Tuesday, November 22, 2005

GM Shakeup: Magna Come Lousy?

General Motors' radical restructuring in a last-ditch bid to avoid filing for bankruptcy will shut down one plant and downsize two others in southern Ontario.

The timing of the announcement couldn't be worse for the Liberals, whose ability to keep their Ontario subjects in line by instilling gratitude for their supposed provision of wealth and fear that the Tories may take it all away. One especially grateful Liberal might be especially fearful today:

The Auto Parts Manufacturers Association says three jobs in the Canadian parts industry are created for every job in the assembly plants.

Those ratios suggest that the GM downsizing of 3,900 jobs could cost close to 12,000 jobs in Canadian auto parts companies.

Thus, the total job losses in assembly and parts plants could hit 15,000 to 16,000 -- hardly a killer for a large economy like Ontario's, but not to be treated lightly. Also, the impact is heavily focused on the area east of Toronto.

But that is only part of the story. In an integrated North American auto sector, Canadian parts plants are linked to supply chains south of the border, thus augmenting the multiplier effect.

Although the Globe doesn't mention Magna by name, its profit projections were somewhat disappointing of late, and even with rival GM spinoff Delphi under bankruptcy protection, the shrinking and potential bankruptcy of GM can't be good for business.

If GM's efforts can't keep them out of bankruptcy protection, southern Ontario is going to hurt really badly over the next few years. Can't blame this one on Alberta, folks. This one is on GM's and UAW's heads.

Globe and Mail

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