COVER

BOOM AND BUST

A tale of two Canadian towns and their fortunes

TOM FENNELL January 23 1995
COVER

BOOM AND BUST

A tale of two Canadian towns and their fortunes

TOM FENNELL January 23 1995

BOOM AND BUST

A tale of two Canadian towns and their fortunes

TOM FENNELL

SITTING PRETTY

As evening slowly descended on the long line of people looking for work at General Motors Canada Ltd. in suburban Toronto, they sustained themselves on hot dogs, potato chips and coffee. At the same time, 190 km to the southwest in London, the evening patrons were beginning to arrive at the trendy Caffé Antico. As they did, co-owner Robert D’Amico, 28, greeted them with a warm handshake and plenty of chitchat before running off the night’s specials. Although his business depends on a healthy economy, D’Amico has no trouble finding customers to fill his restaurant. London’s unemployment rate is just 5.6 per cent—the lowest among Canada’s major cities. In fact, the surging economic growth there, and in such nearby cities as Kitchener and Waterloo, has employers scrambling to find skilled workers.

FIVE BEST PLACES TO FIND A JOB

(CITIES WITH THE LOWEST UNEMPLOYMENT RATES)

Medicine Hat, Alta. 4.

Kingston, Ont. 4.

London, Ont. 5.

Brandon, Man. 5.

Rimouski, Que. 5.

FIVE WORST PLACES TO LOOK FOR A JOB

(CITIES WITH THE HIGHEST UNEMPLOYMENT RATES)

New Glasgow, N.S. 33.3

Sydney Mines, N.S. 31.7

Sydney, N.S. 19.1

Chatham/Newcastle, N.B. 17.9 Sept Iles, Que. 17.9

Symbols of wealth and economic stability do seem to dominate the city of 320,000. Downtown, the head offices of London Life Insurance Co. and Canada Trust lend a sense of permanence. Farther from the city core are many other well-known companies, including 3M Corp., Kellogg Canada Inc. and Labatt Brewing Co. Ltd. And then there is the institutional stability created by the University of Western Ontario and the healthcare sector with London’s five hospitals. But the economic muscle in London is located on the city’s edge, where old-fashioned blue-collar sweat produces locomotives and military vehicles for General Motors of Canada Ltd. Over the past two years, GM has added 1,200 workers, almost doubling its London workforce to 3,500. And if he could find people with the right skills, GM vice-president Bill Peel says he would probably hire even more. ‘We have a shortage of welders,” said Peel. “That’s indicative of the buoyancy of the industrial economy here.”

COVER

GM’s front-office staff recently stripped away the wallpaper covering a giant mural that was painted when the locomotive plant opened in 1950. Part of it depicts a worker with his shirtsleeves rolled up and welding torch in hand. On the plant floor, nothing much has changed. Three shifts of workers toil around the clock, welding and bolting together 10 locomotives a week. And the order books for the $2-million machines, which have been sold to railway companies as far away as Australia and Algeria, are filled well into 1996. Burlington Northern Railroad of Fort Worth, Tex., alone has purchased 350 locomotives worth close to $1 billion. And GM’s payroll pumps almost $150 million a year into London’s economy.

In fields surrounding the GM plant, far smaller operations are also working flat out to meet the demands of the surging North American economy. At Knoch Manufacturing Co. Ltd., visitors pass a display case proudly containing the business at hand: shiny engine and machine parts that the company exports to the United States. And with the roar of steel being cut and the smell of smoke from welding machines hanging in the air, co-owner Dan Thomas held up a gleaming piece of metal to reveal yet another element of London’s economic success—quality manufacturing. Firms like Knoch, he said, can crack the North American market by producing highly engineered parts. ‘The market is incredibly competitive,” said Thomas, who was reluctant to reveal the names of companies that are buying his products. “You have to be able to produce high-quality work.”

That dedication to precision manufacturing is supported by a combination of economic policy and luck. Under the North American Free Trade Agreement, Canadians have open access to both the American and Mexican markets. And many smaller operators, who learned their craft selling into the Canadian auto market, are now supplying firms in the United States. They are being aided by the low Canadian dollar, which last week fell to 70.87 cents (U.S.), its lowest level against the American currency since 1989. The combination of the cheap dollar and high-level production at GM and smaller operations means that over the past two years, while employment in Canada grew by an annual rate of 4.6 per cent, it surged by 9.2 per cent in London.

That robust performance has also spilled over into London’s retail sector. Like many other cities, London’s downtown has been hurt by the construction of suburban malls and overbuilding in the economic boom of the 1980s. Still, many retail merchants said that spending during the Christmas season was up almost 20 per cent this year, compared with eight per cent for the same time period in 1993. Fred Kingsmill, 68, says the city’s prosperity will continue. Kingsmill’s Department Store has operated out of the same downtown location since 1865. And as Kingsmill sat on a couch in the middle of his furniture department, he considered London’s prosperity. “We’re just an eighthour drive from the U.S. heartland,” said Kingsmill. “And at the same time, we are able to attract some remarkable people to live here.” Hopefully, that will continue.