By on July 27, 2015

Chrysler Brampton Assembly Plant

Ontario’s debt is swelling and as home to eight manufacturing plants — the largest complex in North America — automakers may have a tough time keeping plants open in Canada’s most-populous province.

According to a story by the Financial Post, Ontario is moving forward with an ambitious plan to revamp roads and mass transit systems despite its debt being downgraded by Standard & Poor’s bond index. The broad public spending plan also extends to other sectors, despite high unemployment numbers and slumping manufacturing jobs.

Automakers such as Fiat Chrysler Automobiles have called on the provincial government to cut back on public programs and reduce costs on utilities in an effort to keep car building in the province profitable. This year, Chevrolet will shift production of its Camaro to Michigan. On the whole, Oshawa GM production has a dark cloud lingering overhead until the company decides what to do with the facility in 2016.

Ontario’s debt is twice that of California’s with only half the population, the Financial Post reported.

Last month the province reported that 5,200 manufacturing jobs left the region, which prompted local business leaders to sign a petition asking the government to reconsider its proposed pension plan that FCA CEO Sergio Marchionne said this month could hamper growth.

“We’re fully aware of the fact that this proposal on pensions and cap and trade and all this stuff … these are all things that add cost to the running of operations, they don’t come for free,” Marchionne said, according to the Toronto Sun.

Already, automakers such as Volvo and Land Rover have turned down Ontario in favor of operations in the United States and it’s unclear if swelling debt and rising costs of operation will cost the province more jobs in the future.

Other automakers that already have facilities in Ontario are making changes. Honda and Ford are both positioning their plants to manufacture vehicles for export markets. Toyota, on the other hand, will end Corolla production in Ontario in favor of Mexico. The company stated it will “switch from producing Corollas to mid-sized, higher-value vehicles” at their Canadian plant. The replacement product has not yet been announced.

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43 Comments on “Car Building in Ontario Could Die, and They Probably Can’t Save It...”


  • avatar

    Good slave labor is so hard to find.

  • avatar
    psarhjinian

    “Fiat Chrysler Automobiles have called on the provincial government to cut back on public programs and reduce costs on utilities in an effort to keep car building in the province profitable”

    Let’s be honest: this is just jurisdiction-shopping.

    Ontario’s “cost of doing business” is actually quite competitive, aside from utility rates, and the utility rates are only an issue versus other Canadian provinces; they’re still quite competitive with the United States and western Europe. Meanwhile, the dollar is at it’s lowest level in more than a decade and isn’t likely to recover soon, Canada socializes health-care costs, it’s public sector is the most efficient, in terms of $/citizen and Ontario’s corporate tax rates are the lowest in the country (and lower than in the US) and

    Apparently they’re not low enough, though, and it’s unlikely they ever really will be as long as we can keep bringing up the spectre of plant closings as an attempt to garner more and larger grants and tax incentives.

    I understand that this is “business as usual” but the rhetoric is rather hard to swallow.

    • 0 avatar
      stuki

      As a municipality amasses a certain level of debt, it becomes prudent for companies with a choice in the matter to not tie up massive amounts of capital there. As long as banksters run the world, they’ll have their debtors (government in this case) asset strip anyone they can get hold of with a cent to their name, rather than simply defaulting with a raised middle finger, the way they honestly ought to. Hence, even if costs in Ontario are currently competitive, such a huge debt load is a risk most would, sensibly, prefer not to take on.

      Few would want to invest billions in a potentially profitable venture in Greece, knowing that every cent of profit they make, will be taxed to pay off some German bank. Despite the fact that Greece is not, at a first approximation, a particularly high cost place to do business.

      As more and more municipalities starts running into similar debt constraints, Places best Avoided will start shifting form being traditional high cost/tax/benefit jurisdictions, towards simply being places with lots of debt, no matter what the current tax rates might be.

    • 0 avatar
      Pch101

      Ontario’s proximity to the US rust belt ensures that it will be pumping out some cars for awhile.

      But high land costs and manufacturing don’t mix. One advantage of the US South is that land is cheap, cheap, cheap. Ontario is anything but.

      One also has to question whether being tight with the Ontario government does automakers much good. Automakers like to spread out their operations in part so that they can have multiple governments that are beholden to them, and the US’ tremendous market size makes it an appealing place to build up a patronage list.

  • avatar
    Hamilton Guy

    You have to start the discussion by considering the source of this article. The National Post’s editorial position is somewhere to the right of the Wall -Street Journal (indeed probably somewhere to the right of Attila the Hun).

    I think psarhjinian nailed it when he said this is jurisdiction shopping.

    Amusingly enough, one of the main complaints seems to be the high utility rates, which are a direct consequence of the conservative government of Mike Harris’s ill advised privatization of Ontario Hydro.

    • 0 avatar
      psarhjinian

      1. In fairness to the National Post, it isn’t quite as right-wing-nutjob as it was under Conrad Black’s stewardship. Now it’s only slightly right of the Globe. It consider it fairly reasonable.

      2. Yup. You can pin the electrical-rate failures square on the Harris government. McGuinty didn’t improve matters, just shuffled the deck-chains. Wynne is doubling down on the Harris mistake, much to my chagrin.

      Utilities really should not be privatized. You’d think we’d have learned this after Enron and PG&E (as examples to avoid) and Hydro Quebec or EDF (as examples to emulate), but nooooooooo…

    • 0 avatar
      Hummer

      “Amusingly enough, one of the main complaints seems to be the high utility rates, which are a direct consequence of the conservative government of Mike Harris’s ill advised privatization of Ontario Hydro.”

      Maybe Canada is backwards land, but I’ve never seen the right hold cap and trade on a pedestal.

    • 0 avatar
      dash riprock

      It may be jurisdiction shopping, but the actions of the present government since they have been in power is causing industry to probably view Ontario as a higher risk to do business in the future. Blame Harris, or Bob Rae, Or David Peterson(who gets off scot free it seems) but Ontario has become a less attractive place to invest capital dollars.

    • 0 avatar
      CrapBox

      Harris did not privatize Ontario Hydro. He split it into five sub-entities, all of which are still publicly owned.

      The power utility is a vote-buying, money-sucking monopoly.

  • avatar
    mikey

    Yeah….I have to agree with “psar” on this one. Yes, energy cost is a little high. I don’t see it as a deal breaker for auto manufacturing.

    I think the U.S dollar took a little hit today. Even with that, as of an hour ago, $1000 Green backs, will buy you nearly $1300 loonys.

    As for the future of Oshawa GM…????…I do have a shadow of doubt creeping into my thinking.

    • 0 avatar
      psarhjinian

      I would expect Oshawa to close:

      * While it’s a great plant, GM can save more money by better utilizing an American plant than dealing with Oshawa
      * State governments are probably more willing to bargain
      * GM has more ties and obligation to the UAW and the American federal and state government than to the CAW and the province.
      * The Canadian federal government (of any stripe, not just the current one, although the Harper government is nastier than the norm) seems content to let Ontario hang out to dry.
      * The sooner they can bail out of Canada entirely, the sooner they can discharge all sorts of obligations.

      I’m as surprised as anyone to think that St. Catharines is likely to be the last-man-standing. I don’t think it will last long, but it’s interesting

    • 0 avatar

      @mikey

      What is the demolition going on at the Oshawa plant along Stevenson, seems to be a long term project with a demolition company having a temporary office set up along Park Road (near the pedestrian overpass).

      Have you heard that part of the GM Oshawa head office is leased out to OPG (Ontario Power Generation)?

      • 0 avatar
        mikey

        @ bb….We got it covered , no problem, just slap it on the Credit Card, and my great great grand kids , can pay for it .

      • 0 avatar
        mikey

        AGR…..don’t know. , but I will find out . OPG was renting office space at the Swamp , but I think it. was only on a temp basis

        • 0 avatar
          mikey

          @agr….Took a drive by. That would be the , not so old “paint shop” built in the early 80’s . Outdated by 2003 . That is one massive demo project. I circled the complex twice. I can’t say , as I was really thrilled , by the general (no pun intended) Look , of the whole facility.

          It don’t look good. ..?

  • avatar
    Arthur Dailey

    Some very savvy comments above, I guess that is one reason why I keep returning to this site.

    The Ontario government has made some grievous errors regarding electrical production and costing. Ontario should be a low cost creator of electricity, so the manufacturers have a legitimate complaint regarding that.

    Previously public health care was a major cost savings for auto manufacturers in Ontario as the companies paid for health care as a very costly benefit for their workers and retirees in the USA.

    As for the proposed Ontario Pension Plan, those employers who provide a company funded pension plan should be exempt from contributing to it. If that is allowed then it would not even be in the discussion.

    However the elephant in the room is that North American workers cannot work for Mexican or Malaysian wages.

    And management prefers to be non-union for as much as unions may protect their weaker workers, a non-union environment allows management to get away with a higher degree of laxitude.

    • 0 avatar
      RobertRyan

      Strangely they point the finger at wages, not management or the cost of power and goods required to manufacture

    • 0 avatar
      ihatetrees

      You’re correct that Ontario should be much more competitive. Smart workforce, good infrastructure. And electric should be low given their resources in water and (sanely managed) nuclear. But electricity was/is a political football – mismanaged by both the privitization-happy right and the watermelon left.

      I think there has been a notable decline in the competency of Canadian Governance in the last decade. Things get done, but only after insane expense and chaotic, unprofessional delays. They’re becoming more Blue State American when it comes to governance.

      Also, in auto manufacturing, the elephant in the room is union work rules – NOT wages per se. Toyota and Honda seem to be doing OK in Ontario. Sure, they rattle the layoff sabre – and slash with it occasionally – but given the Wynn government’s tax and spend nuttiness (which Ontario voters’ recently endorsed!!!), what choice do they have?

      Mencken had a point: Democracy is the theory that the common people know what they want, and deserve to get it good and hard.
      Good luck Ontario…

    • 0 avatar
      dash riprock

      It is not just FCA saying the environment in Ontario for business is declining. Magna came out and said the same thing but earlier.

      Here is our family’s experience with the Ontario Liberal Government’s green energy policy.

      father in law jumped on the solar panel bandwagon when there was much hype and optimism promoted by the Government. He paid a little less than $100,000 to have the panels built on his farm. All the power generated goes directly into the grid. He then pulls out their electrical needs for the house from the grid. Ontario hydro pays him 82 cents a kwh. He buys it back from them(number is a few years old) at 14 cents a kwh. Even then it will take him approximately 15 years to recover his investment. He was over 80 years old when he started this project. Also to note is that too much energy is produced at times in Ontario and this surplus energy is sold into New York State at less than 8 cents a kwh.

      Ontario is now considered a “have not” province and receives equalization payments(3.5 billion) from the federal government. Without these (really welfare) payments their deficit would be even higher. Businesses can see the trends developing and understandably are cautious in making longterm capital expenditures.

  • avatar
    "scarey"

    Ah-the joys of a socialist paradise !

  • avatar
    RideHeight

    Until I realized what they were, the sharp creases in those cars threw me. I thought I was looking at 1983.

  • avatar
    wmba

    Yup, Ontario has had terrible governments for 25 years now. All three types of parties, from socialist in the ’90s, to idiotic right wingers intent for years to flog off provincial assets to their pals the one-per-centers on the cheap, followed by the present middle-of-the-roaders with no plan at all.

    However, none of them has done the right thing and reduced wages to the level of Mexico. I mean, anyone can get by on four bucks an hour, so why not get with the program?

    The fact that nobody could then afford the cars they make is beside the point. Show me the ranks and ranks of Mexicans proudly driving new VWs, Audis, RAMs, Silverados, Mazdas, Hondas and Toyotas. Hell, they don’t make enough to buy second-hand golf carts, let alone package tours in Acapulco.

    But, I’m sure our betters know what they’re doing.

    • 0 avatar
      ihatetrees

      Mexican love their 1994 model year Sentras, which they make in numbers. It’s a crime to buy one in the US, since it lacks an airbag and stability control. In your world, that must be a golf cart.

      I guess Americans drove golf carts back in the early 1990’s…

    • 0 avatar
      mcs

      @wmba

      Wait a minute, I thought Ontario had plenty of money. Apparently they think have enough cash to host the Olympics in Toronto. Good luck with that one.

    • 0 avatar
      Veee8

      “Yup, Ontario has had terrible governments for 25 years now”
      Exactly, they’ve all dropped the ball – everything can’t be Mr Harris’ fault, but that default position is the easy way out…Ontario Debt is 300+ Billion and counting, now we just hold our breath and hope that desperate infrastructure spending will save us all – it will bring us up to the levels we should’ve been at 20 years ago. Do you hear a flushing sound?

  • avatar
    lexus94

    Why does the Financial Post hyperlink lead to a Toronto Sun article?

  • avatar
    danio3834

    They could but they won’t. The current government’s perogative is buying votes in the core of Toronto and Ottawa where people have different interests than the rest of the province.

    Endless wind and solar farms must sound great to bohemian downtown Torontonians, not in their back yard.

    A second government pension scheme? Must sound great for those who are soon to retire with nothing and have the young foot their bill.

    Additional fuel/carbon taxes? Again, not a huge deal if it helps pay for subway upgrades or you don’t drive.

    Things are pretty well out of control. I’m leaving this mess of a province, so the last one out, shut off the lights. The rates are just too high to leave them on.

  • avatar
    mikey

    @ bb….We got it covered , no problem, just slap it on the Credit Card, and my great great grand kids , can pay for it .

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