Monday, November 5, 2007

Chrysler Layoffs, Dion misses golden opputurnity

On Thursday, Chrysler announced they would be laying off 1,100 Canadian employees. The company blamed the move on a drop in car sales. It appears to be just the beginning with the US economy starting to tank and the rapid increase in the Canadian dollar.

CAW National President Buzz Hargrove was quick to place blame on the federal government. He blamed the dollar and free trade agreements with Asian countries as the reason for the job losses. He made it a point that tax cuts would not help the situation. He also blamed the tax incentives on the purchase of fuel efficient cars. On Friday he presented his solution to the federal government. He wants to drastically cut interest rates to bring down the value of the Canadian dollar. He wants Asian countries to guarantee buying as much automotive product from Canada as they sell.

Stephane Dion has been busy defining the Liberal party policies as being against whatever the Conservatives support. This was his opportunity to step out of the shadows and present a Liberal vision to save the auto industry. He could have presented a policy that merges financial requirements of the auto industry (investment, tax incentives) with a plan to make the auto industry fit with the Liberal environmental goals. Instead Dion started off mentioning something about $1 billion (perhaps a reference to money promised to the auto & aerospace industry in the last election). Dion then went on to say that this was an example demonstrating that the GST cut was the wrong tax strategy and income tax cuts would be much better.

Dion completely missed the point. An income tax cut will not help those workers already on the chopping block nor would it do much to cure the problems in the auto sector. The Conservative strategy is to let the free market take it's course. If the Liberals want to bail out the auto sector they need a real plan. Any plan that does not include initiating an environmental program designed to reduce pollution is a missed opportunity from someone who touts himself as champion of the environment.

The reality is the Big 3 automakers have not been successful at manufacturing cars consumers want to buy. Their production costs are higher than foreign cars due to labour costs. They have earned a reputation of not hitting the high standard of quality that some of the other companies have been able to achieve. The job loss of the Big 3 is being offset to some extent by the growth of the foreign manufacturers. It would be nice to see different types strategies to best suit improving an important aspect of the Ontario economy.

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