BUSINESS

Why auto workers look worried

DUNCAN HOOD May 26 2008
BUSINESS

Why auto workers look worried

DUNCAN HOOD May 26 2008

Why auto workers look worried

Earlier this week General Motors slashed another 1,400 jobs in Ontario, on top of the thousands of automotive jobs that have already been cut. Yet Canada’s economy is in decent shape, and our auto sales are strong. What’s going on? It turns out that Canada’s economy relies more on the U.S. than many thought, and the auto sector is a good example of why that’s so worrying.

Domestic vehicle sales seem to indicate that auto workers in Ontario should have nothing to fear. “Last year was the second best on record for sales,” says Richmond Hill, Ont., automotive consultant Dennis DesRosiers. “Most forecasters predicted a decrease of three per cent to five per cent in 2008, but we were collectively wrong. It looks like the Canadian market will come in at pretty close to last year’s level.” The problem is, almost 90 per cent of the automotive parts and vehicles manufactured in Canada are sold south of the border, and there auto sales are near their lowest point in 15 years. Toyota and Nissan have both just announced that they expect a fall in profit of more than 25 per cent this business year, while sales have fallen by 23 per cent at General Motors and 19 per cent at Ford.

Because of the U.S. crash, automotive production in Canada has plummeted. Despite healthy domestic sales, Canadian production

is down by almost 20 per cent in the first quarter of 2008. Part of that is due to two auto lines switching to new vehicles, but it’s still a huge, unanticipated drop. TD Economics was predicting a production decline of just 7.6 per cent for 2008 just a few months ago.

So yes, Canada’s economy is doing okay for now and employment is high. But the tide is turning quickly, at least in the automotive sector. That’s why both economists and auto workers look so worried. M

DUNCAN HOOD