TORONTO - General Motors has so far announced no plans to speed up plant closures in Canada despite accelerated cuts in the United States, but analysts say the auto industry is in such flux that GM is being forced to make decisions on a "day-to-day basis."
"We have not made any new timing announcements as it relates to Canada," GM Canada spokeswoman Patty Faith said Tuesday.
The automotive giant announced Monday that slumping sales will force it to close a Michigan metal stamping plant and move up the planned closure of a sport utility vehicle plant in Wisconsin to the end of the year. The closures will put about 2,700 people out of work.
GM had already announced in June that it would close the SUV plant in Janesville, Wis., and three other factories -- including a pickup truck plant in Oshawa, Ont. -- by 2010.
Monday's announcement left the Canadian industry worried that the closure of the Oshawa truck plant and a Windsor, Ont., transmission plant would be sped up as well.
Canadian Auto Workers president Ken Lewenza said the union hopes GM will respect the closure agreement at the Oshawa plant, which guaranteed it would stay open until 2009, but he has little faith the company would honour the agreement if it felt closing the plant sooner was in its best interests.
"At the end of the day, they don't consult with us on these particular issues," said Lewenza. "We're holding our breath."
Richard Cooper, vice-president of Canadian operations for industry research firm J.D. Power and Associates, said it's impossible to determine what will happen next at the beleaguered carmakers.
"It's very difficult to speculate on anything in the automotive industry at the moment," said Cooper.
"I think things are so fluid that companies are having to make decisions almost on a day-to-day basis."
Anthony Faria, an auto industry specialist at the University of Windsor, said the Oshawa truck plant "could close at any time."
"All of the (auto) companies simply have too much capacity right now, too much inventory," said Faria.
U.S. sales by most automakers plunged in September amid high fuel prices and rising financial anxiety.
Ford Motor Co. (NYSE:F), Toyota Motor Corp. and Chrysler LLC all posted drops of more than 30 per cent compared with a year ago. Honda Motor Co. reported a 24 per cent drop in U.S. sales while General Motors (NYSE:GM) saw its U.S. sales drop 16 per cent.
Canadian sales fared better, but the Canadian auto assembly industry is heavily reliant on the American market, where about 90 per cent of vehicles assembled in Canada are sold.
Chris Piper, a business professor at the University of Western Ontario, said he wouldn't be surprised if sales continue to decline, but companies like GM should be wary of reacting too swiftly to what could be a temporary downturn.
"People cannot defer purchasing vehicles indefinitely," said Piper.
"The companies walk a fine line between on the one hand eliminating recurring expenses that are killing them, but on the other hand maintaining flexibility to have the capacity available when the market opens up again."
But Piper said further layoffs and plant closures are still possible in Canada, particularly if reports of a potential acquisition or merger between GM and Chrysler come to fruition.
On Friday night, word leaked that GM had held talks with Chrysler LLC owner Cerberus Capital Management LP, but a merger move has been shelved because of the financial crisis in the U.S.
Faria said he puts the chances of a merger between GM and Chrysler at less than 50 per cent because of the extensive overlap between the two companies in terms of both geographic market share and product. But the fact that the companies are even considering such a deal "signals the fact that GM is exhausting its ability to raise cash," he said.
Chrysler is in a better financial situation than GM and could help to temporarily ease the company's cash flow problems. If a merger does occur, the North American auto industry would see "huge job cuts," including thousands of white collar jobs at the companies' Canadian headquarters and the shuttering of Chrysler's Brampton, Ont., plant, said Faria.
"It's clear if those two companies got together, one of the first things they'd have to do would be eliminate a number of plants and a lot of jobs," he said. "They would need to maintain the revenue that the two of them are generating, but reduce all the costs they could in order to improve cash flow."
United Auto Workers president Ron Gettelfinger said Tuesday he would oppose a merger between the two companies because it would cost workers their jobs, and Lewenza said he's wary of a potential deal for the same reason.
"On the surface it doesn't look like it's a good deal for workers," said Lewenza.
"Two big companies like Chrysler and General Motors don't join up to grow the company, they join up to consolidate product and that would be painful for our workers."
GM is Canada's largest carmaker, with 19,000 employees and major assembly and parts operations in Oshawa, east of Toronto, St. Catharines in the Niagara region and Windsor in southwestern Ontario. The company also builds vehicles at a plant in southwestern Ontario under a partnership with Japanese carmaker Suzuki.
Chrysler has more than 10,000 Canadian employees but is restructuring to pare that workforce to 8,400 by next year. The company operates a parts plant in Toronto, a car assembly plant in Brampton, northwest of Toronto, and a minivan plant in Windsor.
In more bad news for the Canadian vehicle manufacturing sector, Daimler AG announced Tuesday it will close its Sterling assembly plant in St. Thomas, Ont., pushing another 700 people out of work, in addition to 720 already set to lose their jobs next month.
Industry analysts say closing factories or cutting shifts would help GM reduce costs and preserve cash at a critical time.
GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion but has been burning up cash at a pace of more than $1 billion a month.
The company announced a plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing through 2009.
GM's shares had lost nearly half their value last week and plunged to their lowest level in 59 years, but they jumped $1.62, or 33 per cent, to $6.51 Monday. They added another three cents to $6.54 Tuesday.
