Ottawa needs to consider its long-term strategic options to reduce dependence on U.S. automakers, argues Adam Radwanski.Jacques Boissinot/The Canadian Press
Canada is stuck in an increasingly abusive relationship with the three traditional North American automakers.
And what governments here need to start asking themselves is whether – and if so, how – they can get out of it and maintain a robust domestic auto industry.
It’s a question that should be top of mind following this week’s announcement by Stellantis NV STLA-N that it’s moving Jeep Compass production from Brampton, Ont., to Illinois – deference to U.S. President Donald Trump that prompted a furious reaction from Canadian politicians.
But it’s been at least two decades in the making – a period during which General Motors Co. GM-N, Ford Motor Co. F-N and Stellantis (the European parent company of erstwhile American giant Chrysler) have shrunk operations here, while perpetually holding Canadian policy makers hostage with demands for public funds.
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In 2007, per data compiled by the Trillium Network for Advanced Manufacturing, the three automakers assembled nearly 1.7 million vehicles in Canada – down from a 1990s peak. That was the last year before the recession during which Ottawa and Ontario (where the industry is based) committed nearly $14-billion to bailing out GM and Chrysler, including billions in written-off loans.
Those governments have since committed billions more in subsidies that the companies demanded not just for new facilities, but to keep existing ones open.
In return, the annual production total is down to around 600,000 cars, in a good year. Some long-standing facilities have been shuttered or indefinitely suspended; others, including the GM Oshawa plant once one of the industry’s pillars, have been dramatically scaled back, putting thousands out of work.
Along the way, the companies’ value to Canada relative to other automakers has eroded. In 2007, they accounted for about 70 per cent of Canadian-made vehicles, while Japan’s Toyota Motor Corp. TM-N and Honda Motor Co. HMC-N made up the rest. Now those percentages have almost completely flipped.
Honda CR-Vs and Civics leave the company’s plant in Alliston, Ont.Fred Lum/The Globe and Mail
And yet, while the two Japanese giants have generally been better corporate citizens – maintaining stable and supportive presences in towns where they’ve put down roots, and being less cutthroat in demanding subsidies (even if they still take them when available) – the U.S.-based companies have maintained an outsized squeaky-wheel influence.
It’s been on display lately in public positioning, via their industry association, around an electric-vehicle transition they’ve largely botched so far. Much more stridently than the Japanese companies, they’ve opposed the federal EV sales mandate – which Prime Minister Mark Carney has obligingly suspended – while being among the most vocal opponents of reducing tariffs on Chinese EVs. In effect, they’re claiming lack of EV demand would be devastating for them if they’re compelled to try to meet it, while also tacitly acknowledging there is demand that others could meet.
None of this means Canada can or should turn away from them altogether now. Each still has operational assembly plants – or, in Ford’s case, the Oakville plant where retooling remains under way – that are important to communities and Canadian-owned companies in the domestic auto parts sector. There’s also the EV battery plant that Stellantis has built in partnership with LG Energy Solution in Windsor.
But the relationship won’t get much better amid Mr. Trump’s tariffs and other bully tactics targeting manufacturing outside the U.S. If anything, all of it – suspensions, closings, financial and policy demands, victim-blaming – will get worse.
So while still engaging with these companies when necessary, this is the time for Ottawa to start considering other long-term strategic options to reduce dependence on them – of which there is no shortage, even if each comes with its share of challenges and obstacles.
The most pressing, though contentious, place to start is with the China question.
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Few people in the industry seriously believe Canada will be able to keep out Chinese EVs forever, if they continue to be cheaper and better-made than Western products (not to mention if blocking them hurts other industries because of retaliatory action).
So the question to be asked is whether China would embrace a build-where-you-sell model – possibly involving duty remissions, a mechanism Canada once used to attract Japanese manufacturing, in which tariffs are waived or reduced in return for manufacturing investments.
That may not be something Mr. Carney can immediately embrace, given how much it would poke Mr. Trump, and it’s unclear how much interest China would have in making cars here if it couldn’t access the U.S. market. But it’s a scenario that at least needs to be fully explored.
So, too, does the question of what (if anything) would get other overseas automakers to set up shop here. South Korean companies, conceivably looking to diversify from the U.S. after last month’s bizarre immigration raid on a Hyundai plant in Georgia, are obvious potential targets; so are European ones, after Volkswagen’s initial foray with its battery plant under construction in St. Thomas, Ont. It’s possible duty remissions could be used for this purpose, too, although Ottawa’s enthusiasm to otherwise impose tariffs on imports from friendly countries might be limited.
Then there’s the idea of Canada trying to start its own automaker, which Flavio Volpe – who heads the association for domestic parts makers – has been pushing. It tends to be met with eye rolls by other industry veterans, but shouldn’t be dismissed out of hand as EVs change market and manufacturing dynamics.
These and other strategic options aren’t mutually exclusive; in fact, they could be complementary. If an all-Canadian automaker isn’t realistic, for instance, there’s the possibility of EV-making partnerships between domestic entities and foreign ones that aren’t here yet.
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There’s little downside risk to putting some resources into determining which pathways work. And that’s more than can be said for another option that inevitably comes up when the auto sector takes a dark turn despite the billions poured into it, which is just to give up on it or accept a much lesser version.
Set aside, even, the issue of the many thousands of direct and indirect jobs at stake. A country pursuing greater economic sovereignty can’t afford to give up on the industry that best serves as underpinning for other manufacturing – be it when more medical equipment suddenly needs to be produced during a pandemic, or to leverage capabilities toward a new military industrial complex that Ottawa wants to build.
But that industry can’t be contingent on companies that are clearly much less interested in Canada than Canada is in them. We deserve better.