Canadian Plastics

Don’t write off the Big Three yet

Canadian Plastics   

The past 12 months have not been good to the Canadian automotive industry. A partial summary of the carnage thus far reads: the closing of GM's Ste. Thrse assembly plant putting 1400 people out of w...

The past 12 months have not been good to the Canadian automotive industry. A partial summary of the carnage thus far reads: the closing of GM’s Ste. Thrse assembly plant putting 1400 people out of work; a re-structuring at money-hemorrhaging DaimlerChrysler calling for 26,000 worldwide job cuts, 3,000 of which will be in Canada; a “revitalization” plan at Ford Motors that will include the mothballing of the company’s Oakville, ON truck assembly plant and the loss of its 4,000 jobs.

The situation has revived talk about the demise of the Big Three automotive OEMs in general, and the Canadian auto industry in particular.

On the latter point, the pain has in fact been spread pretty evenly. Ford has announced the closing of five assembly plants, only one of which is located in Canada. From an historic point, plant closings have been much worse in the U.S. In one city alone (Flint, MI) GM has eliminated tens of thousands of jobs over the past 20 years, as documented in Michael Moore’s film Roger and Me.

At one level the cutbacks can be viewed as a rationalization, probably overdue, of a market saturated with capacity. Sine 1985 total worldwide production capacity has grown 58 percent to approximately 70 million vehicles. Even at the industry’s white-hot peak in 1999, about 20 percent of that capacity was not used. With capacity for another 10 to 15 million units expected to come on line in the next decade, and relatively flat growth predicted, at least in the mature western markets, some consolidation of capacity appears inevitable.


Yet, the cuts are also a sign of the continued erosion of the Big Three’s market share in North America. In the 1970s GM’s take of the North American market was as high as 46%; while Ford took up the bulk of the slack with about 35% of the market. Today GM and Ford’s share of the U.S. market are 29% and 23% respectively; while DaimlerChrysler is getting about 15% of U.S. car buyers.

It is hard to dress up these numbers. Still, is the glass half-full or half empty? Combined, the Big Three still command nearly 70% of the world’s most lucrative car market. The nearest Japanese competitor, Toyota, has 10.2% of this market.

And there are some tentative signs of revival at the Big Three. Ford has jettisoned the ineffective CEO Jacques Nasser. DaimlerChrysler’s chief, Dieter Zetsche, is slowly gaining converts at the demoralized company and getting points for an ad campaign that plays up the broad sweep of DC’s product line. GM has parachuted in design guru Robert Lutz and given him free rein to work his magic. Once the industry’s plodding dinosaur, GM is also getting critical acclaim for vehicles such as the crossover Buick Rendevous and the SUV Cadillac Escalade.

If the Big Three are ever to mount a full-scale comeback, however, it will be because they have finally learned how to design cars (not just trucks) with the edginess demanded by today’s consumer. This is the biggest difference between the market today and 20 years ago. Unlike their parents, Gen-Xers and Baby Boomers reaching their 30s, 40s and 50s refuse to retire into a boxy beige sedan and dawdle quietly into that good night of dotage-dom.

Yet a Big Three rally will also depend on the flexibility of the UAW and CAW in their upcoming contract negotiations. A particularly hard-line stance by union leaders could put the skids on efforts to compete with the Japanese by building better cars and trucks more efficiently. If this happens, more jobs could be in jeopardy.

Michael LeGault, editor



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