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Transitions

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As GM shares surged at the opening bell on Monday, pissed-off autoworkers were walking off the job in Oshawa. The contrast was ironically perfect. Shareholders scored while workers were gored. Gong hybrid and electric may be the immediate reason General Motors is mothballing its sprawling Canadian complex, but this also speaks to us all about the future.

The wealth divide grows ever wider. The polarization of society along with it, sadly. The days when a guy could punch hubcaps or bolt in gas tanks for a living are gone. ‘Middle-class jobs’ is the new mantra of the T2 government at a time when extinction stalks them.

Not only is work being chewed up by AI and robotics, but by global outsourcing and the new American protectionism. We may not know for a while if Trump policies encouraged GM execs to abandon Oshawa, but the US prez often used a Chevy Impala as an example of trade imbalances. That ride, of course, is made here. Soon, no more.

“Now, the people in my community are assuming that houses will suddenly become cheap overnight,” says blog dog Ian, in Oshawa. “I don’t think so. There’s going to be a parting gift from GM that will sustain families for a while. Or perhaps I’m wrong? I mean, the ripples from this stone being thrown in the pond will spread wide. Companies that provide parts to GM will be in trouble too. Convenience stores won’t see their regular customers as often.

“You have to wonder what this could mean long term. That’s why I’m writing you! This is complicated and far beyond my scope of knowledge!”

No, Ian. It’s unclear. Oshawa may lose its biggest employer, but this is not like the mill shutting down in Merritt. It’s a big metropolitan area with the capacity to water down grief and loss. However carving 2,500 direct jobs and maybe ten times that number of indirect ones of out the local economy is a giant deal. In time we will know the impact. It won’t be positive.

There are two thoughts this pathetic blog would like to share on a pivotal day.

First, we’re uncompetitive and growing moreso, to our detriment. Just days ago Ottawa refused to match the massive corporate tax cut which ignited the US economy a year ago. Grudgingly, the Libs will allow our factories to write off new equipment faster, as in America, plus begin the process of reviewing burdensome regs. But. Too. Little. Too. Late. We was Trumped.

Meanwhile global companies like GM pay Canadians more than Americans or Mexicans to do the same job because we’re a high-cost society. Nowhere is that more evident than with real estate.

For example, GM has a big assembly plant in Tennessee located in the town of Spring Hill. Forty thousand people live there, about 30 miles out of Nashville. Here is what $274,000 buys you.

In that plant assembly line workers earn $16 an hour. In Oshawa they’re paid $46. In part this is because houses cost three or four times as much to buy in southern Ontario. For example, this is what $800,000 gets you in that community. Now you know why GM shares are rising.

Here’s the second thought. The stuff we dig up or build, then export, accounts for about a third of the entire economy. The rest is made up of consumer spending. Of the stuff we sell, almost three-quarters goes south. Here are the top two exports: (1) oil – 20% of shipments, and (2) cars – 15%.

As detailed here recently, our oil business is in crisis, whacked by low prices and strangled by a lack of pipelines. The difference between the world price of crude and what our guys get has been at a record high level. Producers are being slaughtered and wells abandoned for a daily cost of about $90 million in lost revenues. Taxpayers may have bought a pipeline company, but no pipe is being laid.

Now our most iconic car factory is slated for shuttering. The American president is still considering a tariff on Canadian-made vehicles despite the USMCA, in which our main focus seems to have been gender parity. This wasn’t supposed to happen.

So, Ian, it’s impossible to know if house prices in Oshawa and Durham Region will be pushed lower as the GM complex empties. But if Alberta is any indicator, there’s little doubt.

About the picture

Anna writes: “Luna the golden retriever belongs to my sister and is standing in this picture with her landlord’s dogs on their farm. “They will get Luna when my sister passes away in a few months from cancer. We hope she makes it through Christmas.”


Source: https://www.greaterfool.ca/2018/11/26/transitions/


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