Business·Analysis

Ford layoffs another hint Canada is heading for peak car: Don Pittis

Ford's announcement of 450 layoffs at a Canadian plant may be a symptom of a long-predicted decline, Don Pittis writes.

The automotive industry has lost its place as a keystone of the Canadian economy

Losing its lustre? The car lot was once the candy store for red-blooded North American youth. But, for many, consumer electronics have become the new object of consumer lust. (Peter Jone/Reuters)

It is sometimes hard to explain to young people how crucial the automotive industry used to be when I was growing up.

Cars are still a huge part of our lives. The retail portion of the industry remains an important employer, and with its glamorous advertising and gleaming showrooms, persists as a quintessential symbol of consumer lust. A large Canadian auto parts sector is still a global player.

But Ford's latest announcement that it is once again slashing jobs and shrinking its operations in Canada is only the latest signal that the car business is becoming less relevant to the economy and less important to many of our lives.

Almost a year ago, General Motors announced it would be shutting down a plant this December, an unwelcome Christmas present to Oshawa, Ont., which will likely lose thousands of precious industrial jobs.

The job losses may be part of a more general movement of industrial employment from the U.S. and Canada to lower-wage countries, as recently described by Canadian economist and author Jeff Rubin.

"The North American Free Trade Agreement might have been a godsend for auto manufacturers, but it has been a nightmare for Canadians on the assembly line, just as it has been for their American counterparts," Rubin wrote in the New York Times earlier this month.

Already peaked?

But according to other analysts, the loss of car jobs is part of a larger global phenomenon sometimes called the peak car hypothesis, usually attributed to British academic Phil Goodwin, a longtime transportation policy expert at University College London.

A series of studies published since Goodwin wrote about the subject seven years ago purport to show that due to congestion, rising costs, increasingly urban living conditions and the fact that consumer electronics have taken the place of the car as objects of youthful consumer yearning, kilometres driven per person have peaked and are starting to decrease.

A flurry of media reports in 2012 prompted by Goodwin and others like Michael Sivak, from the University of Michigan Transportation Research Institute, pronounced peak car had happened or was happening.    

"Among the 15 economically advanced countries [Sivak] analyzed, he found that places with a higher number of Internet users correlated with lower licensure rates among youths between 20 and 24 years of age — including in the United States," Scientific American magazine reported.

Colour samples at a dealership in France. Some studies suggest car use has peaked and started to decline in large wealthy cities. (Regis Duvignau/Reuters)

Since then, many critics of the peak car theory have said the decline — in North America, at least — was due to the recession that followed the 2008 credit crunch. During research for a recent story on mobility as a service, automotive analyst Dennis DesRosiers told me that although figures show the growth in car sales had been tailing off, "vehicle ownership in Canada is at all-time record levels, and it's been increasing."

But yesterday, a new report from the news wire service Reuters projected that numbers out Friday will show that U.S. automotive sales in October declined by 1.3 per cent, according to two automotive consultancies, J.D. Power and LMC Automotive. Canada is unlikely to do better.

Growing fears of recession may be contributing to the decline as car-buyers decide to make do rather than splash out on a new vehicle. But the report says rising costs, partly because the cars being sold are pricey SUVs and trucks, are an increasing barrier, forcing automakers to offer large enticements.

"Incentive spending is on pace to exceed $4,000 per unit for the fourth consecutive month as record levels of old model-year inventory persist," the auto analyst report says.

It's different this time

Sales of autos, as with other expensive consumer goods, inevitably rise and fall with the health of the economy. But as I have reported in the past, there is growing evidence that something different may be underway. Whether it is happening now or will happen eventually, the logic persists that as more people move to cities that are increasing in density, making roads more congested, the utility of owning a car will fall.

The three towers of Union Park, an enormous development proposed for Toronto by Oxford Properties. The development promotes an urban lifestyle close to transit that makes car ownership less essential. (Oxford Properties)

But whether ownership and kilometres driven have reached a peak, what seems even clearer now is that as Ford and GM reduce their Canadian production, auto industry production here has begun to decline, only made worse by the recent GM strike in the U.S. that led to shutdowns in the Canadian parts industry.

Before the Second World War, Canada was the second largest car exporter on Earth. After the war, Canada slipped to number 3, and with foreign competition and the export of jobs to low-wage countries, Canada's share has continued to decline ever since. Estimates show production down about six per cent this year, with sales down nearly four per cent.

In the decades after the Second World War, automotive manufacturing was seen as a keystone industry for the Canadian economy, creating "core employment" that brought money into the community and helping to sustain many more jobs, from shoe salespeople to accountants.

As well as providing core manufacturing jobs in its own right, the sector contributed to jobs in upstream industries such as design, engineering, steel making and mining. With the globalization of the industry, now many of those jobs have moved elsewhere. And if we've reached peak car, it's unlikely they are coming back.

Follow Don on Twitter @don_pittis

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.

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