The labor strike at General Motors Co. in the U.S. could lead to thousands of layoffs in Canada as the ripple effects from the highly integrated auto industry spread from engine plants to parts makers such as Magna International Inc.
The United Auto Workers’ first strike against GM in 12 years began at midnight, with 46,000 employees staging a walk out. Two of GM Canada’s plants -- Oshawa and St. Catharines -- rely on parts from the U.S. and could see jobs being hit as early as this week, said Jerry Dias, national president for Unifor, the Canadian union.
“There will be temporary layoffs in all three facilities as the parts start to dry up,” Dias said in a phone interview. “It could hit about a couple of thousand jobs.”
Jennifer Wright, a spokeswoman for GM Canada, said there’s been no impact on Canadian operations, but the company is monitoring the situation closely. GM Canada has about 5,700 hourly employees at three manufacturing plants in Ontario.
About 2,200 workers at GM’s Oshawa assembly plant build the Chevrolet Impala and models of the Chevrolet Silverado and GMC Sierra. At the St Catharines engine and transmission operations, about 1,100 employees make V6 and V8 engines and GF6 transmissions. Those engines are shipped to about 10 different GM assembly plants across North America. The CAMI Assembly plant in Ingersoll builds the Chevrolet Equinox with about 2,400 employees.
Parts Makers
The UAW is fighting over jobs and benefits, including better health care and the length of time it takes for shorter-tenured members to get top-scale pay. The strike could cost GM about $50 million a day in earnings before interest and taxes due to lost production, Dan Levy, an analyst at Credit Suisse, said Sunday. Shares in the Detroit-based company fell about 3% on Monday.
“GM workers in the U.S. are mad as hell, just like GM workers in Canada,” Dias said. “For way too long we’ve been losing our jobs to Mexico where GM candidly exploits their employees. There’s frustration with GM on both sides of the border.”
Magna along with Linamar Corp. and Martinrea International Inc. are among the largest suppliers to the North American auto industry. Magna gets about 15% of its revenue from GM, according to data compiled by Bloomberg, and is hoping that both sides will get back to the negotiating table.
High Stakes
“We remain hopeful for a quick resolution,” Scott Worden, a spokesman for Aurora, Ontario-based Magna, said in an emailed statement. “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.”
Rob Wildeboer, co-founder and chairman of Vaughan, Ontario-based Martinrea, said in an email that any production affected would likely be made up later and Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, is optimistic a resolution will come soon.
“One day, two days, you can readjust your production schedules, you can bounce around your operations; three days, four days, it starts affecting people’s shifts,” Volpe said. “This is why we’ll probably see a resolution today. On both sides there is just way too much at stake to carry into day two.”
Linamar didn’t immediately respond to a request for comment. Magna shares were little changed in Toronto trade while Linamar and Martinrea rose.
If the strike lasts to the end of the month it would take only 0.1% off annualized U.S. GDP growth in the third quarter, according to economists at Canadian Imperial Bank of Commerce. Sales would continue from existing dealer and wholesale inventories.
“Impacts on Canada would be even more modest,” Avery Shenfeld at the Toronto-based bank said in a note. “In the unlikely case where the strike lasts through the fourth quarter in its entirety, it would subtract a more meaningful 0.7% off that quarter’s annualized pace in the U.S., and take a bit of a shine off Canada as well.”
