Canada and Australia: a tale of two car manufacturing industries

As Australian prime minister Tony Abbott arrives in Canada to talk investment and trade, both countries are facing similar challenges to their respective manufacturing bases, particularly in the automotive industries.

Canada’s Niagara region in Ontario is heavily manufacturing-based and like Australia, its car manufacturers have been under significant competitive pressure from foreign manufacturers, particularly on labour costs.

However governmental responses to these pressures have been poles apart.

Toyota’s announcement in February it would close in 2017 following the Abbott government’s decision not to provide any further industry subsidies, effectively signalled the end of car manufacturing in Australia.

The move coincided with discussion about the future of iconic brands like SPC Ardmona and Qantas – and whether union agreements provided employees with unsustainable wages and conditions – while the plays and counter-plays in relation to Toyota at times seeming like trench warfare.

While the Abbott government lambasted industry assistance as “corporate welfare”, Toyota and the Australian Manufacturing Workers Union slugged it out in the courts. The company’s attempts to renegotiate the Altona plant enterprise agreement were opposed by the union, which succeeded in Federal Court proceedings that are now subject to an appeal – despite the fact that Toyota will cease production in Australia in 2017. The federal Government has intervened in the appeal in support of Toyota’s position.

In contrast, Canada seems to have adopted a more consensus-based approach to similar issues. Commentators such as Professor Charlotte Yates of McMaster University point out that unlike Australia, Canada has not given up on its car industry.

Professor Yates, McMaster’s dean of social sciences and a labour studies professor, heads up the Automotive Policy Research Centre (APRC), a McMaster-based research body that draws in leading academics, Toyota Motor Manufacturing Canada, Ford Motor Company of Canada and the Canadian Auto Workers Union (now called Unifor).

APRC – along with government bodies such as Automotive Partnership Canada, which supports research and development initiatives – typifies the collaborative approach to securing the auto sector’s future in Canada.

The issue also crosses the political divide: Canada’s conservative federal government, led by Stephen Harper, doubled the level of auto industry assistance to CA$1 billion in its 2014 Budget, with the stated objective of creating and sustaining Canadian jobs.

For Canada, the competitive threats to its domestic auto sector lie primarily in being undercut by cheaper labour costs from the United States – and increasingly, Mexico. Southern US states like Tennessee engage in bidding wars to attract car industry investment – not just direct subsidies, but also tax breaks and land grants. In turn, this places pressure on Canadian governments to offer increased subsidies, such as Chrysler’s demands earlier this year for assistance to support its minivan plant in Windsor, Ontario (although it later backed from the demands).

Federal and provincial governments in Canada have committed to retaining the auto industry because it is simply too important to let go.

According figures provided by Unifor, 112,000 Canadians were directly employed in auto manufacturing in 2011. Counting spin-off jobs, the union says almost 400,000 Canadians depend on the continued presence of this vital sector.

A 2013 industry profile by APRC shows that the auto sector – consisting of 11 assembly plants and around 500 parts and sub-assembly plants – contributes more than 8% of Canadian manufacturing GDP.

The town of St Catharines provides an interesting glimpse of just how much is at stake if the Canadian auto sector were ultimately to fail. Apart from its proximity to Niagara Falls and the picturesque wine region surrounding Niagara-on-the-Lake, St Catharines (with a population of around 130,000) has the look and feel of a place that’s struggling.

Testament to this is the abandoned General Motors parts production plant, a sprawling mass covering around 17 hectares of land on both sides of Ontario Street. The plant finally closed in 2010 after 110 years of various forms of manufacturing production on the site.

In the early 1980s, GM employed almost 10,000 auto workers in St Catharines. The wind-down began in 2000, and the death-knell came in 2005 when the company announced the closure of the Ontario Street plant as part of a larger restructure of the company’s North American operations (including total job reductions of around 30,000).

GM has another plant in St Catharines, the Powertrain engine production plant which employs around 1,500 workers. In fact Unifor estimated that 4,000 workers were still directly employed in the auto industry in the St Catharines-Niagara region in 2011.

Canada has been through the same angst-ridden national dialogue as Australia regarding how much – and for how long – governments should subsidise the auto industry.

I’m not advocating endless government intervention as the only solution for supporting our manufacturing industries. But Tony Abbott could learn a lot during his trip from that country’s collaborative efforts to identify what future exists for these sectors, and the communities that depend on them.

The Conversation

Anthony works as a consultant with Corrs Chambers Westgarth; however the views stated here are his own.

This article was originally published on The Conversation.
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