline in the wage-paying capacity of the motor industry and the resultant slackness in the allied fields of activity, in itself supplies a cogent reason for the inability of a great many people to replace their old cars or join the line of new owners. A vicious circle has been created. But with full recognition of this fact, there is ground to believe there are many among the population who are quite able to buy cars but who, like Smithers, are refraining for reasons of mistaken propriety and false sentimentality. It is even safe to say that if every Canadian citizen in the same circumstances as Smithers would let that suppressed impulse to acquire a new automobile do its work, and if every other citizen, like Brown, would follow his example and become for the first time the owner of a car, the result would mean at least all the difference between a stand-still in a great national industry and a step forward out of the rut. Indeed, based on a similar thesis advanced in the United States, it might mean actually the turn of the business tide; the beginning of the real drive to carry

industrial and commercial activity over the dead centre.

The motor car population of Canada roughly is 1,000,000, the average life of an automobile is six years and most of them have reached the trading-in stage at three and a half years. On this basis, it is estimated that Canadian motorists collectively are at least 100,000 cars behind this year in normal replacements. Considering the place of the automotive industry in the Canadian industrial structure, it is a fair inference that even if half of this shortage of new cars on the highways could be made up, a powerful general business impetus would be created. It is a logical proposition that once the motor industry gets under way, it will bring back to life all the varied industries that are directly dependent upon it. This, in turn, should shake up other allied and contributing industries and infuse new vigor in all forms of primary production. With adjustments in other phases of the economic structure to meet changed conditions, and to which all thought and energy are being directed in both political and business spheres, this development might easily mark the beginning of the big procession.

It is natural for people to regard their relationship with the automotive industry purely from the buying standpoint. They see themselves merely as car owners or prospective purchasers. But the plain facts are that a large proportion are really partners of the industry on the selling side. For every car that is sold there is benefit, one way or another, for every producing individual in the country.