The CAW And King Canute

A very interesting article in Bloomberg about the auto industry in Ontario and Michigan is set out below. What is also interesting for us is the lack of mention of anything significant happening in Windsor and what Governor Granholm has realized and what she is doing about it.

I wonder if the Star's circulation will increase dramatically today. I would think that every Economic Development office of cities along the East-West corridor will buy several copies of the Star to put into their files to show prospective investors and auto industry manufacturers and suppliers :

• The front page picture of Buzz Hargrove in the Star,
• the headline "No cuts, Hargrove tells parts plants;
• the subheadline CAW pledges strikes over pay reductions and early retirements"
• the story with Hargrove saying that "he will "take down" any company that tries to do what Delphi, the U.S.-based parts maker, and General Motors have done this week to cut wages and reduce their workforces with early retirements." and
• Ken Sr. saying "The minute they attack our jobs, we will not build minivans."

Would you want to build or invest in Windsor after seeing that?

What is the answer to the dilemma for Windsor?

How does a CAW town deal with the significant auto industry changes? How do we deal with the fact that the automobile industry is passing us by as our manufacturing plants keep shrinking in size? How do we deal with the fact that the industry is growing rapidly in Ontario but decreasing dramatically in Windsor? How do we deal with the fact that we have one of the highest unemployment rates in Canada after years of prosperity?

I am certain that you can think of dozens of questions to ask but what is important is to start thinking about answers.

Given what is happening in the auto industry, the image that came to mind when reading about what Buzz and Ken Sr. said was that of King Canute trying to hold back the waves and tides.

However it seems, as the legend goes, that the good King understood at least that he did not have the power to control the forces of nature. When he talked to his fawning royal officers and courtiers as the water lapped up against him "Well, my friends," Canute said, "it seems I do not have quite so much power as you would have me believe. Perhaps you have learned something today."

Michigan Rues `Buy American' Kick, Loses Car Plants to Ontario

June 27 (Bloomberg) -- In the 1980s and 1990s, Michigan unions and politicians urged U.S. citizens to ``Buy American'' and told Japanese carmakers to go elsewhere. The auto companies took their dollars next door to the Canadian province of Ontario, and haven't looked back.

Today, Ontario is North America's biggest car producer, turning out more cars than Michigan by building for companies including Honda Motor Co. and Toyota Motor Corp. The gap is widening after carmakers announced C$7 billion ($6.23 billion) of plant expansions in Canada's most populous province.

``Michigan completely messed up on this,'' Dennis DesRosiers, president of DesRosiers Auto Consultants, told a meeting of businesspeople in Oshawa, Ontario, home to General Motors Corp.'s Canadian plants. ``Would you rather go to Ontario, where we like you, or Michigan, where we don't like you?''

Honda seems to have found the answer, announcing plans last month to build a C$154 million engine plant in Alliston to supply its nearby car factory that has made almost 4 million vehicles since 1986. Toyota unveiled plans in February to build a C$1.1 billion assembly plant for its RAV4 sport-utility vehicle in Woodstock, with production starting in 2008.

All of Ontario's car factories are within a two-hour drive of the U.S. border, as both Japanese and U.S. makers keep their Canadian production close to the world's largest auto market. Carmakers save about 10 percent on the cost of each vehicle because of Canada's government-funded health-care program. They also receive incentives from the provincial government and tax breaks from the North American Free Trade Agreement.

`Logical Place'

``The automotive corridor in Ontario is great,'' Adriaan Korstanje, spokesman for Toyota's Canadian unit, said in a telephone interview. ``Lots of existing suppliers, great infrastructure, so it's a very logical place to establish a plant.''

Canada's unions have made concessions to attract work. In March, workers at three General Motors plants that build the Chevrolet Impala and Monte Carlo agreed to let the company use some contract workers and reduce break times. Industry Canada says last year's average hourly wage for vehicle assembly was C$30.43 in Canada, compared with C$39.16 in the U.S.

So many carmakers have flocked to Ontario that a C$500 million fund set up by the government to entice them has almost been emptied in the past two years, with just C$37 million left.

GM, Ford

Even Michigan-based car companies are expanding in Ontario. Ford Motor Co., the world's second-biggest automaker, plans to spend C$1 billion on a plant that will make four models in Oakville, as well as a fuel-cell research and development center.

GM, the biggest producer, is spending C$2.5 billion on research centers and plant upgrades. And Canadian car-parts maker Linamar Corp. plans to spend more than C$1 billion on a research center near Guelph. They all received funding from the Ontario government.

It was a different story three decades ago. Starting in the late 1970s, auto unions in Michigan promoted a ``Buy America'' campaign as more fuel-efficient Japanese cars gained popularity, said Al Warner, former director of the U.S. Commerce Department's motor vehicle division.

``There was serious `Buy American,' anti-Japan bashing going on,'' said Warner, now president of consulting firm Automotive Strategies. ``They banned foreign cars from parking lots at the union halls.''

In 1992, Michigan Governor John Engler, in his state of the state address, urged residents to ``Buy American'' and put a ``Made in Michigan'' car in the garage.

Out-Producing Michigan

By 2004, automakers were building 2.7 million vehicles in Ontario, more than Michigan's 2.6 million, according to WardsAuto.com, the Web site for industry monitor Ward's Automotive. A decade earlier, the state produced almost twice as many cars as Ontario. Ward's predicts Ontario will make 3 million vehicles in 2008, to Michigan's 2.4 million, with about 85 percent shipped to the U.S. Canada now ranks eighth among global car producers.

Ontario has been making cars since Henry Ford opened a plant in Windsor, on the Canadian side of the Detroit River, in 1904. The industry received a boost in 1965 when the Canada-U.S. Auto Pact was signed, eliminating trade barriers between the two countries for cars and parts. The number of workers in the Canadian auto industry soared to 491,000 in 2002 from 75,000 in 1965, according to government figures.

Japan's automakers still have only one assembly plant in Michigan, a joint venture between Ford and Mazda Motor Corp. in Flat Rock.

Southern States

Michigan has also lost plants to U.S. states including Alabama, Georgia and Tennessee, which like Ontario, offered incentives to attract assembly and parts plants. Alabama more than doubled its auto employment from 2001 to 2004, adding more jobs than any other state, according to the U.S. Labor Department.

That has convinced Michigan Governor Jennifer Granholm to take action. Granholm has visited Japan twice in the past 10 months to woo automakers to the state, said Mike Shore, spokesman for the Michigan Economic Development Corp.

``We're doing our damnedest to erase those memories'' of `Buy American' campaigns, he said. ``They're welcome here.''