Trump fights while Trudeau, Ford roll over

Trump fights while Trudeau, Ford roll over

General Motors’ decision to close its Oshawa plant is treated by the federal and Ontario governments as irreversible — as the inevitable result of global market forces. It is neither.

Rather, it is a self-serving decision made by a multinational adept in navigating the areas where politics and economics intersect. In making it, GM has taken advantage of Prime Minister Justin Trudeau’s fascination with high technology and Ontario Premier Doug Ford’s laissez-faire approach to industrial policy.

True, there is an important economic element behind the automaker’s plan to close eight plants worldwide. Consumers no longer buy many of the cars GM makes, including the Chevrolet Impala sedan manufactured in Oshawa.

Nor are they buying the hybrid Chevy Volt, once touted by GM as the car of the future. The Detroit plant that makes the Volt is one of the eight due to be shuttered.

Rather, consumers are buying gas-guzzling SUVs and pickup trucks, including the Silverado and Sierra models assembled in Oshawa.

So when GM says it wants to focus on developing electric and self-driving autos, it isn’t being entirely straightforward.

What the company really wants to do is shift production from vehicles that people don’t buy — including electric hybrids like the Volt — to those they do buy, such as pickup trucks.

In a nutshell, this is the economics behind GM’s Monday announcement that it will close four plants in the U.S. and three overseas, as well as Oshawa.

The politics of the decision has to do with where GM will manufacture those models it still plans to produce.

Its preference is to assemble them in low-wage countries like Mexico. But like all car companies, it is willing to be enticed by government subsidies and is susceptible to pressure from government threats.

In strict efficiency terms, it would make sense for GM to shift the production of profitable models to its Oshawa plant. Oshawa’s flexible assembly line can handle both cars and trucks. Oshawa already performs the final assembly stage of two profitable pickup models. GM itself says the Oshawa workforce is one of the most productive in its stable.

But in the real world of politics, GM knows it wouldn’t get away with keeping a Canadian plant open when it was shutting down four U.S. operations. U.S. President Donald Trump wouldn’t let it happen.

Indeed, Trump has already signalled that he expects GM to backtrack on at least one plant closure in Ohio. If the company can’t make money selling the compact cars manufactured there now, he warned Monday, then, “They’d better put something else in.”

What can Trump do? He’s already shown he can use tariffs with devastating effect. I’m sure he’d think of some way to punish GM if it didn’t comply.

But the importance of the Trump threat is that he’s not taken in by arguments of economic inevitability. He knows that when it comes to the auto industry, nothing is written in stone.

By contrast, Canada’s federal and Ontario governments have convinced themselves that nothing can be done. The Trudeau Liberals are so focused on high-tech jobs of the future that they too often — as in this case — forget the needs of the present.

Trudeau appears to have accepted the claim that the Oshawa decision is irreversible.

Ford, for different reasons, has taken the same tack.

He blames the planned federal carbon tax in part for GM’s decision, yet insists that nothing can be done to change it.

Both Canadian leaders fail to see what Trump instinctively understands: This is the auto industry we’re talking about. Nothing is immutable.

Thomas Walkom is a columnist with Torstar Syndication Services.

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