TOROTNO - Even with the promise of a made-in-Canada aid package, the Canadian auto industry will likely lose between 15,000 and 20,000 jobs as General Motors, Ford and Chrysler work to restructure and streamline operations, industry analysts say.
Federal Industry Minister Tony Clement said Friday the federal and Ontario governments have agreed to provide the equivalent of 20 per cent -- proportional to the number of vehicles produced in Canada -- of whatever emergency aid the Bush administration gives to the so-called Detroit Three companies.
Clement said the promise of proportional aid will help ensure that any job losses will be proportional as well.
Peter Morici, a business professor at the University of Maryland and an outspoken critic of the Detroit Three, said he expects about 100,000 jobs will be lost in the U.S. industry even with a bailout, meaning Canada could see a proportional loss of 20,000 jobs.
That number may sound high given the promise of government aid to the beleaguered companies, but the main problem facing the industry is slumping demand for new vehicles in the U.S., which a bailout package is not going to solve, said Carlos Gomes, an auto industry analyst with Scotiabank.
"Even with the bailout package, they will have to make additional cuts in terms of employment and so forth, just because demand is not there to enable them to keep all their facilities running over the long term," Gomes said.
"We keep hearing each day of additional cuts, and I think even as we go into the early part of 2009, those announcements will continue to be with us, so it's certainly not the end at this point."
Gomes estimated the Canadian auto industry -- including assembly and parts plants -- will give up approximately 15,000 jobs in 2009, on top of the approximately 13,000 jobs that were lost in 2008.
But Bill Pochiluk, president of Westchester, Pa.-based AutomotiveCompass, said he expects the fallout in Canada to be less severe than many experts are predicting, and pointed out that a new Toyota plant in Woodstock, Ont., and a new Honda engine plant in Alliston, Ont., will help offset some of the jobs lost at Detroit Three plants.
"If Canada is able to staunch the wounds of the vehicle manufacturers in play, then we expect that some of the restructuring costs picked up by GM, Ford and Chrysler to be significantly offset by future growth at Woodstock and at Alliston," he said.
Pochiluk said the "most vulnerable players" are Canadian auto supply companies which export to the U.S., and he predicted these companies could bleed between 5,000 and 10,000 jobs as the Detroit Three restructure.
But David Cole, chairman of the Ann Arbor, Mich.-based Center for Automotive Research, said many of the job losses in both the U.S. and Canada will be temporary, with as many of 75 to 80 per cent of lost jobs being replaced "once things settle down."
"What we have right now is this incredible uncertainty associated with the credit crisis, and that's been an absolute killer," Cole said. "Until we get some resolution of the credit crisis nothing is going to heal fast -- that's what it amounts to."
The Bush administration is considering using money from the US$700-billion financial bailout fund to provide loans to the carmakers after a US$14-billion rescue package was defeated by the U.S. Senate Thursday night.
The 20 per cent in proportional aid promised by Clement works out to about US$2.8 billion or C$3.3 billion at current exchange rates.
The Detroit Three currently employ more than 35,000 people at car assembly and parts plants in Ontario. Each auto industry job generates several jobs at parts plants and other spinoff jobs, including car dealerships, meaning thousands more jobs could be lost in the broader economy as well.
