Now that the dust is settling from Monday’s announcement General Motors Corp.’s last auto assembly plant in Oshawa, Ont., will soon be closed, the emerging landscape is not promising for Alberta.
Leastways, it’s not hopeful from the perspective of an Alberta that has no plan to transition from a single resource-based economy based on a commodity for which demand is projected to decline.
Consider the reason Detroit-based General Motors Corp. gave for its decision to close one of only two auto-assembly plants it operates in Canada. In future, it intends to concentrate on building electric and hybrid gas-electric vehicles, it said.
Of course, small electric vehicles can be bolted together in any GM auto-assembly plant, so that may not be the reason the corporation chose Oshawa and four plants in the United States for its restructuring upheaval. But the important part of this story from Alberta’s perspective is that the direction the company intends to head is clear.
Despite its downsizing, GM remains a huge corporation – and one known for its arrogance. It has seen the future and made up its hive mind to go there. And the future, in GM’s estimation, does not run on petroleum, or nearly as much of it as the present does, at any rate.
We know, of course, that other major globalized automakers like Toyota and Volkswagen, both now bigger than GM, have made much the same judgment.
So the key message in this for Alberta is that whether we like it or not – even if we stamp our feet – the domestic and international market for our oilsands bitumen is likely to decline, probably steeply, and perhaps quite fast.
Someone is sure to remind me at this point that with low retail oil prices in North America, car makers have been moving toward – not away from – larger and less fuel-efficient vehicles.
This is true enough in the current model cycle. Automakers have moved to maximize profit from old lines and take advantage of current U.S. policy that is unlikely to survive much past the Trump regime. Just as clear, though, is that GM and other carmakers see the long term and even the medium term differently, and this should be the key takeaway for Alberta.
What’s more, “the Motors” is not for turning – an observation that might apply to the road handling quality of some of its vehicles as well as its business strategy.
GM’s top executives have made up their minds and they are shrugging off the protests of Donald Trump, supposedly the Most Powerful Man on Earth, not to mention those of a cast of characters in Canada that includes Prime Minister Justin Trudeau, Ontario Premier Doug Ford (now pathetically reduced to blaming the NDP provincial government that lost office there 23 years ago for the closing), and Jerry Dias, the president of Unifor, the Oshawa workers’ union.
None of this will make any difference to GM. The company has a history of doing what it pleases without much consideration for national leaders, local economies, or employees.
Nor will anything Mr. Trump says now do much, although the politics of the United States certainly influenced GM’s decision to include a Canadian plant in this week’s industrial carnage.
Given the timing, another important takeaway for Canadians generally is that international “trade” deals like the USMCA will not do much to alter the decisions of globalized corporations on either side of the Medicine Line, or anywhere else for that matter.
Cursory research into General Motors – I’m talking about a one-second Google search – will establish that China is a more important market for the corporation than Canada, and possibly more important even than the United States, notwithstanding GM’s nominal headquarters.
This goes a long way to explain GM executives’ coolly dismissive response to President Trump’s bombastic protests in the face of the company making him look like a charlatan to the voters of Ohio.
Herein lies another unhappy lesson for Alberta.
For what is China doing? It’s pursing a conscious state-directed industrial strategy of not just waiting for the future, but creating it.
China’s goal is to leapfrog its national and regional competitors in Western Europe and North America. In practice, this means a swift move not only into new technology, but toward dominating world markets for such technologies. We have already seen this in China’s swift domination of the manufacture of solar power panels.
So how are we going to retrain Canadian workers in new technologies as their old jobs disappear in the car industry and the oilpatch if China dominates all of those new businesses?
I can tell you one thing: no strategy will work if it is not directed by the state, especially if managing the transition is left to foreign-dominated resource extraction industries like the one in oil and gas. Quasi-theological faith in a market-fundamentalist ideology, and not even 1,000 press releases from the Fraser Institute and its ilk, can change any of this!
It is also already understood that a major popular concern in China is the health impacts pollution – and this means efforts to clean energy technology will likely be a major part of China’s emerging state-directed “Leap Manifesto,” to borrow a term.
How do you think that will affect the market for Alberta’s bitumen shipped through a pipeline to the West Coast?
Even if increasing the supply would result in higher prices as long as we have access to new markets via the pipe, it’s probably not a good sign that the biggest of those new Asian markets is moving as quickly as it can to generate electricity with atoms, running water, sunshine and wind.
To summarize: Alberta faces declining markets for our principal product at home in North America and overseas, and increasing hostility to the planetary environmental impact of our principal industrial activity. As a result, the best market will likely remain the United States, at least until we can develop more domestic upgrading and refining capacity, which will take even longer than building a pipeline.
Increasing the pace of extraction to increase the supply is not a sound strategy.