The report's author: one H. Penny

A report released today claims the collapse of the Big Three US automakers will cost the Canadian Economy 582,000 jobs. Let’s all try to stop snickering long enough to talk about this, shall we?

First of all, the statistical methods (or the objectivity) of this study have to be questioned. 582,000 employees would represent 29.4% of the entire Canadian manufacturing industry (according to StatsCan). That seems rather extreme.

Second, the report’s logic doesn’t hold much water. Manufacturing jobs will be there as long as the demand for the end products exists, and the collapse of the Big Three won’t suddenly make people stop driving and switch to public transit. If Detroit fails, people who still need or want to drive will simply buy a Honda, Toyota, Mercedes or whatever. Whether those companies choose to manufacture cars in the same place (i.e., Canada, and Ontario specifically) is a valid question, but some manufacturers already have plants in Canada and distribution efficiencies, tariffs , etc. (and perhaps a small portion of the proposed bailout money that could be put to incentives?) would suggest many of the jobs could remain here.

Would allowing the failure of the Big Three cause temporary disruption and have uncomfortable economic effects? Yes. So would bailing them out. They’re outdated & outmatched; I see no reason to reward them for achieving inefficiency. I’d call this throwing good money after bad; my friend Colin at The Bankwatch put it more eloquently:

“Providing [GM] aid now will simply fund their losses and postpone the inevitable.  Nothing else will change.”

It’s time to let the buggy whip manufacturers go.

0 responses to “The report's author: one H. Penny

  1. Dan … I am biased but yes, you are dead on. The issues at stake in the world (imho) are not auto manufacturers. There are two issues that I think about:

    – consumer confidence which is 100% fuelled by perception of job retention or job loss. Interest rates are irrelevant in this state. BoC – please stop reducing them and ignore the US ignorant move today
    – Sone industries has been in a state of benign ambivalence for 30+ years. This includes Banks, Auto, Telco’s. None of those three are aligned to survive as is for the next 30 years.

    The fundamental reason is that they have not adapted to internet, and customer empowerment. Customers know more than them now, and they don’t know it. They are stuck in product mode. Wesabe/ Mint, Tesla/ Toyota/ Nissan, and TBD are examples that will prove this point out.

    Phew – that felt good. Thanks.

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