Ottawa buys a clunker

General Motors is a lousy candidate for a quarter-billion-dollar federal bailout. It was just three weeks ago that the North American automaker…

General Motors is a lousy candidate for a quarter-billion-dollar federal bailout.

It was just three weeks ago that the North American automaker promised 2,600 Canadian workers at its Oshawa light truck plant their jobs were secure.

Today, the plant is slated to be shut down by 2010.

What changed?

GM blamed the plant shutdowns on high gas prices.

You’d think, given the fuel-sucking vehicles GM champions, that it would have noticed pump prices sooner.

According to president Rick Wagoner, GM now believes expensive gas is here to stay.

And, so, it is changing its business model away from SUVs and trucks toward smaller, more fuel efficient cars.


However, it needs to be noted the decision to restructure comes on the same day GM reported that US sales had fallen 30 per cent in May.

The latest plant shutdowns come just days after the company said 19,000 hourly workers had accepted buyout and early retirement packages.

And GM reported a $3.3-billion loss in its first quarter this year.

(For context, this week’s plant closures are expected to save the automaker just $1 billion a year.)

The loss of the Oshawa plant will further stagger the Ontario manufacturing sector, which has been sent reeling from the high Canadian dollar and ailing US market.

So, just a day after the plant closure was announced, Finance Minister Jim Flaherty offered GM $250 million from Ottawa’s Automotive Innovation Fund to retool the Oshawa plant for car production.

Let’s forget, for a second, that the fund is supposed to foster research and manufacture of fuel-efficient vehicles and that Flaherty is offering it to GM to build Aveos or Cobalts, which, while more efficient than light trucks, are hardly cutting edge.

Instead, it’s better to remember how GM repays generous public investment.

It received $235 million in support from the Ontario government in 2005, including $60 million for research and development.

Despite that huge public investment, the company is now cutting jobs and shutting factories in the province.

The company is hemorrhaging money.

And it failed to read the market.

Now it is retooling.

It did so because, according to Wagoner, gas prices are high, they aren’t likely to drop and that’s changing consumer behaviour, said Wagoner.

It is a remarkably dense admission from the leader of one of the largest corporations on the continent.

The company has clearly not anticipated the market.

Despite this, after 24-hours consideration, Flaherty announced his department is willing to dump hundreds of millions into the company.

That’s an irresponsible public investment.

He’d do better to invest in a firm that could parlay $250 million of R&D money into technology that will employ the next generation of Canadians.

Or simply toss each of the 2,600 affected Canadian workers $100,000.

Odds are they’d invest the money better than Wagoner would. (RM)

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