With car sales in the US and China locked in a precipitous slowdown that is only expected to worsen, GM on Monday is expected to announce the closure of one of its Canadian plants as the company hopes to move more production to Mexico and (hopefully) bolster its lagging shares, Reuters reported. The company’s plant in Oshawa, Ontario – the plant in question – produces slow-selling Chevrolet Impala and Cadillac XTS sedans, while also completing final assembly of the better-selling Chevy Silverado and Sierra pickup trucks, which are shipped from Indiana.
The outcry from the union and local officials is already causing political pressure on GM to mount after the carmaker accepted billions of dollars in subsidies from the Canadian and US governments after filing for bankruptcy nearly a decade ago. But the company must weigh these considerations against the demands of Wall Street analysts, who believe that GM has too many plants in North America. Signaling the start of the carmaker’s latest cost-cutting initiative, the company said on Oct. 31 that about 18,000 of its 50,000 salaried employees in North America would soon be eligible for buyouts.
Two sources told Bloomberg that the announcement of the plant’s closure is expected on Monday.
The closure is not unexpected. In a message to employees last month, GM CEO Mary Barra cited the stagnant share price as a reason for tougher restructuring measures.
Unifor, the Canadian autoworkers union that represents the plant’s employees, told Bloomberg that it has been told there is no car production planned at the factory beyond next year, raising the prospect of talks to preserve jobs. Unifor National President Jerry Dias said back in April that the Oshawa complex had been slated for closure in June of this year. But he added that one top GM Canada executive had vowed that it wouldn’t close on his watch.
“We have been informed that, as of now, there is no product allocated to the Oshawa assembly plant past December 2019,” Unifor said in a written statement Sunday night. “Unifor does not accept this announcement and is immediately calling on GM to live up to the spirit” of a contract agreement reached in 2016, the union said.
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The survival of the factory was a key issue in the automaker’s 2016 labor talks with Unifor, the union that represents tens of thousands of autoworkers in Canada. As part of that settlement, GM had agreed to spend some C$400 million ($302 million) in the Oshawa operations, Bloomberg News reported at the time. The union hailed the agreement as part of an effort to stem the loss of jobs to Mexico.
During its latest earnings call, GM CEO Mary Barra said at the New York Times DealBook conference earlier this month that the company had negative cash flow for the first nine months of the year and it needed to cut costs, according to the Detroit News.
Canadian lawmakers said they’re fighting to keep the plant open because thousands of jobs are on the line.
“We are aware of the reports and we will be working in the coming days to determine how we can continue supporting our auto sector and workers,” a Canadian government official said.
“The jobs of many families are on the line,” said Colin Carrie, a Member of Parliament for Oshawa. “Communities all over Ontario would be devastated if this plant were to close.”
Oshawa Mayor John Henry told CBC that he hopes the planned closure is “just a rumor”, and that he had not spoken to anyone from GM. According to the carmaker’s website, the Assembly plant in Oshawa employs roughly 2,800 workers – down from ten times that number in the early 1980s. Production at the plant began in November 1953.
“It’s going to affect the province, it’s going to affect the region…the auto industry’s been a big part of the province of Ontario for over 100 years,” Henry said.
As the CBC pointed out, the Oshawa plant was a talking point during the negotiations for Trump’s USMCA (Nafta 2.0) deal. “Every time we have a problem…I hold up a photo of the Chevy Impala,” Trump once said about the negotiations.
In a tweet, one conservative Canadian lawmaker lamented the news of the closure.
This is terrible news tonight for thousands of auto workers and their families. My heart goes out to all those affected by this devastating decision. Conservatives will monitor this closely and stand up for those affected. https://t.co/BJFHFv1sDs
— Andrew Scheer (@AndrewScheer) November 26, 2018
And while this closure would certainly be bad news for Canada, the situation could always get worse – particularly if Congress refuses to pass Trump’s USMCA trade deal, raising the possibility that the US, Canada and Mexico would revert to WTO rules, potentially throwing GM’s foreign North American operations into chaos.
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