Thursday, December 04, 2008

Auto Sector Bailout?

"I don't want to get 'butt-f@c%ed' by the Americans again" - Comment from Jamie, a hard-working Calgarian, regarding a potential Canadian Government bailout of the Big 3 auto makers. The Calgarian was in favor of helping the workers from plants in Ontario and Quebec, but NOT the corporations.

In this weakened economy we're seeing politicians all over trying to find something - anything - to "bail out". We are hearing of potential bail-outs of the "Big 3" US automakers by a Canadian government. In the USA, decisions by members of both houses are being met with disdain and anger from voters. American voters seem sick of watching these giant corporations make poor decisions (Hummer, giant SUVs, poor mileage, etc.) then ask for handouts (people were also rightfully upset about the bank bailouts).

In Canada we may experience fallout from the American backlash. Right now, parties are clamoring for bailouts for various industries and the US (yes, that's foreign) automakers. This would be a mistake. While we need to help the CANADIAN industries associated with manufacturing, helping the "Big Three" is NOT our responsibility. Helping their Canadian employees IS.

We should work with Canadian companies like Magna (and other parts manufacturers), Bombardier (they make GREAT "green" products like trains, etc.), Ballard, etc. We should spend money to re-train or find work for out of work auto-workers. At the same time, we should look at doing something to expand relationships with the other foreign manufacturers who haven't asked for anything (specifically Honda and Toyota). We need to ensure they maintain their existence, and benefit from the superior skills of Canadian workers. Perhaps incentives to expand their local facilities?

Increasing education and training to grow our home-grown "knowledge industry" will help offset losses in manufacturing. Workers in those industries can be prime candidates for positions in the new "knowledge economy". Canada can also lead in green industries, and green knowledge. Our government needs to fund these ideas, and grow our "group intelligence". A smarter country is an economically "fitter" country.

What I've heard from Canadians these past few months is that we need to ensure the stability of CANADIAN companies, and Canadian workers, first and foremost. We need to get all our eggs out of the American basket, and look to Europe, Asia, and Latin America for future trade ties. We are beginning to see the effects of "having all our eggs in one basket". It ain't pretty. Alberta is seeing the effects of letting American Big Oil run rough-shod over their economy, while Albertan taxpayers spent nothing on infrastructure development, or other diversification, and asked for a pittance from Big Oil in return (royalties smaller than what the Arabs charge).

Ontario and Quebec manufacturers need help BEFORE we begin to help the rest of the country, simply because, due to the number of jobs implicated, and the size of populations in those Provinces, failure to do so will worsen effects of a recession. Also, we need to act there first because they are the areas most impacted. At the same time we need to put in place fallbacks and failsafes for employees of the Big Three manufacturers. We have seen how just giving the manufacturers money does not work - they still pick up and move. Nothing can stop them from closing plants weeks or months AFTER receiving a bailout, as we've seen in the past few months. The solution HAS to be for the workers.

Following this action, we need to work on infrastructure programs in the rest of Canada. Roads, transit, "green" industry, etc. New passenger railways (Edmonton-Calgary, Fraser Valley, Toronto-Southwest Ontario, etc.).

Major projects and expenditures such as these will help bring Canada out of recession sooner than doing nothing - as it seems our government appears intent on doing right now...

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1 comment:

Phillip Huggan said...

(pasted from a recent bailout blogversation)
To answer the specific question about auto industry, I’ve two main objections.
1) Wages+Salary negotiated when industry wasn’t receiving federal loans, need to be renegotiated to account for the feds wanting a solvent company to employ workers or get their money back or whatever. Matching Japanese wages+salary seems *more* than reasonable when you consider what has happened to the rest of the semi-skilled middle class since these wages and seniority wage increases were enacted pre-Asia globalization.
2) The industry is using the reasoning that an absence of big-3 just-in-time parts orders will collapse the entire supply chain. If the industry has been structurally overbuilt based on cheap USA credit and can’t contract as their report last week claims, they are basically saying we need mid-2000s USA consumer purchase levels or nothing at all. It reminds me of GWB saying your either with us or against us in attacking Iraq. I’d need to see evidence the supply chain could still function at say, 60-80% USA mid-2000s consumer volume, in the decade ahead, before committing any funds. Meanwhile Zenn languishes….
Our plants are USA branch plants and I don’t like bailing out incompetant CEOs in finance or auto.
I feel bad giving this advice because if it means anything it cannabalizes wind turbines, electric cars, transit (Wpg houses leading N.A. manufacturer BTW), and Bombardier’s LRT/High-Speed-Rail.