GM could pull back from Ontario, auto analyst says

Canada could soon see one of its largest automakers, General Motors, dramatically decrease operations in Ontario, an auto analyst says.

The warning comes at a time when the auto parts industry, autoworkers union Unifor and others dependent on the auto sector are saying Canada is missing out on its share of new auto investment.

• GM delays closure of Oshawa plant to 2016
• Chrysler turning down Ontario money shocked Kathleen Wynne

Investment in plants and equipment by the Canadian automotive industry is in the range of $1.5 billion annually, down from an average of at least $3 billion each year during the early 2000s, according to a recent study from the Canadian Automotive Partnership Council.

CAPC, a partnership of auto assemblers, parts suppliers, federal and provincial ministers and union representatives, warned that Canada is losing out to the U.S. and Mexico for new investment.

Canada makes 2.4 million vehicles a year, about 15per cent of North American production, but wont keep that share in the years to come, thestudy warned. Canada may make 15 per cent of autos, but it is no longer getting 15 per cent of investment. Now, it'smore in the range of five per cent.

On Wednesday,Joe McCabe, president of AutoForecast Solutions, sounded a fresh warning on General Motors, saying he expects the auto giant to pull out of Oshawa and reduce its Ingersoll, Ont., plant to a single shift, perhaps by 2019.

Bailout agreement expiring

GMs promise to maintain 16 per cent of its production in Canada in return for its 2008 bailout expires in 2016.

McCabe said the automaker is not making plans for continued production in Oshawa.

"We talk to suppliers, the people who are responsible to bid on new programs at these facilities, and they are looking two to four years in advance, they are not hearing anything from GM," he said in an interview with CBC's The Exchange with Amanda Lang.

"Were not hearing from GM what specific vehicles will go in there, so all the information from the industry is pushing us in that direction."

GMs Camaro production has been shifted from Oshawa to Lansing, Mich., and it has made no commitment to other models past 2016, though it has not said it is planning to close the Oshawa plant.

One problem is how few of the vehicles that GM makes here it actually sells in Canada, McCabe said.

McCabe says more of the vehicles made in Canada by manufacturers like Toyota and Honda are sold here in Canada, in part because themodels made here are more popular with consumers. But GM sells only about seven per cent of the vehicles it makes here and the fluctuating dollar exposes it to exchange rate risk.

Until recently, Canada suffered from a high dollar that made the cost of labour seem high. Michigan recently became a so-called right-to-work state in an effort to compete for automotive jobs and Mexican labour costs are about one fifth of what Canadians are paid.

Our competitors understand that a vibrant auto industry is at the centre of a healthy economy and they are willing to invest- Greig Mordue, CAPC

But even with a lower dollar, Canada is competing againstjurisdictions around the world over incentives for new production.

McCabeurges government to actively recruit new investment from GM before it is too late.

"The province and the federal government has to talk to the decision-makers at GM and say, if youre staying, give us some hard facts why youre staying, show us your new car programs," he said.

"And if youre not staying, what agreement can we find mutually beneficial to make you stay," he continued.

CAPCrecommends Canada find a way to becomecompetitivewith Mexico, China and U.S. in the race for new capacity. It must provide tangible support and a more streamlined approach to dealing with the industry, saysGreigMordue, general manager of corporate planning with Toyota and aCAPCspokesman.

Its still the most important manufacturing industry in Canada, Mordue said.

Winning investment game

CAPCproposed the creation of a Automotive Investment and Attraction Board, a sort of one-stop shop for prospective investors to put Canada back into the game of winning automotive investment.

There is a perception that Canada is too slow in making attractive offers to prospective investors, and puts too many hurdles in the way, Mordue said.

Our competitors understand that a vibrant auto industry is at the centre of a healthy economy and they are willing to invest, Mordue said.

The auto industry has huge capacity to generate jobs and because of that, the rest of the world is very active in this field, he said.

Mordue says it will be difficult for Canada to sustain its productivity improvements in the auto sector unless it gets its fair share of new investment.