The Globe and Mail’s Greg Keenan explored an interesting conundrum that Canadian governmental officials are facing; is it worth subsidizing auto industry manufacturing facilities, even with austerity programs in place?
The closure of the Oshawa consolidated line last week brought into focus the issues facing Ontario’s once bouyant auto manufacturing sector. On the one hand, there’s the instinct to preserve the auto plants, and the stable, well-paying jobs that come with them, even if it means “investment” from both the provincial and federal government (at a rate of 15 percent of the total cost from each level of government). But with governments imposing wage freezes and layoffs on public employees, subsidizing profitable private businesses goes beyond just poor optics.
Keenan cites upgrades to Ford’s Oakville plant, which builds vehicles like the Edge and Flex, as having the potential to require a total of $400 million in government money. While the sum is steep, the upgrades would preserve the 2,800 jobs currently at the plant, and allow for a global platform vehicle to be built, increasing the potential for exports beyond the U.S. market.
States like Tennessee and Alabama are courting car companies with what Keenen describes as “… incentives worth hundreds of millions of dollars at auto makers to finance training, infrastructure and real estate purchases and provide tax holidays to land the thousands of jobs created by assembly plants.” Of course, those states tend to have plants that aren’t unionized. Foreign automakers tend to build in the South more than the Big Three, but GM recently moved some production of the Chevrolet Equinox from Oshawa to Tennessee in part because they could pay new hires $14 an hour rather than the $32 an hour paid to Oshawa employees.
High CAW wages and a strong Canadian dollar give the automakers the potential for an easy way out when it comes to packing up and moving their plants elsewhere. Bringing production back to America, at $14 an hour would not only cut costs but provide good optics for American manufacturers. Moving production to Mexico, already a trend among a number of automakers, would provide further costs savings, and if the last generation Ford Fusion is anything to go by, no major drop in quality.