A study by the Canadian Auto Workers shows that Canada’s three automakers were successful financially almost every year for the past 35 years until a gradual and ultimately marked loss of market share brought the industry to the brink of collapse as recently as last year.
The study, to be released Monday, estimates that profits generated by General Motors Canada and Chrysler Canada reached $37-billion between 1972 and 2007.
According to the CAW, the study focuses on GM and Chrysler since they are the two companies facing the most urgent financial challenges and that, for the past decade, profits are estimated on the basis of industry-wide trends, since Canadian subsidiaries stopped publicly reporting their financial results in the late 1990s.
Prepared by CAW economist Jim Stanford, the report concludes that “while the auto industry is facing a deep financial crisis, over the long haul it has been a strongly profitable and beneficial sector in Canada’s overall economy.
“Today’s retired autoworkers are the ones who produced the value-added (work) that underwrote the strong and consistent profits which the auto industry captured through the last several decades,” said Mr. Stanford in the report’s conclusion. “It is painfully ironic that the retirees who worked during the auto industry’s ‘golden age’ should now be targeted for major reductions in income and benefits.”
Comments late last week from Ontario Premier Dalton McGuinty that the province’s guaranteed pension benefit fund may not guarantee, after all, the pensions of retired autoworkers should either Chrysler or GM — or both — declare bankruptcy, have been met with criticism by the CAW.
“Their pensions and health benefits today are considered a legacy cost, but in fact they represent deferred contractual compensation for work which was successfully performed and which generated enormous economic gains for both businesses and government, the latter via taxes paid,” said the report.
Mr. Stanford said that pension funding rules are inadequate, especially in the case of GM which benefited from provincial legislation that allowed the company to contribute less than otherwise would be required to maintain full funding of its employees’ pension plan.
“How is it that work that was performed for companies that were so successful at the time, was not fully compensated?” asks Mr. Stanford.
According to the CAW study, the aggregate auto manufacturing industry was profitable every year between 1972 and 2007 except for 2002 when auto companies were affected by the economic fallout of the 9/11 attacks and the one-time charges associated with the closure of three assembly plants.
The study says that for those 35 years, the auto manufacturing sector in Canada generated a cumulative total of $102-billion in after-tax net income.
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