Canadian auto sector starting to feel effect of GM strike in U.S

Canadian manufacturers in the highly integrated auto industry are starting to feel the effects of the General Motors strike in the U.S. as workers picket for a second day.

GM Canada said Tuesday afternoon that about half of the production at its Oshawa Assembly Plant has been impacted by the strike, which has disrupted supply chains for the major automaker and is expected to continue on Wednesday.

Canadian auto suppliers, which export about $18 billion in parts a year to the U.S., are also expected to be feeling the effects of close to 48,000 unionized workers in the U.S. walking off the job, said industry analyst Dennis DesRosiers.

“There’s an immediate impact on the suppliers in Canada, the Magnas of the world supply GM plants in the United States, and I suspect that as early as yesterday they were getting instructions to stop production and wait until the strike is settled.”

Magna International spokesman Scott Worden said in a statement that the company was in a “wait-and-see” mode and continues to monitor the situation, but declined to outline impacts so far.

“Although Magna supplies GM on a number of programs globally, it would be premature to comment on the potential impact to our operations right now,” he said by email.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said member companies he’s spoken to seem to have avoided major changes so far but that it’s not far off.

“At this point, they’re still managing, they’ve really got another day or so before the next phase.”

He said companies are looking to adjust production schedules to adapt to the disruption, but that they might have to cut shifts if the strike drags on.

A spokesman for the United Auto Workers said that talks with the automaker, focused on issues like wages, health care and job security, are ongoing, but did not say how far apart the two sides were as of Tuesday morning.

GM workers in the U.S. last walked off the job for two days in 2007, while a strike in 1998 lasted 54 days.

Jonathon Azzopardi, chair of the Canadian Association of Mold Makers, said secondary suppliers won’t feel the immediate impacts as much as direct parts suppliers, but they are concerned about the potential long-term effects. He said that if the strike has a significant impact on profitability, it could mean less money to invest in new programs and vehicle platforms that boost manufacturers like mould makers.

“What we are concerned about is potentially a situation that create a snowball effect,” said Azzopardi.

This strike could drag on because workers have much more leverage thanks to recent company profitability, compared with the difficulties the industry faced in 2007, said Azzopardi.

“That’s why this strike could get ugly, because the last time we had this type of situation, the leverage was heavily on the side of the 1/8auto manufacturers 3/8, this time not so much.”

He said the strike comes at a delicate time for the industry as auto sales are expected to slow from recent peaks, and that the strike will only make things worse.

“When you start to put disruptors in like this, it makes it that much more fragile.”

DesRosiers said he doesn’t expect this strike action to drag on too long.

“I think calmer heads ultimately prevail and that this will be a relatively short situation.”

He said, however, that if forecasters are correct and auto sales continue to slide then it will make next year’s negotiations between Unifor and GM even tougher than the current U.S. negotiations.

Unifor president Jerry Dias said Monday that Canadian GM workers could strike next year as workers feel “betrayed” by the company.

GM is scheduled to end production at its Oshawa assembly plant by the end of the year at a loss of 2,600 union jobs, though the company plans to convert part of it into a parts assembly operation to save about 300 positions. DesRosiers said, however, that the strike could lead to the company accelerating that shutdown.