GM Turns Down $3 Billion Federal & Ontario Assistance...

It appears that the days of General Motors producing cars in Canada are numbered. For a corporation to turn down access to auto aid package agreed to by Ottawa & the Ontario government signals a likely withdrawal from auto manufacturing in Canada. From a business standpoint, this makes sense. In my opinion these are the most likely reasons:

1> The Canada-US Auto Pact is irrelevant. In the 1960's when GM, Ford & Chrysler had over 95% market share, the Canadian government through it's branch plant doctrine forced the Detroit 3 to manufacture a car in Canada for every car they sell in Canada. Today the Detroit 3 are less than 50%. The Auto Pact is archaic since it does not even cover the majority of cares sold in Canada. It is highly unlikely that the government in Canada has the stomach to strangle GM's Canadian dealership network, which employs more Canadians than the GM plants.

2> The Canada US border is a hassle. Sourcing any vital components on the other side of the international boundary screws up manufacturing that uses the just in time inventory management. One has to ask how many dollars of a auto manufacturers production costs are due to busy border crossings, and overzealous Customs officers.

3> The new deals being negotiated with the United Auto Workers in the USA will undoubtedly have greatly reduced health benefits, thereby nullifying any advantage to producing in Canada where the majority of employee health care costs are covered by the national health system.

4> Obama is now President of the United States. Compared to George W. Bush, Barrack Obama is a protectionist who favours barriers to trade as a means of protecting domestic (US only) jobs. GM has probably calculated they are more likely to receive better terms from the US government. Any new production capacity for GM can be moved to Mexico, where the labour costs are dramatically lower.

This is why I think the days of the Detroit 3 manufacturing cars in Canada are numbered.