GM Plant Closure Shows Industry Transition Catching Canada, Ontario Flat-Footed
Opinion & Analysis
The more than 2,500 workers at General Motors’ 65-year-old auto assembly plant in Oshawa, Ontario were among the casualties earlier this week when the company announced it was cutting 15% of its salaried work force and closing five plants across Canada and the United States, plus two more overseas to be named later.
But while the resulting media flurry in Canada focused on the local and regional impact, with Ontario Premier Doug Ford seizing a questionable opportunity to lay blame on the federal government’s carbon price, the broader coverage pointed to a growing industry transformation that seems to have caught both Canada and Ontario flat-footed.
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“This industry is changing very rapidly,” GM CEO Mary Barra said Monday. “These are things we are doing to strengthen our core business.”
For a couple of years now, analysts have been pointing out that the total cost of owning and operating an electric vehicle will soon fall below the equivalent cost for internal combustion. The strictly economic reckoning leaves out the utter delight many EV owners get back from their cars—or the pace at which that buzz is spreading by word of mouth. And anyone who follows the market knows that at least one relatively affordable option, GM’s Chevy Bolt, largely defeats worries about vehicle range, with a battery that covers about 360 kilometres on a single charge. [Disclaimer: This is not a product placement, but that’s based on personal experience since January—Ed.]
So it’s hardly a shock to see internal combustion models like the Chevrolet Impala and Cruze, the Cadillac CT6, and the Buick LaCrosse giving way to a new, company-wide focus on electric and autonomous vehicles. The change doesn’t affect the models that GM most depends on—it’s still conventional wisdom that the Big Three North American automakers only know how to make money on SUVs and pick-up trucks.
But the announcement suggests GM might at least be making an effort to decipher the handwriting on the wall, with the company set to double its investment in electric and autonomous vehicle programs over the next two years, according to Greentech Media. Even though the company isn’t abandoning its traditional, high-emission product lines just yet.
“I like what they said about electrification; the problem is what they’re investing in,” David Reichmuth, senior engineer with the Union of Concerned Scientists’ clean vehicles program, told Greentech. “A lot of it in the short term has been around their SUVs and pickup trucks. I think GM and a lot of the companies know that electrification is the future, but they’re prioritizing the short-term profits from some of these less efficient gasoline vehicles.”
At the same time, “I think there’s a little hypocrisy in talking about cleaner cars and electric vehicles while at the same time directly or indirectly, through trade associations, asking for lower standards for gasoline vehicles,” Reichmuth added.
“There definitely is a huge disconnect between the 70% of the market today that’s SUVs and trucks, and the autonomous and EV future that’s advertised,” added industry analyst Jeremy Acevedo of Edmunds.com. “It comes down to leveraging the high-profit nature of the SUVs and trucks that are so popular today,” he added, “so they can focus on bridging over to the future that’s really autonomous and electric.”
The announcement also makes clear that, at least for GM, the future is electric, not hybrid. In addition to the internal combustion models the company is discontinuing, Quartz notes that production of the Chevy Volt hybrid will end, turning the model into a “dead-end in automotive evolution” that likely “won’t be missed”.
When GM introduced the Volt in 2011, it was a time when plug-in hybrids “tried to be everything to everyone,” Quartz observes. “Electric drive and gasoline range? Check. Recharge at home, work, or while driving? Covered.”
But the vehicles were still stuck “dragging around two drivetrains, rather than optimizing for one. As a result, they tended to have slightly higher prices (the Volt is $5,000 more than the all-electric Nissan Leaf) without the full high-octane performance or cachet of their all-electric cousins.” GM made its move after seeing full EV sales increase 120% in the third quarter of this year, outselling plug-ins by a three-to-one margin.
With China as the company’s biggest market, Acevedo added that GM’s “international strategy, more than ever now, is dictating what we’re going to see in the U.S. I believe a big part of the commitment that we’re seeing to the EV architecture is because so many international markets are demanding the production of electric vehicles.”
Which in turn reinforces arguments for Canada to chart its own course in setting tailpipe emission standards, rather than going along with a Trump administration rollback that ignores climate reality as well as international market trends.
But that sense of future prospects doesn’t take away from the wrenching present the announcement creates for GM workers in Oshawa, Lordstown, Ohio, Detroit-Hamtramck and Warren, Michigan, and White Marsh, Maryland.
Canadian union Unifor vowed “one hell of a fight” against the closure, asserting in a statement that “based on commitments made during 2016 contract negotiations, Unifor does not accept this announcement and is immediately calling on GM to live up to the spirit of that agreement.”
There was also an immediate call for federal and provincial action that goes beyond standard retraining assistance.
“These workers can go from producing cars to electric vehicles…they have the skills and abilities to do that tomorrow morning,” said Canadian Labour Congress President Hassan Yussuff, who’s been getting a direct immersion in just transition processes as co-chair of the federal coal transition task force. “But the entire supply chain is under threat, and all levels of government need to address that.”
“GM’s decision to close plants in North America is a huge blow to Ontario: but it’s also a wake-up call for Alberta,” tweeted Alberta Federation of Labour President Gil McGowan. “THE WORLD IS MOVING AWAY FROM FOSSIL FUELS! We can either acknowledge that fact and prepare; or ignore it and fall behind.”
Provincial opposition leader Andrea Horwath criticized Ford for focusing on corporate tax cuts and consumer electricity rates, rather than building innovation to keep auto industry jobs in the province. “We have to realize there’s a big change coming in the automotive industry and we should be at the front end of that,” she told media, “not burying our heads in the sand and watching jobs walk away.”
“He just canceled the (cap-and-trade) credit that brought investment in the auto sector,” interim Ontario Liberal leader John Fraser said of Ford. “It’s a cave man approach. His science is prehistoric. Companies like GM and the world are going in a certain direction. And we know where they’re going: cleaner and greener. They’re investing in technology, artificial intelligence. That’s where the jobs are.”
“Bottom line is we’re a leader in the auto sector, and if we’re going to remain a leader, we need a province that’s going to embrace electric vehicles,” said Green Party leader Mike Schreiner.