TORONTO — A new analysis by the Canadian Auto Workers union indicates General Motors’ and Chrysler’s Canadian branches racked up an estimated $36.7 billion in after-tax profits between 1972 and 2007, but one analyst questioned the accuracy of the study’s numbers.
The report, written by CAW economist Jim Stanford, relies on the companies’ publicly reported profits until 1996, when the Canadian subsidiaries’ numbers began to be lumped in with the companies’ overall results. After that, Stanford estimates the subsidiaries’ profitability based on industry-wide data from Statistics Canada.
The study suggests the Canadian auto sector as a whole had more than $100 billion in after-tax net income in the 35-year period, and the CAW estimates that included $31.75 billion at GM and $4.95 billion at Chrysler.
Stanford said the study should make people question why GM and Chrysler — both asking for billions of dollars in emergency government loans to survive slumping sales — say they can’t afford to pay the legacy costs of retired workers.
“We had an industry that made $100 billion in profits over that 35-year period, yet today is saying it can’t afford the pensions it promised to the people who produced that profit,” Stanford said.
“That’s not just immoral in my view, it also undermines the legitimacy of the whole pension system.”
But Joe D’Cruz, a professor at the University of Toronto’s Rotman School of Management, said the CAW’s numbers may be exaggerated.
“The profits attributed to GM and Chrysler include an estimate for years in which the data are not publicly available, and those are the very years in which GM and Chrysler were experiencing significant losses, so these two facts don’t jibe with each other,” D’Cruz said.
“They certainly don’t reflect the fact that in the last three or four years, both GM and Chrysler have been losing significant amounts of money and that’s the current reality,” he added.
GM Canada spokesman Stew Low confirmed the company hasn’t been profitable for “several years.”
Bill Pochiluk, president of industry adviser AutomotiveCompass, said the study’s methodology and conclusion are sound, but cautioned against using the past to predict the future.
The industry underwent significant structural shifts in the last five to 10 years that altered its competitiveness on the global stage, including the death of the Auto Pact — an agreement between Canada and the U.S. that removed tariffs on vehicles and guaranteed a certain amount of production in Canada — lower vehicle prices and a higher loonie.