There has been so much grim news out of Detroit recently, you would be forgiven for thinking the Canadian auto industry was going down the tubes. Canada is, after all, integrated into the North American car industry, building vehicles for General Motors, Ford and DaimlerChrysler from parts made in the U.S, Canada and Mexico. So when Ford and GM announced plant closures and job cuts recently, it seemed logical for many to assume the entire Canadian industry was in crisis.
In fact, it isn't. The auto sector in Canada is doing rather well at the moment. Production grew in three of the past four years and was down only marginally in 2005. Overall employment in the sector has grown. And investment, which averaged about $3-billion a year for the past 10 years, is set to rise to about $4-billion this year. Yes, there are problems at certain companies and within certain unions, but the overall picture is not one of an ailing sector.
Why then has the idea of crisis taken hold?
One reason is that we tend to equate the Canadian auto industry with the Big Three auto manufacturers, ignoring the Japanese car companies, which arrived in the 1980s, set up plants, hired workers and quietly went about their business of producing cars consumers actually want to buy. While the Big Three are laying off workers and closing plants, the Japanese companies are moving in the opposite direction. Times have changed faster than public perceptions.
The Big Three have large, well-oiled public-relations teams that make sure their message is broadcast far and wide. The Japanese companies, in comparison, have kept their heads down. After all, they were treated as the enemy when they first arrived in Canada. Even now there is no single auto industry association that speaks for all the members. If there were, we would have more balanced news of the sector.
But there is more to it than that. The workers who are losing their jobs tend to be unionized and the Canadian Auto Workers union has been very vocal about their plight. Meanwhile, the Japanese plants are non-union. Thus while the CAW is making waves about job losses and demanding government assistance, there is no collective voice trumpeting job gains. Dennis DesRosiers, a reputable and independent industry analyst, estimates that in the past eight years, 20,000 union jobs have disappeared, but between 40,000 and 45,000 non-union jobs have been created.
Granted, it is part of the CAW's job to stick up for its members. And it has done so not just in the realm of public relations, but also at the bargaining table. The union has negotiated financial cushions for workers who are laid off or lose their job completely.
While not nearly as generous, nor as uniform, as the "jobs bank" that allows U.S. auto workers to collect their salaries even after their job has disappeared, the Canadian system tops up unemployment benefits and provides severance packages if a job is lost to productivity improvements at a plant. The contract with GM, for example, provides a $70,000 "restructuring incentive" for certain workers. This may not take away the pain of losing a job, but it helps.
Where the CAW goes overboard, is in overstating the auto sector's importance to the Canadian economy. In a publication put out just before the January election, it said that Canada's auto industry is our most important export sector and that one job in a major auto facility supports 7.5 jobs in the national economy. The first assertion is dead wrong and the second is highly questionable.
While the auto industry was once the pre-eminent export sector, this hasn't been the case for years. Energy, machinery and equipment and even industrial goods are all more important export categories. As for the jobs multiplier, Statistics Canada has studied the ripple effect of employment in a range of industries and the auto sector is close to the bottom. Part of the reason for this is that close to half of the content of a vehicle produced in Canada consists of imported parts. There are jobs created in the production of those parts -- just not in Canada.
These shibboleths persist because they are constantly repeated, often in an effort to attract government support for car companies. No doubt the incoming Harper government will soon be fielding numerous requests.
But if more taxpayers' money is going to be spent on the auto industry, we should be clear about its problems. The layoffs and plant closures at Ford and GM reflect important changes going on within the Canadian auto sector. Individuals who have lost their jobs and communities losing plants may well be in crisis. The same cannot be said about the entire Canadian auto industry. That's an important distinction to make when we start to think about solutions.
Madelaine Drohan is an economics writer based in Ottawa.