GM overhaul not surprising, but Canada needs to mind its competitiveness: Martinrea chair
TORONTO -- Martinrea International Inc. says it will be forced to close an automotive factory when General Motors winds down production at its Oshawa assembly plant next year in one of the clearest indications of the knock-on effects of the closure on suppliers.
Rob Wildeboer, executive chairman of manufacturer Martinrea, says the company will have no choice but to end operations at its Ajax, Ont. plant and offer relocation to the 77 people who work there because the site is entirely dependent on GM's Oshawa assembly line.
"If they're not making vehicles there then obviously they don't need our assemblies," he said in an interview Wednesday.
The closure of the Oshawa plant and the nearly 3,000 jobs that will be lost have raised concerns of ripple effects through the supply chain, with Unifor estimating every job represents seven spin off jobs in the local economy.
Parts manufacturers and other suppliers have, however, downplayed the overall impact of the closure thanks to diversification efforts after the global economic downturn that helped lead GM into bankruptcy in 2009.
Automotive manufacturer Linamar Corp. said it expects to see minimal to no impact from the closure since most of its GM parts are exported to assembly plants in the U.S.
"The impact to GM's total vehicle build is expected to be quite minimal at this point in time meaning we will still be supplying product to the powertrain programs that supply those vehicle platforms at expected volumes," said Linamar CEO Linda Hasenfratz in an emailed statement.
Wildeboer said that the Oshawa closure will affect about one per cent of Martinrea's revenue, since the company is internationally diversified. He said the company has also been able to ramp up its headcount at a plant that supplies GM's Cami Ingersoll plant from 200 to 500 but that the Oshawa closing will still affect Martinrea.
"This is a hit. It's like two steps forward one step back."
Automotive consultant Dennis DesRosiers said he expects many suppliers will pick up other contracts from GM and others to minimize impacts, but that not all will be able to replace the work.
"Not all will, there will be an impact. It might be 1,000, 2,000 jobs, I'd be surprised if it was more than that," said DesRosiers.
"The ones that are sole-sourced to the plant, you know, who've been living off GM rather than getting out and hustling other business, they're vulnerable."
Some smaller operations did see signs of trouble at Oshawa and have been actively looking for alternatives.
Mike Prencipe, part-owner and director of Mississauga-based packager TEC Business Solutions, said the company started shifting business away from exposure to the Oshawa plant as GM kept cutting back production.
"We planned for it, we kind of said, this is where GM is heading, we're not going to supply to manufacturers that supply GM."
He said the move was part of a wider need to stay nimble and adapt, especially after the 2008 recession.
"We diversified. Not only did we go to other sectors, other types of packaging, but it forced, in a good way, forced us into the freight business as well."
The company is now about 60 per cent reliant on the auto sector, down from 80 or 90 per cent in the past.
Despite the Oshawa loss, Prencipe said he still has faith in the automotive sector in Canada.
"I think automotive's safe here, I think we're good. There's too much integrated systems here, I don't see any cause for concerns in the short-term or even the mid-range, long-term, I think we're fine."
Wildeboer said he also believes Ontario's automotive sector is still largely secure both because the industry is still sizable and investments have kept workforces and factories up to date.
"We have some of our most competitive parts plants in the world in Ontario...we have a very good workforce, we have very good equipment, and the latest in manufacturing. And that's how you get competitive."
He said higher energy costs and rising minimum wages have put pressure on the province's economy, but that there's still enough production to anchor the industry.
"If you're producing a million and a half plus vehicles, I think you've got a good critical mass."