By on February 11, 2014

windsor

Just a few short years after the Canadian and Ontario government bailed out General Motors and Chrysler, a familiar scenario is playing out along Highway 401. Chrysler is reported to be negotiating with both the Ontario and Canadian federal government regarding subsidies for their Windsor assembly plant that builds the Dodge Caravan and Chrysler Town & Country minivans.

While auto makers like Ford and Toyota have received government money recently, the size and scope of the subsidies are said to be unprecedented. And according to reports, Chrysler is threatening to leave if they don’t get what they want. According to the Financial Post, Chrysler is looking for a total of $460 million (compared to the $71 million and $34 million received by Ford and Toyota respectively), which would represent about 20 percent of the planned $2.3 billion investment. Chrysler is said to be seeking funding for R&D work on the new vans, as well as money to revamp Windsor to a new flexible assembly plant that can build sedans, minivans and crossovers. Reports from the Windsor Star quote Ontario government officials as stating that they are in “serious negotiations” with Chrysler. When reached by TTAC Chrysler Canada refused to comment.

While the minivan market is shrinking in America, Windsor is still running flat-out, with three shifts running and both nameplates ranking among the top sellers in the segment. Chrysler is slated to transition one nameplate to a crossover while keeping the other as a traditional minivan. But Chrysler and CEO Sergio Marchionne have flip-flopped on this decision so many times that it’s tough to keep track of what was said last. As early as the end of January, Marchionne made comments that hinted at a secure future for Windsor at a launch sometime between 2015 and 2016 model years.

But the recent developments, as well as the expiration of Chrysler’s contract with Unifor (formerly the Canadian Auto Workers) could prove to create an opportunity for Chrysler to make a hasty exist from Windsor. The hardball talk is backed up by the very real fact that Chrysler has the capacity in other plants that could enable a move for their minivans. Mexico is one option, with production of the Fiat 500 moving to Poland and the Dodge Journey said to be leaving Mexico for Sterling Heights, Michigan. Either plant could be a candidate for minivan production, assuming the new vans ride on the CUSW architecture used for the Dart, Chrysler 200 and Jeep Cherokee.

Both levels of government are captivated by a desire to keep Canada’s auto industry intact, even at great expense to the taxpayer, and Chrysler head Sergio Marchionne is likely banking on this. With elections looming in the next couple of years, Marchionne and his team know that the threat of moving production to the United States or Mexico is potent enough to get the governments to acquiesce to his demands. With roughly 4,700 jobs at Windsor, Chrysler is the town’s biggest employee, and crucial electoral districts are up for grabs as well.

The wrong decision could have political consequences in tightly contested elections at both the provincial and federal levels. The negotiations with Chrysler are occurring against a gloomy backdrop for the Canadian auto industry. Production levels have been on the decline, as a strong Canadian dollar, lower labor costs and generous incentives from other jurisdictions have made Canada an unpopular choice for new assembly plants. The lion’s share of new investment has gone to the United States and especially Mexico, which has seen a boom in auto assembly plants from Japanese and European auto makers.

While a recent slump in the Canadian dollar will help Canada’s overall export picture, it’s this author’s opinion that Canada’s auto industry will eventually meet the same fate as Australia’s. The Canadian auto market is roughly the same size as Australia, and though it does not have such a competitive and fragmented selection of brands, it does share Australia’s proximity to low-cost assembly locations that have reciprocal free-trade agreements. The Minivan may stay in Windsor, given the costs associated with moving production, and Marchionne’s prediliction for blusters. But it’s this author’s opinion that when the Vitality Commitment between General Motors and the Canadian government ends in 2016, the Oshawa assembly plants will close, ending a century-long tradition of auto assembly in that town.

The move will devastate an already vulnerable municipality, but every vehicle built in Oshawa is already built at another, lower-cost assembly plant, and GM CEO Dan Akerson made up his mind long ago, calling Canada “the most expensive place to build a car“. Like Windsor, the timing of the Oshawa closure could easily coincide with the expiration of the current CAW/Unifor labor agreement, allowing for a clean break.

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94 Comments on “Editorial: Canada’s Auto Industry Is Hooked On Subsidies, And It Won’t End Well...”


  • avatar
    MoDo

    I truly believe that Sergio wants the plant to stay there – he’s said on multiple occasions that it was safe, mainly because he use to live in Windsor, but he’s not going to lose money to do it. 460 mill seems pretty steep though, I’d think even half of that would be hard for them to get.

    He has said earlier that this isn’t a 3-5 year commitment though, it’s more like 20+ years so we’ll see.

  • avatar
    Slocum

    “While a recent slump in the Canadian dollar will help Canada’s overall export picture, it’s this author’s opinion that Canada’s auto industry will eventually meet the same fate as Australia’s.”

    The cases are pretty different. Australia had an auto industry that was not only assembling cars, but designing and manufacturing Oz-specific models (Commodore and Falcon) that weren’t built or generally sold elsewhere. The Canadian industry, on the other hand, has long been fully integrated into the North American market. Windsor is pretty much just another Detroit suburb with an auto-assembly plant. If the CAW/Unifor is willing to adjust wage demands to make up for the strong Canadian dollar (or the Canadian and Ontario governments are willing to kick in the money to make up the difference), there’s no reason auto-manufacturing can’t stay in Ontario.

    • 0 avatar
      ect

      Slocum, you’re absolutely right about the differences between Canada and Australia.

      Another reality is that companies operating in Canada have substantially lower costs for employee health care than is the case in the US. To the tune of several thousands of dollars per worker per year.

      Historically, Canada and Ontario have been much less generous with industrial incentives than US states have been (especially in the South). For a much smaller Mercedes facility ($300 million total investment, up to 1,500 jobs estimated), Alabama gave the company an incentives package that has been valued in the range of $250-325 million.

      Similarly, the package that Tennessee gave to VW is estimated at north of $300 million.

      Sergio has placed a marker on the table. So, the negotiation begins, we will see where it ends.

      • 0 avatar
        Big Al from Oz

        @ect
        What about the $8 billion dollar handout from the Ontario government to the CAW and manufacturers during the GFC.

        Proportionally the Canadian’s have gone to the auto manufacturers with fist full of dollars and ignored WTO rulings on protectionism regarding the Canadian auto market/industry.

    • 0 avatar
      Ron B.

      Historically, Australia had to make her own cars because of the distance from anywhere else. But because of the tiny market for cars,it was only viable if taxpayers subsidized it. Looking back over the decades it is obvious that the car makers were suckling on the taxpayer tit a little too long .Labor governments have borrowed several hundreds of billions of dollars to give to these companies,while they bought in a “carbon tax” and quite frankly OZ citizens are sick of it. The new LNP government has declared that if your business cannot survive without being propped up,then you close.
      The car workers union rep has been crying crocodile tears for two days now but it was because of his recalcitrant attitude towards Toyota (for example) which has seen Toyota shut down here .The cost to build a Camry here is $3800 higher than in Thailand for example because of massive wages and the union was attempting to get a wage rise .
      Also,because of the small market,Holden and Toyota were using the same component and panel companies to supply parts. Many of these companies have said it is not possible for them to remain in Business if they only have Toyota as a customer so they intend to close. Alcoa being amongst the more well known.
      Holden and Toyota were even using the same presses. The Prospect of a recession in Victoria is said to be very real now , and given that the state of Victoria struggles from one recession to another on an almost annual basis it might just come to pass.

      • 0 avatar
        Big Al from Oz

        @Ron B
        There are also other industries within Melbourne that are hiring.

        Tullamarine is going after 3 000 new employees.

        Some of the money saved by not subsidising will find it’s way back into those communities. We just can’t keep on living in a dream in Australia, we just aren’t competitive in producing labour intensive manufactured items.

        To keep and industry via subsidisation, which reduces standard of living is ludicrous. The reality is right now most Australian don’t buy a locally manufactured vehicle.

        The money from vehicle manufacturing is over rated. The secondary motor vehicle service industries, logistic/transportation, infrastructure industry, energy, etc is worth multiples the value of the manufacturing, and it’s profitable and there are many momma and papa small businesses within it. We need to develop those more. Companies like ARB, TJM etc that do business in the US and overseas are making more profit for Australia than GM/Ford/Toyota which suck money out of the taxpayers.

        We will have other industries. If we only have profitable business the government will gain more taxes to pay down the debt built up during the GFC.

      • 0 avatar
        RobertRyan

        @Ron.B,
        A recession for South Australia and Victoria, is very likely UNLESS they can bring in new businesses to stimulate the economy. The weird thing is they are out there and need encouragement from Governments to establish themselves in those States.

    • 0 avatar
      RobertRyan

      @Slocum,
      That is not going to save those industries as OEM’s are looking for cheaper places to manufacturer. That is why already 50% of your parts are made outside NAFTA.

  • avatar
    Big Al from Oz

    I hope the Canadians reduce/remove subsidisation and force the vehicle manufacturers somewhere else in NAFTA (Mexico?).

    Subsidisation of jobs is a no win situation for any person as it will eventually end in disaster.

    If you read the Japanese auto industry article below you will see why the Canadians are throwing good money after bad.

    The best thing the Canadian’s can do is move more towards the UNECE global harmonisation of vehicles model, like they appear to be heading in. Let more non NAFTA based manufacturers and brands onto the Canadian market and may the best product win.

    Is this called capitalism?

    • 0 avatar
      tresmonos

      We raise everyone else’s standard to our own.

      Or:

      We lower our standard to everyone else.

      When I woke up this morning, I saw the sons and daughters of the textile mill workers walking to work (in snow) to where their parents worked. Except they were wearing hard hats to dismantle the cotton spinning mill that employed their ancestors. They walk because they can’t afford cars.

      • 0 avatar
        ect

        I presume your little parable is personal fantasy. Reality appears to be somewhat different:

        From Textile World – “It’s been another tolerably good year for U.S. mills and apparel manufacturers. And barring the unforeseen, there’s little to suggest otherwise, not only for the new year but also well into the second half of the decade.

        Domestic mill shipments, for example, should approach $54 billion to $55 billion in 2013 — the fourth consecutive year that totals have held steady or inched ahead. And the same is likely for apparel, for which the new year’s shipment total will approach $16 billion — more than a double-digit percentage gain over 2010, when the industry hit its recession low.

        Do the math, and all this adds up to a $70 billion to $71 billion textile and apparel industry — not bad for a sector that many analysts were writing off as a lost cause as recently as four to five years ago.

        And the picture is even brighter when it comes to industry profits. Indeed, anticipated after-tax earnings gains for 2013 are quite impressive — nearly double last year’s for textile mills.”

        Also see:

        http://www.nytimes.com/2013/09/20/business/us-textile-factories-return.html?pagewanted=all

        Production is much more automated than it used to be, which reduces the impact of labour costs. Not to mention the efficiencies and other savings associated with buying from local, rather than distant, suppliers.

        Reduced employment in the mills is not a straight job loss. The machinery requires very skilled people to design, manufacture, operate and maintain it. It’s all part of the natural evolution of industry and technology.

        • 0 avatar
          tresmonos

          Nice anecdote. Look up the job losses between the mid 1990′s and now. Look at the manufactured output from the same time periods. Textile technology hasn’t advanced much since John D Hollingsworth’s innovations. Capital expenditures were culled and investment went to locales with cheaper labor.

          Stop ‘doing your math’ and educate yourself.

          Shove that parable comment right up your ass from where it came from. Textiles may be coming back, but one mill doesn’t mean much to the three that I drive by in my short drive to my house. The landscape has already been hallowed out.

          Also see:
          http://www.gof*ckyourself.com
          You did a half ass job at google searching articles. Next time, try harder. Or stop talking about regional economic landscapes and ‘manufacturing’ that you know nothing about.

          • 0 avatar
            RobertRyan

            @tremonos,
            “The landscape has already been hallowed out.”
            It is only going to get worse. Real unemployment in the US..who knows?? 13-17%? Taken into consideration the published figure of 6.5% and the vast number who have not bothered to look as they are long term unemployed.
            I do not know Canada’s figure, but using the US as an example.

          • 0 avatar
            ect

            My, we’re a bit touchy.

            The textile industry is certainly not what it was. But neither is it disappearing. Nor is other US manufacturing, which has been growing strongly since 2010.

            Technology is changing manufacturing, has been for many years. The pace of that change is accelerating, along with the disruptions it creates.

            The low-skill jobs that have disappeared are not coming back. The jobs that are being created call for higher skills, to achieve higher productivity. That is a good thing for North America, because by global standards we have a highly-educated, highly productive workforce.

            Government has done a lousy job of dealing with the people who get left behind in this process, although I’m not sure there is any kind of “magic bullet” solution.

            But the doom and gloom that permeates these pages about the future of manufacturing in North America and elsewhere in the developed world is, in my opinion, misplaced. I’ve been hearing it since I entered the workforce over 35 years ago. Wasn’t true then, isn’t true now.

        • 0 avatar
          Big Al from Oz

          @ect
          I don’t think you really can understand why the textiles industry was off shored. It was actually the first industry to be industrialised globally. It all started in Scotland.

          Textiles can be produced in massive quantities on computerised equipment. But using that cloth and value adding is a different issue.

          Sort of like agriculture. We in the West can grow massive quantities of food. But the processing of this is where we value add, but also where it is most competiitive.

          To value add to textiles is extremely labour intensive. The ability of the human mind to work with cloth is different than to most any other material. This is due to the shapes or a better word converting a 2 dimensional and variable material into a 3 dimensional product.

          This is why we don’t have composite motor cars yet that are cheap. Working with composite materials is similar to the clothing industry. We can produce massive quantities of carbon fibre, kevlar, glass, etc cloth but converting this and value adding in the form of a motor vehicle is prohibitively expensive due to the labour involved.

          No computer is economical enough yet to work with cloth. This will occur one day and clothing will be manufactured in advanced economies again.

      • 0 avatar
        Big Al from Oz

        @tresmonos
        If you are living in Canada and these textile workers are going to the mill, I bet at a Canadian mill the cloth produced wouldn’t have been cheap stuff for everyday clothing that we wear.

        The cloth would have been highly value added expensive cloth.

        But if you are in Mexico, then it would have been ‘normal’ cloth.

        Nostalgia, isn’t reality.

        • 0 avatar
          tresmonos

          @Big Al:
          In reality, you don’t know where I live nor do you know anything about ‘cloth.’

          The problem with the loss of manufacturing is the fact that the workforce isn’t ready for it. Education being a primary deficiency. The gap between the lower class and the middle class keeps expanding.

          Go talk about chicken tax.

          • 0 avatar
            LALoser

            Tresmonos; Its pointless to engage people who already know all.
            Another note: I spit coffee on the monitor with your stick it up your ass comment! Now that was funny! QOTD.

          • 0 avatar
            RobertRyan

            “The gap between the lower class and the middle class keeps expanding. ”

            Really expanding rapidly in the US, it is destined to become another “Latin America” with the extremes in wealth.

          • 0 avatar
            Big Al from Oz

            @tresmonos
            My knowledge of cloth is this. The Europeans did manage to profit from cloth.

            Why? Because the value added significantly.

            But the market is only so big for the likes of the trendy Euro clothing labels.

            Even now look at where much of their cloth and clothing is manufactured.

            Just like the auto industry.

      • 0 avatar
        LALoser

        +1 Tresmonos. The rest of the world drags down and dilutes our own economy. Jobs shipped overseas, ironically to a country where the central government owns a stake in most companies, and our wages go down, tax base erodes, property values dive, and government handouts increase.

        • 0 avatar
          Big Al from Oz

          @LALoser
          What do you do in your case? How do you live with distorted prices and taxation?

          The reality is most countries rely on imports of some form or another. They couldn’t exist without them.

          Protecting parts of industry and taxing the profitable industries to support inefficient industry sounds really illogical.

          Wouldn’t you want to expand the profitable businesses in Canada and not tax them to support the unprofitable ones?

          Weird logic you have.

          • 0 avatar
            tresmonos

            @Big Al:
            I’m not against free trade, I’m against free trade with nations that oppress their citizens with bad domestic policy that inhibits their prosperity.

            Both the US and Canada has failed their population by not readying the lower class with good public education. When low skill labor jobs leave, the low skill labor force has to be pacified with welfare.

            You and Etc would pair well together giving each other verbal one liner hand jobs.

          • 0 avatar
            Big Al from Oz

            @tresmonos
            Then just don’t trade with them and source or create alternatives. Like the Iranian experience.

            I do agree with you. But in the case of say China how do you encourage change?

            If the Chinese went down the route of Sth Africa or Russia then China wouldn’t succeed.

            The USSR has failed and is regressing. In Sth Africa when it liberalised it’s people processes weren’t in place for the change.

            This has occurred in many developing countries. We in the west must devise ways to encourage these countries to transition in an organised and orderly fashion, or they will revert back to where they started.

            Look at Egypt.

          • 0 avatar
            tresmonos

            @Big Al:
            There are textile mills that operate within the US borders. The high volume, low margin operations are open due to sourcing decisions that are tied to vertical integrated suppliers that rely on NAFTA. There were a plethora of mills that shuttered due to their allegiances with clothing ‘OEM’s that off shored the majority of their operations. Two examples: VF and Levi’s. Which is more profitable? You can do the leg work and research who employs more NAFTA employees than the other, then make the call if it’s worth it.

            The second category is the high tech mills tied to the chemical industry.

            The last is the high end apparel made on vintage open shutter looms or cut and sew operations that sew USA made clothing out of domestic and imported fabric.

            We trade a lot of textiles with Egypt. Should we? Should we do trade with Mexico if their gov’t still oppresses their citizens with corruption? Or should we send our troops to our neighbor and stabilize the nation?

            Then there’s the argument of only being able to afford what we import with low cost labor because we don’t have a job that gives us a choice because we’re so poor and my local school didn’t teach me the value of an education.

            These are the grey areas and close ended loop arguments that I’d rather not get into.

            The TPP doesn’t scare me as much as some of the other countries the US trades with. I lived in Mexico, Canada and the USA. I don’t want to go work in Vietnam. I don’t want to work in Egypt. I don’t want to work in the Horn of Africa. Yet companies manufacture a lot of goods that we consume there.

          • 0 avatar
            Big Al from Oz

            @tresmonos
            The production of textiles is great. But also look at the textile manufacturers and look at the manpower used to produce cloth.

            This isn’t like assembly, which the auto industry is. Manufacturing cloth is like rolling steel in equivalence.

            The US can’t produce clothing economically in large quantities unless it was subsidised like the auto industry.

            Rolling steel and textile manufacturing are different to value adding and production of consumer products.

  • avatar
    Pig_Iron

    I wish I could disagree. Caterpillar made all sorts of demands that were so impossible, it became clear it was their exit strategy all along. To it’s credit WAP has earned a new building addition in the form of a metrology lab. But then again, they started a new paint shop at WTP for the Ram vans just before they pulled the plug.

    There is a national election due in 2015, I’m sure the government is quietly lobbying to postpone closure of Windsor and Oshawa until after the election in order to avoid any political fallout. The Ontario Conservative leader is openly pushing for right-to-work (open-shop) by force of law.

    I always liked the Windsor plants, its one of the few places were I saw open jocular comradery between the hourly and salaried people. They looked out for each other, and the always tried to make suppliers feel like part of a team effort. I wish them all well.

    • 0 avatar
      tresmonos

      Plant investment means nothing. Norfolk Assembly was Ford’s first ‘flexible’ body shop. Right after install, they shuttered the plant.

      • 0 avatar
        mikey

        @tresmonos… I think, or should I say hope?? ,The modern Flex plant in Oshawa, and our falling dollar, are about all we have to cling to here in Oshawa. However as you know, if it bolts together, it can unbolt apart.

        Unlike other articles written on this subject, Derek has done his research, and got his facts straight. I don’t entirely agree with his conclusion’s.

        Let me add some more info. First off. I’m a high school dropout. I spent 36+ years on the GM Oshawa plant floor, and am now retired. My spelling, grammar,puncuation, and sentence structure, is atrocious. If anybody feels the need to remind me, go ahead. Its not as if I didn’t already know.

        So whats Sergio up to? He using his management skill, and his Canadian background, and his political savvy. Sergio is trying to get the best deal he can, for Chrysler/Fiat. I believe thats exactly what a CEO is paid to do. Facts are facts, shopping for hand outs is nothing new. If Ontario, and Ottawa, don’t want to play ball. Their ain’t no shortage of other players

        Derek has summed up the political situation here in quite well. We, in common with our rust belt neighbors, are bleeding jobs. Ontario is in a worse fiscal situation than California. The Canadian economy is being carried by the oil sands. What we do have in Ontario, is a whole lot of voters. In Ottawa, the governing Conservatives, are well aware that their on shaky ground. They have to call an election before Oct 2015. Standing by, watching car manufacturing leave Ontario, will not bode well for them.

        In Ontario, the unelected premier, is desperately clinging to power. Her scandal riddled government could be forced into an election at any time. Corruption and all, she is blessed with a very weak opposition. We do have a labour party here in Canada, and they can, make or break, an election.

        The new union” UNIFOR” is untested as yet. I could be wrong on this. I see UNIFOR as a toothless tiger. UNIFOR was a merge of two struggling unions. Think “Packard- Studebaker”…how did that work for them?
        Be ready for a lot of noise, nashing of teeth, and stomping of feet,from UNIFOR. Maybe even some idle threats? At the end of the day, I don’t expect much more

        Whatever deal Sergio cooks up with Chrysler, GM, Ford and Honda, and Toyota, will be standing their with their hand out.

        Well see how it all works. My guess? GM will still be here, after 2016.

        I hope so!

        • 0 avatar
          Toad

          Mikey, don’t apologize for your education; 36 years ago quitting school (particularly if you really didn’t enjoy it anyway) to work in a unionized auto plant was a very rational decision. You were able to earn good money, job security, and the ability to retire far younger than I ever will.

          The world has changed a lot since then, but your perspectives are always informative and useful to whatever is being discussed on TTAC.

          BTW, you grammar, punctuation, and logic are better than many commenters here. Don’t sell yourself short :)

        • 0 avatar
          tresmonos

          Mikey, your grammar is fine by me. I’m still buried in student loans and not one bit of it was paid to improve my comprehension of the English language.

          It all really depends on capacity. GM and Chrysler-Fiat has excess capacity elsewhere. Don’t believe for one minute that those plants are safe. The day you see tooling being installed for a new model is probably the day you can stop fretting for at least 2-4 years. Norfolk was a poor example. The entire company woke up and overnight, mindsets changed. Anne Stevens (who Fields kicked out) made instantaneous decisions that reshaped the manufacturing foot print to what you see today. GM and Chrysler-Fiat didn’t trim to the bone.

          Until these two company’s get with the program and get their capacity aligned, I think Derek has a solid point. After working at Cuatitlan Assembly, I see no real advantage of a US or Canadian plant over a Mexican plant. Complexity requires more American’s to guide the Mexicans to make the required change, but after you get them rolling, the craftsmanship is usually better. The only thing that is lacking is the discipline and back bone to disrupt the system to make improvements or implement Production System / Quality Op System changes or to make a supplier implement detection/prevention to get better parts – and that impairment is derived from their culture. There are plenty of manufacturing engineers who will travel to implement Production and Quality systems to foreign plants. It’s a well defined system and it can travel in a suitcase.

          There is nothing special about the workers in USA, Canada or Mexico. And after dealing from the supplier side with Oakville, I’m led to believe that the guy putting on my part is no better at catching quality issues than the guys / gals putting it together at 1/4 of their labor rate.

          Derek keeps telling me I should write a book about my experiences. I usually just try not to think about all of this as I get really depressed and start drinking. Our economies will continue to ‘correct’ from the lack of trade we had after World War II. Just enjoy life, man as you’ve earned it. I’m a bit pessimistic about manufacturing’s future in my own and your great nation.

          • 0 avatar
            mu_redskin

            Chrysler actually has maybe 2 excess assembly lines. A new body shop and paint shop were added to Sterling Heights for the new 200. What happens to the old body shop/paint shop once the current 200/avenger winds down? Seems like with a little investment, they could have 2 lines. The new line is flex so can easily build the new 200 and whatever is built to replace the Dodge Journey/Fiat Freemont. Michigan would be eager to provide the money for the retooling of the old sterling heights line. All the new workers on that new line would be at the lower UAW pay scale.

          • 0 avatar
            tresmonos

            @mu_redskin:
            And the next minivans may be based on the same platform.

          • 0 avatar
            mikey

            @ Toad & tresmonos…Thanks

        • 0 avatar
          tresmonos

          Just a bit more to add:
          It’s always discouraging to see how politicized the unionized OEM line worker is and how forgotten the supply chain is. The OEM line worker is assembling at least 50% imported content. In Canada, that number is much higher. That should be the indicator to the worker of the future location of their job. Final assembly is the last job to get de-sourced and it’s usually tied to capital.

        • 0 avatar

          Mikey, you are a big part of this community. Besides, nobody said my spelling, grammar etc are perfect.

          • 0 avatar
            mikey

            Thanks Derek…Its just when I’m reading some of the other guys, I’m thinking OMG they are SO good.

            We have some very gifted writers amongst the B&B.

          • 0 avatar
            tresmonos

            @mikey:
            There are a lot of great writers in this community but to be brutally honest, I much rather hear your stories than most of theirs. You grew up in a different time and only people like you can truly give us all a glimpse into when the automotive manufacturing landscape was just beginning to see global competition.

            The only thing that keeps me coming back to this site is the industry discussion and analysis that Derek brings to the table and a few of the B&B that antagonize me to the point I stop being lazy and comment. If it weren’t for that, it would be just stories and reviews with no substance in the B&B discourse.

          • 0 avatar
            Lie2me

            “The only thing that keeps me coming back to this site is the industry discussion and analysis that Derek brings to the table and a few of the B&B that antagonize me to the point I stop being lazy and comment.”

            That’s funny, because your comments are among those I specifically seek out when I come here. When looking for the truth on the day to day industry operations, your perspective is the one I count on to be the no BS, this is how it really is one to measure all the others by.

            I really wish you would write more about your experiences, but if it messes you up too much, it’s not worth it

        • 0 avatar
          DC Bruce

          Clearly, you learned enough before you left high school, or, like most people, you continued to learn after you finished (left) school. The Canadian and Australian “problems” have a similar origin: a commodities-based economy. For the past several years, commodity prices have been quite high, not just petroleum. As a result, the currencies of countries which export a lot of commodities (which includes Canada and Australia) have appreciated in value against those of their principal trading partners. The consequence of that is to make products manufactured in those countries expensive when exported, increasing those countries’ economies dependency on commodity extraction, as you describe. Quite literally, those countries have become “victims of their own success.” I don’t think anyone has figured out the solution to that problem, other than, possibly, a currency union with neighboring states. However, as we see with the EU, that brings its own set of problems, too.

          • 0 avatar
            Pch101

            Their problems are not the same.

            Canada has an exchange rate issue. A cheaper looney makes the Canadian problem go away.

            A weaker dollar will not help the Aussies. Their cost structure is inherently excessive by design.

            The most expensive component of car production is in the parts. The Canadian supplier base is well integrated to the US system, so much so that it is virtually impossible to distinguish American from Canadian content.

            The Aussies operate in an environment that lacks scale. Local suppliers have to charge more because they don’t get the benefit that comes from high volume — local production is not high enough to push down prices to that level.

            There are only two things to save Aussies: (a) a ban or boycott imports to the extent that domestic production can be supported and/or (b) a massive surge in global demand for cars that are specifically made in Australia. Neither of those things could possibly happen.

          • 0 avatar
            Big Al from Oz

            @Pch101
            The US is the country with the exchange rate issue.

            Doh! How much of bond buying is going on with your government to prop up assets so the banks don’t go under.

            Why is it everyone else outside of the US at fault.

            Are you that insecure and full of fear.

            That’s why you don’t respect me. It’s you fear my views, as they are foreign to you.

            America can’t be wrong, can it?

        • 0 avatar
          SCE to AUX

          @mikey – I happen to be well-educated and a decent writer – so what.

          I’ve really come to appreciate your measured commentaries on all car subjects, but especially your unique perspective on union matters, and the Canadian market as well.

          You can hold your head high among the B&B because of your experience and integrity in this community, credentials which are more important than a piece of paper and a silver tongue.

        • 0 avatar
          ect

          As many others have already commented, I very much appreciate your writings.

          36+ years? It sounds like we entered the workforce at about the the same time. I did it with 3 university degrees. At this point, though, your retirement may well be more secure than mine – which hasn’t yet arrived.

          One thing that would be very interesting to learn is how the plant and work force that you joined compared with the plant and work force when you retired.

        • 0 avatar
          Athos Nobile

          mikey, your spelling and grammar and etc… are very good. It’s been nearly 10 years reading your comments here and have yet to fault it.

          I’ve seen truly atrocious things done to English, and this is from my “English as second language” perspective.

          Carry on mate.

          threemonkeys, mi pana, if you ever write that book, I want a copy.

        • 0 avatar
          calgarytek

          Given Ontario’s severely mismanaged hydro coupled with the ever increasing prices for electricity, it would be in their best interests to leave anyway.
          Put em up in Quebec. The wages are low and power’s far cheaper. So what if they separate. Their new currency will be worth 35% to Mexico’s. Manufacturing renaissance…

  • avatar
    areader

    This extortion will go on until we wake up and scrap ‘free trade’. Free trade is just subsidized transfer of jobs to low-income countries while wages race to the bottom for all while corporations milk the taxpayers. I remember recent bitching by car companies about Canada being a high cost production country due to the high $C. What happened to that bogus argument? Well, predictably the $C fell. So what’s the reason now? No reason needed. Just extort until the financial juice is gone and then transfer to Mexico or wherever the lowest cost country is at the time.

    IBM has gotten one tax giveaway after another over the years to upgrade their chip plants in New York. Now they want to sell the plants because their incompetent management can’t make money doing something that Intel, TSMC and others live on. And this after going from 401K contributions per pay period to annual.

    Let the bastards move and then impose tariffs to import their vehicles.

    • 0 avatar
      danio3834

      Most people agree that Canadians pay comparably too much for cars now, what do you think would happen if Canada left NAFTA? There’s very good reasons why most countries are moving toward free trade, not away from it. It gives consumers the full benefit of competitive products at the lowest possible prices because costs can be better amortized.

      “Let the bastards move and then impose tariffs to import their vehicles”

      This would just be an additional cost the customer would ultimately bear. Why should they?

    • 0 avatar
      olddavid

      I used to believe your method would work, Reader, but every time I drive by a Wal Mart the damn lot is packed. Until the working class wakens to its fate and refuses to buy cheap imported goods, any external imposition is doomed. Imagine if every customer walked into a Ford store and would only consider a US-built Fusion? The maquilladeros would be building for import elsewhere, not to America. The power of the dollar is the only force equal to our current inequitable system. Refuse to purchase foreign made goods from cheap wage countries. It can be done – I do it on a fixed income. American quality and productivity is unmatched, and I especially include so-called superior German engineering in that declaration. They’ve been riding the coattails of the past for almost 20 years.

  • avatar
    CrapBox

    ‘The industry is fond of citing its “contribution” to the Canadian economy in terms of jobs and output, but what it is really talking about is its claim on productive resources, notably labour and capital.’

    http://fullcomment.nationalpost.com/2014/02/10/andrew-coyne-time-for-canadian-politicians-to-junk-their-car-fetish/

    • 0 avatar
      kmoney

      But would all the capacity really be sucked up by other industries?

      Vehicle manufacturing is 29.9% of all Canadian manufacturing, with wood and primary metals being the other big two. Everything else is small-scale, with things that tend toward actual assembly of industrial equipment (shipbuilding, other transportation equipment, aerospace and the like) are mostly on the decline.

      I don’t really think that the growth is really going to be endogenous
      (as we seem to be growing more in other sectors) and I can’t really see manufacturers rushing in to build here when they could likely find labour rates cheaper in many other countries.

      If we were able to shift the freed up economic and human capital to something outside of manufacturing — i.e., a more self sufficient and growing sector — I’d be all for letting it die, but sadly the realist in me thinks that wouldn’t really happen.

      • 0 avatar
        olddavid

        I need to understand why the Alberta government doesn’t use the Heritage Fund to float bonds to build their own refinery? Why not do your own value-added benefit and export gasoline and other end user products? It cannot be much more than the Keystone proposition, can it? Every time I see a barge of raw logs heading from Vancouver or Coos Bay or Portland, I cringe, wondering why we allow them to literally export jobs? How can it be cheaper to send logs 8,000 miles to China, pay to have it turned into pencils and desks and shipped back? I guess a simple business major is ill-equipped to analyze these questions. But I do know if your numbers are correct, Canada cannot absorb a 30% manufacturing hit without major disruption of the entire economy. You think 67 cents was a cheap dollar? Lose auto manufacturing and that will look like the good old days. The government would blow through $50 billion trying to back the Loonie – and fail.

      • 0 avatar
        CrapBox

        Well, if you believe in free markets, then you’d have to say that, yes, the capacity would be sucked up by different, more productive industries. The best example of this sort of transformation is wartime Germany. From 1943 onward, German businessmen received vast transfers of wealth from Poland and France and used this capital to add capacity to industries which could be transformed to peaceful, money-making purposes. When the war ended, West Germany quickly adapted to a (relatively) free marketplace and sprang ahead of its continental rivals. East Germany, on the other hand, stagnated as it continued to operate with a command and control economy which allocated resources inefficiently (though always “justly”, in the eyes of our good Marxist friends).

        At any rate, it doesn’t matter whether a factory is employed to produce machine guns in 1943, cars in 1983 or textiles in 2013. The important thing is that capital be used efficiently. Sometimes, the best thing to thing to do is to close a factory and devote the capital to other uses.

        Why would any citizen of a resource-rich nation such as Canada need to work in a factory anyway? Wouldn’t it be preferable to take the money intended for FIAT-Chryco and use it to sit at home and write poetry? That’s what plenty of people do in Norway. (Well, perhaps they don’t write poetry, but they do sit at home.)

        The root word for capital is “cattle.” So really, when people argue that capitalists should be obligated to employ large numbers of workers in dirty old factories, they’re off the mark. It’d be more logical to say that capitalists should restrict their activities to grazing longhorns on the savanna, and only employ herdsmen from their own tribe.

  • avatar
    Neb

    Marchionne’s bet regarding local and national politicians is a shrewd one. Thanks to Canada’s utterly screwed up industrial development policy, large industries that are in Canada can try to get all sorts of baksheeh. Especially as the dollar isn’t moving away from par with the American dollar anytime soon. If you think the Cons will continue to loose ground in Ontario, then they will agree with whatever Marchionne wants – until after the election.

    Your ‘like Australia’ comment got me thinking, Derek. A question for you: unlike Australia, Canada never really had its own auto industry. As you know, we signed an agreement with the Americans (in the 1950s, I think) officially saying we were fine about this, as long as a certain percentage of cars bought in Canada were Canadian made. If American auto industry involvement in Canada drops beneath a certain level – what happens? Does the American government start subsidizing Canadian auto plants? Or has NAFTA (or some similar agreement) superseded the Canada-USA auto pact?

    • 0 avatar
      Lou_BC

      @Neb – correct. The Auto Pact of 1965. IIRC, it meant that companies had to build X number of cars in Canada to be able to import Y number. It did give an advantage to USA companies since they were just accross the line in Michigan.

      • 0 avatar
        Lorenzo

        NAFTA must have superseded that agreement. There’s no room for a quota system in a free trade agreement.

        • 0 avatar
          Deaks2

          Auto-pact officially died in 2001. However, NAFTA had already largely superceded it.

          • 0 avatar
            Lou_BC

            @Lorenzo,@Deaks2 – correct. NAFTA replaced the Auto Pact but tariffs that were on the books pre-Autopact were in limbo during the AutoPact. Once the Auto Pact was replaced by NAFTA those tariffs on imports outside of NAFTA resurfaced. The WTO ruled those tariffs illegal but Ontario politicians and USA auto companies lobbied the Federal Government to keep them.

  • avatar
    Jerome10

    More picking winners and losers. Getting tired of it.

    What governments really should be doing is lowering the cost of doing business for everyone, making it as easy as possible on everyone to start or grow a company etc etc.

    It’s ridiculous to collect taxes from an individual or company and turn around and hand it to another, simply because the 2nd company is big and famous and in the news. It’s insulting to the smaller companies to see their wallets get raided so (insert favorite government here) can turn around and hand the cash to Chrysler.

    This isn’t the first or the last, but this practice is insane and really should stop.

    Flushing other people’s money right down the toilet.

    • 0 avatar
      mikey

      @Jerome10…Great idea…Well just get all the other Countries, states, provinces, counties to agree to cut subsidies to all their big companys.

      We will see how that works out.

    • 0 avatar
      Toad

      If you level the playing field politicians lose the ability to extort campaign contributions, create jobs for friends and family, favor their political friends & punish their enemies, and brag to taxpayers about all the industry they have recruited (while ignoring the jobs that were driven away). There would be no more reason for lobbyists to take them out for dinner, interest groups to hire their kid in a make work job, fly them to exotic locations to make a speech..the list goes on.

      Illinois is an extreme example, but it happens to a lesser degree everywhere that voters don’t pay attention.

      • 0 avatar
        mikey

        @Toad….Your so right, and its no different north of the border.

        I have to laugh at the media, beating up the Russians over their perceived corruption. Laughing at the obscene” cost over runs” at Sochi.

        Give the Russians credit, at least their upfront about it. In Ontario they just fired the chief of the Pan Am games, for aledged expense cheating.

        Of course after 18 months on the job, he walked away with a half million in severance.

    • 0 avatar
      Big Al from Oz

      @Jerome10
      There’s one problem with your argument. The bulk of the taxes that are going to these subsidised industries doesn’t come from those industries.

    • 0 avatar
      jimbob457

      The sort of tax breaks under discussion in this thread imho are best seen as a version of what used to be called community development. Traditionally, when a town lost an industry, it offered tax subsidies to attract a replacement. These subsidies made economic sense because their was little need to build much in the way of new infrastructure. The existing public capital: roads, sewers, schools, et.al. already existed. So did the private infrastructure: housing, commercial buildings, etc.

      My personal favorite example is the Texas town of Corsicana. By 1910 it had a population of 50,000. It still has a population of about 50,000. Originally built as a rail transportation hub for cotton shipments, it endured an erosion of employment in the 1920′s. This initial loss was replaced by a manufacturing plant for oil tools. Over the next nearly 100 years additional losses were replaced by various new plants of different kinds. My favorite is the most recent one, a mushroom farm located in a large building just north of town. What has always amazed me is a display in the hallway of the local Chamber of Commerce. It consists of eight photographs of each new industry starting with the oil tools plant from the 1920′s. Those guys knew what they were doing and are still proud of it.

      Good government, and the denizens of the North are known for it, seeks to at least maintain the infrastructure of its community if at all possible. They can either let an industry move out and then lure a replacement, or try to prevent it from moving out in the first place. Either one may require some tax breaks.

      You can see the consequences of a bad and inactive local government in the abysmal fate of the city of Detroit. I am guessing that Windsor is striving to avoid a similar outcome. Can they? I don’t know. I do know that it boils down to an essentially conservative dollars and sense calculation made, one hopes, by serious men and women with sharp pencils. You gotta look at the overall picture.

      • 0 avatar
        Big Al from Oz

        @jimbob457
        What you state isn’t over the top, if it is a short solution.

        But is the auto industry issues in many countries a short term issue?

        An industry can’t survive without continual handouts and protection. If it requires this type of protection for decades then restructuring is needed. Real restructuring to end handouts and protection.

        There is a distinct difference, sort of like Newcastle in Australia. After a few years government assistance stopped because unnecessary jobs weren’t supported. The city knew the handouts would stop and they had better put in an effort to make real changes that were profitable.

        Keynesian economics. The wets.

        • 0 avatar
          jimbob457

          Well, you have three ways to go, and you can mix and match.

          1. Let the industry go and use tax breaks to help attract new industry.

          2. Use tax breaks, maybe for decades, to keep at least part of the declining industry.

          3. Just let the place decline.

          Virginia City in Nevada simply let itself decline once the mines ran out. Population went from 12,000 in 1880 to 500 in 1940. Corsicana’s population stayed at roughly 50,000 totally by bringing in new industry. Windsor at about 300,000 population is so big that it will likely have to do some of all three.

          In general, the problem is completely empirical. Stupid ideology of both the right and the left have no place in any serious debate. Why choose to become a prisoner of the ideas of a dead economist when you can hire business savvy people to get the right answers?

          Choice 1. above has a all the intangibles going for it, but is it always best? Seen Detroit or Flint lately? When your alternative is trashing perfectly good infrastructure, maybe it is not.

          Personally, I suspect Oz probably made the right choice in throwing its auto industry under the bus. Aussies are the best miners in the world but only average car makers.

          Windsor is a suburb of Detroit. Its case is different.

          • 0 avatar
            RobertRyan

            @jimbob457
            “Windsor is a suburb of Detroit. Its case is different”

            It maybe part of the supply chain, but why keep throwing money at the supply chain, if it is efficient? Does not make sense.
            We have companies here in manufacturing, who never get handouts/subsidies but are thriving. Why does it need to be different in the US/Canada?

          • 0 avatar
            Big Al from Oz

            @jimbob457
            The problem is the US (and Canadians) auto industry is totally reliant on handouts. It contributes very little in the form of standard of living to the actual American population. It might in fact take from the people.

            The US does have a market to sustain a vehicle manufacturing industry. But how big should this manufacturing industry be. From the amount of handouts I would say substantially smaller than what it is.

            Short term assistance I do agree with, like a few years. But basing a capitalist system on handouts will not work. Look at the Eurozone and US’s economies.

            Why? Because the system does become reliant on these handouts.

            The same goes for trying to create false markets like what has occurred with EVs, CNG powered vehicles, windmills and alternative forms of energy.

            The US already had a cheap and viable way to reduce its energy reliance and reduce greenhouse gases. It called natural gas.

            But it supported and subsidised ventures that ended up being bought up by foreign countries.

            The same goes for your car subsidisations. In Australia every American car on average we buy costs the US taxpayer $3 000.

            So how can the US build an export market that isn’t subsidised by the taxpayer.

            I do think you guys really need to look at how your ideologies are impacting a nation.

            Are your economic paradigms good for the longer term US economy?

            I do think the Canadian’s are trying to move away from the ‘US model’ of vehicle manufacturing and subsidisation, or else they wouldn’t be looking at the Europeans.

      • 0 avatar
        CrapBox

        Don’t speak for Canada. I’ve lived here all my life and it does not enjoy “good government.”

        For seventeen years I commuted past the GM plant in Oshawa. Unlike the people employed there, I didn’t have a special job in a special industry, so I could never expect to receive a government handout, either directly or indirectly.

        It’s one thing to live in a place where the government’s major role is to transfer wealth from the faceless masses to the poster children of Marxism. It’s another thing to remain silent when it’s suggested that this system is morally justified.

        • 0 avatar
          Pch101

          I know that it’s fun to throw around slogans and stuff, but it comes down to this:

          -If they don’t build cars there, then they’ll build them somewhere else.

          Do you want the business or not? Apparently, you’ll have to earn it if you want it.

          • 0 avatar
            jimbob457

            @Pch101
            Amen brother. You buy ‘em books and buy ‘em books and all they do is eat the covers. Too many school teachers are educated miles beyond their experience and intelligence by others of their same ilk. Doing the deals and actually dancing the dance? Now, that is hard and takes a little brains.

          • 0 avatar
            Big Al from Oz

            @Pch101 & Jimbob
            So, it’s okay to waste billions of tax payers dollars that could be used more efficiently to produce more jobs??

            Wow, no wonder the world is screwed up when we have economists promoting the destruction of nation building because of politcal paradigms.

            No wonder cultures come and go. People like you guys are sure to destroy the very cultures you live in.

            You live in the past.

            I think the Canadian’s had better modernise there economy.

            Canada like most Western nations needs to restructure to remain competitive.

            The go down the path of the US and devalue your currency and reduce the standard of living to compete with developing nations will only have a society living like a developing nation.

  • avatar
    schmitt trigger

    One has to give credit to Sergio Marchionne. He sure looks like a bum, one step above homelessness…but he is a shrewd businessman.

    He is playing hardball, because he knows he has some Aces in his hand.

    • 0 avatar
      tresmonos

      You are 100% correct. He has a gun with one in the chamber – excess plant capacity. The more I learn about this guy, the more respect I have for him.

      • 0 avatar
        danio3834

        I would count two in the chamber for plant capacity. Not only is there some unspoken for in the NAFTA region, but now that Canada has a free trade agreement with Europe, FCA has a ton of unused capacity there too. Not that the economics of floating over 300k minivans a year is feasible, but other lower volume products can easily be made there instead of here putting less strain on domestic capacity.

  • avatar
    Lou_BC

    Sergio is playing on the fact that Ontario is vote rich and is a province that sways elections just like Quebec does.

    460 million will be one more off the books political contributes made in the name of re-election.

    • 0 avatar
      Big Al from Oz

      @Lou_BC
      Sergio also has a large and unused production capacity in Europe.

      I think there some on this sight who have a too nostalgic view on auto production in their homelands.

      Auto production is treated like some form of idolised activity.

      The reality is it is business and business will go to where it is cheapest and easiest.

      Look at the postion Australia was in. GM and Ford vehicle manufacturing was more efficient with less handouts within Australia to produce a vehicle for the Australian populace then it is to produce a vehicle in the US.

      Even though that was the case in Australia we were still to expensive to export and uncompetitive against imports.

      This might have worked decades ago when most auto industries could survive within their borders.

  • avatar
    Lightspeed

    To an extent, it’s a grand game played out between companies and governments, each with an agenda to fulfill. As one privy to some of this kind of stuff, it’s all about negotiation at the end of the day. Yes it sucks that Canada will give these guys all that money, yes it’s good that giving them that money made them do more applied research here, which means high-quality jobs and their spin-offs. We all need to admit that inequity in systems is what drives them, otherwise entropy.

  • avatar
    Pch101

    “The Canadian auto market is roughly the same size as Australia”

    For the purposes of the auto industry, Ontario is the United States with a different currency. There is no border for automaking, but for the exchange rate risk.

    Australia is quite different. There would never have been an auto industry there without subsidies, barriers and tariffs, and we’re now seeing the byproduct of what happens when those things are reduced. (Canada gets the scale benefits of US proximity; Australia does not.)

    On the other hand, automakers know that they have something that every government wants — high-wage blue-collar jobs — which gives them plenty of leverage. Every new plant and plant expansion provides an opportunity for more free stuff from the government; in North America, it’s easy to play off locations against each other, thanks to the US federal system creating competition among the individual states.

    Meanwhile, Marchionne is trying to turn around an organization that is still fairly cash-strapped, so he’s especially motivated to get free stuff. The Canadians may just have to give him what he wants; calling his bluff will be risky if he isn’t bluffing.

    • 0 avatar
      Big Al from Oz

      @Pch101
      You are displaying DiM’esque logic here, what I term unlogic.

      How did tariffs protect the vehicle manufactuers in Australia?

      What develop most of Australian industry was war and isolation from Europe. Then after WWII the US became a closer ally and Australia with the US did much of the heavy lifting in Japan.

      Japan bought our mineral wealth and we bought their cars.

      We are no longer isolated as the centre of global activity is moving in our direction quite rapidly. The region is called Asia.

      This region will be of much more value to Australia than the ‘Old World’ of the US and Eurozone.

      But, we will export minerals so you can have your manufacturing in the ‘Old World’. Without countries like Australia providing cheap commodities, countries like the US, China, Eurozone, Japan, Korea and on and on wouldn’t have the economies you have.

      Your some commonsense in your arguments instead of trolling. Or you are ‘simple’.

    • 0 avatar
      RobertRyan

      @Pch101,
      Interesting that in Canada.
      “For the purposes of the auto industry, Ontario is the United States with a different currency. There is no border for automaking, but for the exchange rate risk.”

      Then you count Canada as a SEPARATE Country when it comes to exports. Cannot have your cake and eat it too.

    • 0 avatar
      Lou_BC

      @Pch101 – other than the loss of “good will” towards FCA products in Canada, he has nothing to loose by pulling out. NAFTA and the new FTA with the EU means he has other options.

      • 0 avatar
        Pch101

        That depends.

        If Marchionne needs the plant capacity, then that would require building or expanding a different plant somewhere else. And the cost and possible delays associated with building or expanding a different facility might exceed the cost of updating this one. So that would depend the overall circumstances.

        And at this juncture, Marchionne doesn’t have the money. His main play is to flip the VEBA stock for a profit, while he builds earnings and fixes the balance sheet. (My expectation is that the new Fiat Chrysler will pocket $1-2 billion from the gain, which it can then plow into R&D and building up Alfa Romeo.) He may be bluffing here, but he’s a talented and gutsy negotiator who is good at pulling rabbits out of hats.

        • 0 avatar
          ect

          “His main play is to flip the VEBA stock for a profit”

          Really? How do you imagine this will unfold?

          So far, it seems that all of Marchionne’s actions have been aimed at fully integrating Chrysler and Fiat.

          • 0 avatar
            Pch101

            I presume that you missed the fact that the stock will be trading in New York by the end of the year. (I know that your prediction was that no such thing would be taking place.)

            You really should step back for a moment and ask yourself why Marchionne made it such a priority to control all of the stock prior to it trading on a US exchange. (Hint: He wants the upside to go to the company, not to the VEBA.)

          • 0 avatar
            ect

            Firstly, I made no such prediction. I may have opined (and would have, if asked) that Chrysler would probably not go to an IPO, but that Fiat and the VEBA would most likely do a deal for Fiat to buy the VEBA’s interest in Chrysler, because that made the most sense for both sides. Ultimately, it seems, they and their armies of high-priced advisors came to the same conclusion.

            Secondly, Chrysler stock will not be trading. In New York or elsewhere.

            The stated plan is that Fiat S.p.A. will become FCA, and will reincorporate or continue as a Netherlands N.V. Fiat is already a public company, trading on the Milan exchange. Fiat ADR’s currently trade on NASDAQ.

            The existing Fiat shareholders will become shareholders in the new N.V., which will continue to trade in Milan. In addition to this, FCA will list in New York, which will improve the liquidity of the stock.

            So far as I have read in the press, the New York listing does not involve a new offering of FCA shares (I don’t see why the Agnellis would want to dilute their controlling interest), but that is neither here nor there.

            Under that plan, Chrysler will continue to be a wholly-owned sub of the N.V. It is always possible that Fiat will do a deal to introduce a strategic partner into Chrysler or some other part of their business, but for a whole host of reasons it makes sense for Chrysler to remain wholly-owned by Fiat/FCA going forward.

            In my next life, I want to come back as an investment banker doing fairness opinions in M&A deals. Those guys do far less work than anybody else involved in the deal, and they get paid far, far, more than everybody else. It’s about the best racket going.

  • avatar
    Big Al from Oz

    Here’s what happened in the city of Newcastle in Australia.

    Newcastle is a medium size city of a little more than half a million people, one eight the size of Melbourne where most of our auto manufacturing is centred.

    Newcastle lost 12 000 jobs directly within BHP steel mills, this doesn’t include the 10s of thousands of support jobs.

    The city is has become the better for it. Why? Because the community embraced the change and not try and protect the unviable, like in the rust belt in the US and Canada.

    Put your heads down and a$$ up, that’s what we say in Australia and get on with it.

    http://www.stasiareport.com/the-big-story/asia-report/australia/story/australias-former-steel-city-thrives-it-reinvents-itself-2

    • 0 avatar
      SCE to AUX

      I’ll bet nobody wants Chrysler to stay in Canada more than GM and Ford, so they can get their pockets lined, too.

      Handouts impoverish everybody – both the giver and the recipient, who ends up enslaved to them.

      • 0 avatar
        Big Al from Oz

        @SCE to AUX
        It’s not that I disagree with particular manufacturer’s. It doesn’t matter which manufacturer is in any country, so long as they can create productive employment.

        Subsidisation is creating inefficiencies. The same problem occurs with parents, if their kids are given most anything they want when they whine, what happens?

        If a kid is brought up not expecting handouts from parents to often then they will be independent. Business is no different.

  • avatar
    honda_lawn_art

    Hopefully, the Canadians can bring a counter offer that both beats the savings that Chrysler might stand to make by moving production to Mexico, and is not more than the economic benefit that Windsor sustains by having the plant there.

  • avatar
    Lou_BC

    @tresmonos – I do agree that the USA and Canada has not done a good enough a job of educating the lower class. It is a very complex situation and in many respects the problem is considerably worse in the USA.
    In Canada the biggest education gap that exists is in First Nations communities. Most have not yet crawled out from under the effects of Colonial Imperialism. You add to that the way money is trickled down to First Nations communities and very little gets in the hands of those who need it.

  • avatar
    Lou_BC

    @tresmonos – interesting blog name. Your avatar is from The Good ,The Bad and the Ugly and isn’t tres monos = three monkeys? Is that also a play on words related to that movie?

    Good posts.


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