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Auto industry turns its back on a miserable 2008, focuses on new opportunities

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TORONTO — The North American auto industry is hanging on by its fingernails as the smash-up derby that was 2008 crashes to a close.

But industry players are turning to the new year with as much optimism as they can muster, convinced the industry will not only survive but will emerge rejuvenated and ready to innovate.

Sam Gindin, former economist for the Canadian Auto Workers union and currently a political scientist at York University in Toronto, said there's plenty of opportunity waiting to be seized, but first the industry has to shed its defeatist attitude.

"Part of the problem is that people have been defeated for a long time, expectations have been lowered about what's possible, and that's why it's so important to get out of that frame of mind," Gindin said. "If we think small, we're going to end up losing everything."

It's difficult to be anything but defeatist when reviewing the auto industry's fortunes in 2008.

Between 12,000 and 13,000 fewer Canadians work in the industry today than at the end of 2007, according to Scotiabank economist Carlos Gomes. That's a decline of almost 10 per cent.

The industry was suffering long before the economic slowdown from a combination of a high Canadian dollar, which hurt exports, and a slump in U.S. demand for North American-produced vehicles.

When the financial crisis hit in the fall, economic worries sent demand plummeting even further, the automakers suddenly finding it was nearly impossible to squeeze cash out of tight credit markets, pushing GM and especially Chrysler to the verge of bankruptcy.

The two automakers pleaded with governments in both the U.S. and Canada to provide them with emergency loans. Without the funding, they warned they might not survive the year.

Both governments eventually complied. The Bush administration provided US$17.4 billion to the beleaguered automakers on Dec. 19, and the federal and Ontario governments followed suit on Dec. 20, providing a proportional C$4 billion to GM and Chrysler's Canadian subsidiaries.

Ford, the third member of the so-called Detroit Three, is doing slightly better and hasn't asked for a loan, just a line of credit to draw upon if required.

Joe D'Cruz, a professor at the University of Toronto's Rotman School of Management, said that even with the loans, the industry is going to continue to shrink dramatically.

"Even in the best-case scenario there will be many further job losses," he said.

Analysts have predicted that, even with the aid package, the Canadian industry will lose as many as 20,000 more jobs as GM and Chrysler work to restructure and streamline their operations.

But Gindin said it's time to stop worrying so much about the automakers and focus instead what can be done with mothballed plants and, more importantly, the communities they once helped to build.

"I think the way to think about it is to go beyond auto, to say, 'Look, if we want to strengthen our manufacturing base, we can't just lose these productive capacities, these component plants, these tool and die plants,"' Gindin said.

"We have to have some kind of general plan in the economy about where we're going."

CAW president Ken Lewenza said his union is doing exactly that.

"Right now we're thinking about surviving, but long-term we're thinking about positioning ourselves so that when there's a global financial crisis, the stormclouds won't be as heavy next time," Lewenza said.

He said the union will be more aggressive going forward to attract the best and newest technology, an area in which he said Canadian plants currently lag.

"We want to meet whatever the benchmark is in terms of technology. We want in," he said.

But "the union can't do it in isolation," he added.

Lewenza called on the federal government to "let the stakeholders set policy" and give more clout to the Canadian Automotive Partnership Council - an industry organization comprised of automakers, part suppliers, industry associations, the CAW and the Ontario and federal ministers of industry.

Lewenza acknowledged that the "first six months of next year are going to be incredibly tough," but said he's optimistic the industry will emerge from the wreckage smaller but stronger.

"There seems to be a great deal of optimism beyond this four-or five-month window of survival, and we have to think that way," Lewenza said. "Running around with your head down to your knees doesn't do any good."

Bill Pochiluk, president of industry adviser AutomotiveCompass LLC, said there are plenty of opportunities for innovation as the entire industry restructures, and Canada is well positioned to take advantage of these.

"The underlying trend can quickly be summarized as green transformation," Pochiluk said.

"The single best thing you can to do improve fuel economy is mass reduction, you cut the weight," and Canada's aluminum industry is perfectly placed to fill the demand for lighter-weight metals, he added.

New technology is also leading to the replacement of expensive precious metals like platinum and palladium with cheaper metals such as nickel used in catalytic converters.

"There are places in Canada, Sudbury being one of them, that are sitting on a mountain of nickel," Pochiluk said.

"This new technology would be a great opportunity for Canada to use some of its natural resources."

Gindin said it is exactly this type of opportunity that Canada needs to take advantage of to revitalize its economy and revive the manufacturing sector. He said it's not necessarily easy to retool old plants so they can manufacture new items, but it has been done before.

"In 1942 the auto industry stopped production because of the war and we ended up with more jobs because people were making military things at that point in time," he said.

"If we consider this as serious and as urgent as we did the war... why can't we get creative?"

LINK:The Canadian Press: Auto industry turns its back on a miserable 2008, focuses on new opportunities
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