Canada's largest auto parts company is shutting down two Toronto-area plants, with the loss of 850 jobs, in the latest blow to the beleaguered Ontario manufacturing economy.
Magna International Inc. (TSX: MG.A) said today it will close two plants from its Decoma body parts division. About 850 workers in Aurora and Newmarket, two bedroom communities north of Toronto, will be affected by the shutdown of Decoma's Exterion unit by next June.
Exterion, which makes exterior plastic parts such as bumpers, fenders, body panels and trim, will be folded into other Decoma plants.
Magna is one of many parts makers and auto assemblers to shut down plants and pare jobs as the so-called Detroit Three carmakers – GM, Ford and Chrysler – restructure their North American operations.
The planned closures at Magna, which does a big chunk of its business with the Detroit Three, comes a day after a Conference Board of Canada report predicted the Canadian auto industry will lose a staggering 15,000 jobs by the end of 2009 as a "maelstrom" of change sweeps through the sector.
Newmarket Mayor Tony Van Bynen expressed concern about the job losses associated with the Magna plant closings today, but said his municipality has been anticipating such cuts for some time and is well-positioned to deal with the future.
"Whenever anybody loses a job, it's a big deal," said Van Bynen. "There is no question that the auto industry is an important part of our economy ... The extent of the impact is hard to determine. We will have to wait and see."
Newmarket is relatively well-positioned to handle the plant closing, he said, because the beleaguered manufacturing sector accounts for only 6.2 per cent of the overall work force of 40,000.
The Newmarket Exterion plant and its 500 jobs does, however, form a major part of the town's auto sector, which includes five Magna plants employing 2,000, plus a company that supplies parts for Honda, with about 500 jobs.
Van Bynen said town officials have been anticipating the global shift in manufacturing away from places like Newmarket and have begun focusing on two other growth industries: the business services sector and the health services field.
"The responsible approach for the municipality is to focus on growth industries that would be advantageous to our communities," he said. "Much of our future-oriented focus will be around the health care industry, to accommodate growth in York Region and an aging population that requires health care."
In the past 10 years alone, Newmarket has seen a 71 per cent increase in the health services field because of the growth of the Southlake Regional Health Centre, which now employs almost 3,000 people. The business services field includes Allied International Credit, an international collection service that employs about 700 people.
Ontario NDP Leader Howard Hampton said the Magna shutdown suggests that smaller, financially weaker auto parts companies in Ontario may be near collapse and will need provincial help to survive.
"Magna is huge, it's got the size, the financial and political connections to last through some very tough times," Hampton said. ``So when Magna starts closing down parts plants, that tells you that there are a lot of small manufacturers who are at the edge of the cliff and they're not going to be around much longer.
"It's time for the McGuinty government to stop blaming Ottawa and stop blaming Washington and come up with a strategy, otherwise we're going to see the loss of tens of thousands more jobs in the auto parts sector."
GM has already announced the closure of its pickup truck plant in Oshawa by next May, with the loss of 2,600 jobs, and plans to close a transmission plant in the southwestern Ontario border city of Windsor, cutting another 1,400 jobs, by 2010.
Jobs have also been cut at GM's 5,000-employee car plant in Oshawa and at Ford and Chrysler operations across southern Ontario.
Other industrial companies, ranging from truck makers and lawn mower producers to lumber and paper companies, have also shut down factories and chopped thousands of mill or factory jobs across the province.
With lower output expected in 2009 at the Detroit Three plants as the companies struggle to stay alive and seek a multibillion-dollar U.S. government bailout, further cuts are looming in the Canadian sector.
That's because Canadian plants export about 90 per cent of their auto assembly production to the United States and about 80 per cent of parts output from Canadian factories.
At Magna, the Detroit Three restructuring has squeezed the Exterion division and many of Magna's other businesses, producing losses at the 51-year-old company, which employs more than 80,000 people around the world and is controlled by businessman Frank Stronach.
"The difficult decision to close the facility came after a careful evaluation of the facility's financial status, future business and open capacity in other facilities," the global company said in a brief statement.
"Those factors, combined with the difficult economic conditions facing the North American auto industry due to reduced domestic production and customer demands, have made the Exterion operations no longer viable."
Magna spokeswoman Tracy Fuerst said in an e-mail today that the parts producer will try to place workers who lose their jobs at other Magna plants, where possible.
Earlier this year, Magna cut operations in the United States and in Europe to reflect lower demand for cars, SUVs and trucks in those key markets.
In its latest financial report, Magna International reported a third-quarter loss of US$215 million, slashed its dividend in half and reduced sales expectations because of "extremely difficult" conditions in the North American auto business.
Sales fell nine per cent to US$5.5 billion from $6.08 billion.
In the Conference Board report, the non-profit research organization predicts the Canadian auto industry will lose $1.7 billion this year as new vehicle production declines by 15.3 per cent.
Conference Board economist Sabrina Browarski said the drop is attributable primarily to reduced demand for new vehicles in the U.S.
Production is expected to reach an eight-year low in 2009, adding up to another $1 billion in losses.
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