Is the threat to Ford's Canada assembly plant real?

Author

TORONTO — The union local representing workers at Ford of Canada’s Oakville assembly plant says this isn’t the first time it will go into contract negotiations fighting for a new product, and potentially the plant’s survival.

“We’ve been here before,” said Mark Sciberras, president of Unifor Local 707, which represents nearly 4,200 hourly employees there.

In late 2006, the Freestar minivan, a rebranded version of the popular Windstar, was coming to an end, but the plant would benefit from a C$1 billion ($750 million U.S.) investment to produce the new Edge, Sciberras told Automotive News Canada.

The Edge would go on to be a big seller in the growing market for crossover utility vehicles, securing the plant’s future for another 15 years.

But this time it’s far from clear what might happen following reports that Ford Motor Co. is scrapping the next-generation Edge, leaving the Oakville plant with no new products after 2023.

Industry observers say Ford, which has declined to confirm or deny the forecast by AutoForecast Solutions, could be floating a trial balloon ahead of fall contract talks with Unifor. But it’s also possible the company might be paving the way to pull the plug on its last remaining vehicle assembly plant in Canada.

“Ford has, historically speaking, had a strong presence in Canada, but so did General Motors,” said Dimitry Anastakis, a professor with the University of Toronto’s Rotman School of Management, referring to GM’s decision to close its largest Canadian assembly plant, in Oshawa, in 2019.

“But we’re in a COVID crisis and crises tend to accelerate long-term trends. And the trend in Canada has been to reduce the [auto manufacturing] footprint.”

The global auto industry is facing unprecedented challenges to produce automated, driverless, electrified vehicles while a global pandemic has thrown a massive wrench into sales and profits, said John Holmes, a professor emeritus at Queen’s University in Kingston, Ontario.

Cash burn

“The capital requirements for the EV, let alone the autonomous stuff, are horrendous. And given they’re all burning through a lot of cash during COVID, it’s not surprising [if] they’ve postponed or canceled some of the programs they were previously committed to,” Holmes said.

Ford has a long history in Canada, starting in 1904 when Henry Ford signed a deal with Gordon McGregor of Walkerville Wagon Works, now in Windsor, Ontario, to produce Ford-branded vehicles for the Canadian market and beyond, taking advantage of Canada’s favorable trade relations with the British Empire.

The company would grow on the early success of the Model T car. Unlike other branch-plant automakers, Ford of Canada had its own shareholders and made its own decisions about which models to build.

“Cars built by Canadians for Canadians,” the ad in the Toronto Daily Star proclaimed in May 1953 when Ford moved its assembly operations and head office to the eastern edge of Oakville to be closer to the growing Toronto market.

Though it would never achieve the massive scale of GM’s assembly plant in Oshawa, Ford Oakville has ranked among the top 10, sometimes top five, largest automakers in Canada, said Brendan Sweeney, managing director of the Trillium Network for Advanced Manufacturing.

“This is a very important part of Canada’s manufacturing ecosystem. And certainly, a very important part of Ontario’s economy and the [Greater Toronto Area],” Sweeney said.

Auto pact beneficiary

Along with the rest of the Canadian auto manufacturing industry, Ford benefited from the signing in 1965 of the Auto Pact between Canada and the United States, which imposed local content requirements for vehicles to enjoy tariff-free status.

At its peak, the Oakville operations, including a separate truck plant built in 1966, employed between 7,000 and 8,000 people. But that all changed after Canada and the U.S. added low-cost producer Mexico to a broader North American Free Trade Agreement in 1994 and the Auto Pact was declared illegal by the World Trade Organization in 2001.

The southern U.S. states and Mexico began competing for new automotive assembly plants, offering generous incentives, free land, tax breaks and lower labor costs.

Global automakers began shifting production further south.

In 2004, Ford closed the Oakville truck plant, at a cost of 1,200 jobs.

“That was a big blow for us,” Unifor’s Sciberras said.

The Canadian and Ontario governments responded with incentives aimed at stemming the exodus. Ford was among the beneficiaries.

Since 2005, Ford has invested almost C$3.5 billion ($2.6 billion U.S.) in its Canadian operations while the two levels of government contributed more than C$639 million, according to the automaker.

But incentives were never enough to prevent a wave of auto plant closures that swept through the province. In 2011, Ford announced it would close the Talbotville assembly plant, near St. Thomas, which made the Crown Victoria and Mercury Grand Marquis models.

Bailout rebuffed

Ford avoided becoming part of the massive government bailout during the financial crisis of 2008-09 that saw the Canadian and Ontario governments invest C$14 billion in GM and Chrysler to keep them from going out of business. The deal was tied to Canadian production commitments that expired in 2016.

“So they don’t have an obligation with either the federal or provincial governments. But they do have a corporate citizen obligation. They’ve been in Canada more than a century. The Ford people are very sensitive about their history in Canada,” said the University of Toronto’s Anastakis.

He added: “If Oakville does close, that’s going to be really bad news for the Canadian auto industry.”

Subscribe for the latest Celebrity Gossips

Spread the love

Leave a Reply

Next Post

GM watches Ford-Jeep's fight from the sidelines

General Motors‘ decision not to join Ford and Jeep in a renewed battle for off-road supremacy is reportedly not sitting well with the company’s top executive. The buzz surrounding the […]