Event Summary:
Auto Industry Aid: A Sound Investment for Canadians?
3 February, 2009
In Partnership with McMillan
Summary by Ani Koulian
On February 3, 2009, McMillan LLP hosted the Canadian International Council’s Toronto Branch. Jim Stanford, Canadian Auto Workers Union Economist, Dennis DesRosiers, President, DesRosiers Automotive Consultants Inc., and David Crane, Journalist and Author, were invited to discuss the question: ‘Auto Industry Aid: A Sound Investment for Canadians?’ Bill Hearn, McMillan LLP, welcomed all in attendance, and Jo-Ann Davis, CIC Toronto Branch, moderated the event.
Stanford discussed ‘Finger-Pointing and the Political Economy of Industrial Policy.’ He suggested that Canada is not unique in facing significant economic risks from auto industry decline, stating that at least 20 countries are enacting emergency auto aid measures. He stated that the discourse in Canada has been dominated by a uniquely negative mood demonstrated by the ‘vitriol’ aimed against the Detroit Three and the unions and that this negative, divisive political mood undermines efficient economic policy-making. He suggested that this explains why North America lags other regions in developing proactive industrial policy. Stanford concluded by stating that the fate of the Detroit Three is essential to Canada’s industrial and fiscal well being and that it will take effective, creative policy intervention to help save these companies and protect Canada’s share of the footprint.
DesRosiers began by stating that there are very serious issues for the Detroit Three in the market and that market problems lead to very serious issues on the manufacturing side of the auto sector. He stated that this has been illustrated by the fact that General Motors, Ford and Chrysler market share losses have translated into significant reductions in their light vehicle production. Analysts have the market down for both 2009 and 2010. However, Canada has traditionally been very successful within the North American automotive sector and is operating from a relatively strong position. DesRosiers continued by saying that a strong case can be made for a bail out if one believes that the primary problems in the sector are cyclical. There are a lot of complicating factors. Government assistance does not solve the Detroit Three’s structural issues, it only buys them more time. They still have extremely difficult problems to overcome. DesRosiers concluded by stating that unless the Detroit Three can turn around their market share losses, no amount of Government money can save all three of these companies.
Crane suggested that the industry will, in time, get out of the cyclical crisis and move into slow-paced economic recovery. However, once the industry is out of the crisis, it will not be back to business as usual. Crane discussed the efficacy of new technologies, the reality of climate change and the new opportunities mitigating the effects of climate change presents the industry. He suggested that the industry will become more cost conscious and that change is already happening to the Detroit Three’s outdated business model. A more competitive global industry is emerging, governments will be playing a bigger role in the industry, and flexibility is key for all parties involved.
All three of our guests shared one common thought: it will take a long time for the industry to turn around.
View the event flyer: Flyer.
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