INDEPTH: AUTO INDUSTRY
History in Canada
CBC News Online | August 21, 2006
More than 500 different car companies have called Canada home – most of them plied their trade in the early 1900s. Almost all of them were Canadian-owned.
More than 500 different car companies have called Canada home.
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Between 1918 and 1923, Canada was the world's second-largest carmaker and a major exporter. By 1925, the Big Three – General Motors, Ford and Chrysler – controlled three-quarters of the American car market.
Consolidation was happening in Canada, too. And it would have meant the death of the Canadian industry, had the federal government not entered the picture. The government slapped a tariff of 35 per cent on cars made in the U.S. and sold in Canada. The move persuaded the companies to build some of their vehicles north of the border.
In 1926, the tariff was eased, but most cars sold in Canada had to have some Canadian content. The move was a boon to the Canadian auto parts industry.
Canada also proved to be a convenient conduit for American companies to sell their cars to the British Empire. High tariffs discouraged direct sales from the United States.
But by the mid-1930s, evolution – and the realities of a small domestic market – took their toll.
The Canadian-owned car company was extinct. The industry, on the other hand, was booming.
Industry grows
In the 1920s, jobs in the Canadian auto industry doubled, to 16,000. Windsor, Ont. – the heart of the Canadian auto industry – saw its population increase fivefold from 1904 to 1929.
Canadian auto output was 170,000 units in 1927 and 240,000 units in 1928. In January 1929, just under half the cars built in the country were made to be exported.
By 1940, auto plant production was turned to military purposes, as the Second World War raged. Canadian auto plants were turning out 600 armoured personnel carriers a day.
When the war ended, the plants quickly switched back to peacetime production. By 1953, 20 automotive plants employed 33,000 people and produced 360,000 cars and 120,000 trucks. It was still just a slice of the North American industry.
Hitting a rough patch
By 1960, Ottawa again turned its eye to the health of the Canadian auto industry. Post Second World War growth pushed Canadian production to about 500,000 units although growth was relatively stagnant in an otherwise booming economy. Because of the high tariffs, vehicle prices in Canada were very high, there were large and growing trade deficits, and the parts sector was in serious trouble.
In 1960, the government established the Royal Commission on the Automotive Industry led by Dean Vincent Bladen from the University of Toronto.
Bladen's report recommended a continuation of Canadian content rules to protect the industry. The government rolled back some duties – equal to the amount of Canadian content in a car.
By 1960, Ottawa again turned its eye to the health of the Canadian auto industry.
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American companies complained, saying the move was illegal under the General Agreement on Tariffs and Trade.
By 1965, the U.S. and Canada headed off an automotive trade war and signed the Canada-U.S. Automotive Products Trade Agreement, or the Auto Pact. It established a conditional free trade zone for both vehicles and original equipment parts. Duties remained in place on aftermarket auto parts.
Under the Auto Pact, carmakers had to build as many vehicles in Canada as they sold here. In exchange, the automakers were allowed to move their products across the Canada-U.S. border duty-free.
The Canadian industry did far better than that. Vehicle production increased from 670,000 units in 1965 to 2.9 million units in 1988. Employment grew from 65,000 to
142,000 and the value of trade grew from $1 billion to $74 billion during the same period.
Free Trade
The Free Trade Agreement that came into effect on Jan. 1, 1989, effectively ended the Auto Pact. It did that by eliminating the penalty contained in the old deal. The Auto Pact remained on the books until 2001, when the World Trade Organization upheld a complaint filed by Japanese and European carmakers.
They argued that the pact was unfair because it allowed all vehicles from big U.S. manufacturers like Ford, General Motors and DaimlerChrysler to enter the country duty-free, including European cars made by automakers owned by the Big Three. Cars made by companies like Honda faced a 6.1 per cent tariff.
There were fears that the death of the Auto Pact would have severe repercussions for the industry in Canada.
Canadian Auto Workers Union president Buzz Hargrove warned that thousands of jobs would head south to places like Mississippi and Mexico, where the car companies could make their vehicles for less money. He also complained that too many foreign imports are sold, but not built, in Canada.
Car industry slows, jobs slashed
The 1990s saw little growth in the Canadian auto industry. The expansion that had seen foreign carmakers build plants in Ontario ended as older plants began shutting down. The end of the once-popular Camaro meant the end of the line for GM's operations in Quebec.
In 2004, the federal government and Ontario committed a combined billion dollars to lure new auto industry investment in Canada. That was enough to persuade Ford Canada to commit $1 billion (including $200 million in government money) to expand its plant in Oakville, Ont.
On Nov. 21, 2005, GM announced 30,000 job cuts in North America. Details include plans to close plants in Oshawa and St. Catharines, Ont., by 2008. The two plants employ 3,900 people, about 20 per cent of Canada's automotive workforce. GM attributes the losses to restructuring.
"It is very important to restore GM North America to profitability," said Michael Grimaldi, president of GM Canada.
GM said it was closing its No.2 plant in Oshawa because of overcapacity in the market. The plant produced the Pontiac Grand Prix and the Buick LaCrosse/Allure models. Those models won't be made after 2008.
The move came only eight months after the company's largest-ever investment in the auto industry in Canada - $2.5 billion (including $435 million in government money). The investment was intended to improve automotive research and development in Canada, and to foster relationships among auto suppliers, universities, researchers and students in auto engineering, design and innovation.
Industry keeps going
However, the cutbacks did not mean the end of the road for General Motors. Grimaldi expressed General Motors' commitment to maintaining production in Canada, with plans for new projects and products in the coming years.
On Aug. 21, 2005, GM announced it would roll out a redesigned Camaro in Oshawa, Ont., saving 2,700 jobs in the automotive industry. The new Camaro is set to roll off the line in 2008, the same year Oshawa's No. 2 plant was slated to close. GM is investing $740 million to get the plant ready for the new production. It hopes to sell about 100,000 Camaros a year.
GM is just one of several North American automakers to relaunch a classic muscle car. It follows in the footsteps — or tire tracks — of Ford, which is producing a revamped Shelby GT, a high-powered version of its Mustang. Daimler Chrysler is relaunching its Dodge Challenger in 2008 as well.
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