Special Report:Global Financial Crisis
by Chinese media Writer Zhao Qing
OTTAWA, Dec. 17 (Chinese media) -- As the U.S. "Big Three" automakers -- Ford, General Motors and Chrysler -- struggle to avoid bankruptcy, Canada's auto industry has been thrown into similar situations, sending chill to a country which has long taken vehicle manufacturing as a core industry.
With the auto giants' Canadian subsidiaries a major player in Canada's auto industry, Canadians view their likely bankruptcy a looming catastrophe not only to the sector itself, but to their whole economy.
AUTO INDUSTRY VITAL TO ECONOMY
Economists here have warned that a collapse of the "Big Three" automakers could have proportionately bigger impact on the Canadian economy than on the U.S., considering the bigger share of employment numbers and total output here.
Canada is the ninth largest vehicle producer in the world. The auto sector is Canada's biggest contributor to manufacturing gross domestic product (GDP) and its largest manufacturing employer.
The value of Canadian auto vehicles and parts totaled 26.2 billion Canadian dollars (20.9 billion U.S. dollars) at the end of2006, or 2.2 percent of overall gross domestic product, compared with 1.3 percent for the United States.
As for employment, the Canadian auto sector totaled about 1.1 percent of the labor market in 2006 while in the United States they made up just 0.6 percent of total U.S. payrolls.
A total of 155,000 people are employed in Canadian vehicle and parts manufacturing. Including those who work in the sale and after-market service of vehicles, close to a million Canadians work in the auto industry.
The "Big Three" subsidiaries in Canada not only constitute the bulk of Canada's vehicle assembly industry but also consume 80 percent of Canada's vehicle parts production.
HALF A MILLION JOBS LOST WITH COLLAPSE OF "BIG THREE"
If Ford, General Motors and Chrysler were to collapse, the impact would be sharp and immediate for Canada, resulting in nearly 600,000 jobs lost, the Ontario Manufacturing Council said in a study Tuesday.
The report projects 323,000 jobs would be lost immediately, with 281,000 of those in Ontario, where most of the industry is based. Within five years, the job loss across Canada would climb to 582,000, with 517,000 in Ontario.
Even if the auto industry's output dropped by half, nearly 300,000 jobs would be lost across Canada, with 270,000 disappearing in Ontario, the report said.
Ontario's Economic Development Minister Michael Bryant on Tuesday said the report makes it clear the demise of the auto industry in Canada is the "economic equivalent of a nuclear freeze with catastrophic effects that would knock us into a deep recession." He called on both provincial and federal governments to step in to help the industry.
AUTO COMMUNITIES ON ROLLER COASTER
The Canadian subsidiaries of Detroit's automakers are seeking about 6 billion Canadian dollars (4.8 billion U.S. dollars) in loans or loan guarantees. While waiting for that money, the companies have decided to halt production temporarily.
"It's been a roller coaster on our members, our union and our communities," Ken Lewenza, head of the Canadian Auto Workers union, said of the impact of the automakers' financial fragility, all of which manufacture vehicles in Canada are dependent on U.S. auto sales.
Every vehicle assembly plant in Canada will have temporary shutdowns and layoffs this month and in January, affecting 30,000 workers, Lewenza said. All the moves are for inventory control given the sales slowdown in the U.S., where most Canadian-built vehicles are sold.
Even the CAMI plant, a joint venture of GM and Suzuki Motor Corp., is facing more temporary layoffs in the weeks ahead.
Amid reports that Chrysler Canada has threatened to pull its manufacturing operations out of Canada without government aid, the auto communities in southern Ontario have issued urgent appeals to governments for support.
"All our manufacturing facilities are feeling anxiety and stress and uncertainly today," Lewenza said.
GOVERNMENT RESCUE CONDITIONAL ON U.S. AID
Canada is prepared to "react quickly" to help the industry, but it will not come in the form of blank check, Finance Minister Jim Flaherty reiterated Wednesday.
"It's going to require some terms and conditions with the industry and all of the participants in the industry. It isn't just a question of the government of Canada and the government of Ontario providing a solution," said Flaherty.
Industry Minister Tony Clement said last Friday the federal and Ontario provincial governments have agreed to provide aid contingent on GM, Ford and Chrysler working together with parts suppliers and unions for a long-term solution for their industry, as well as the American rescue plan going forward.
Canada's aid will be "proportional" to the size of the industry's domestic operations relative to North America. As Canada accounts for about 20 percent of production, the aid should be at 2.8 billion Canadian dollars (3.5 billion Canadian dollars), compared with 14 billion U.S. dollars in the U.S. plan, he said.
Clement said although the U.S. bailout plan died in the Senate, Canada expects new announcements from President Bush very soon.
"The federal and Ontario governments are ready to move quickly if and when the Americans approve a support package," he told reporters in Toronto.
On Wednesday, Flaherty also said cuts are expected to be a major part for the restructuring of the struggling North American auto sector.
"It's realistic to acknowledge there's over-capacity in the auto industry overall in North America and that there will be some reduction in the size of the industry," he said.
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