Auto parts makers to shed 37,000 jobs this year, Conference Board forecasts

More bad news for Canadian stampers. One can expect roughly the same results south of the border, at least in proportion.

From Yahoo! Canada Finance

The Conference Board of Canada says auto parts makers will cut 37,000 jobs, or about one third of their workforce in Canada, as the North American industry undergoes massive restructuring.

The sector has been shedding jobs for years, but this year’s losses are expected to top the total of the last four years combined.

Ontario will be hard hit by the job losses since the province has most of the parts companies.

Chrysler dealers left without vehicles

Here’s another amusing (well, probably not to the dealers) side of the Chrysler saga. From the (Toronto) Globe and Mail:

Chrysler Group LLC will start cranking out vehicles at seven of its North American assembly plants on June 29, but some Canadian dealers say they will be unable to restock their dealerships with new vehicles because they can’t get the financing they need.

Inventories have fallen to minimal levels […but many …] can’t order new cars and trucks because they are still waiting for financing approval from GMAC LLC

This is another example of cascade failure I spoke about earlier. Seemingly unrelated things combine to topple systems that should continue to work. If it were easy to get credit another way, these dealerships would not be having a problem. They might pay a little more for credit from someone else, but at the moment, all other sources are choked off, and this one is slow.

This is another bottleneck on the road to a recovery for stampers.

Chrysler plants will open in weeks: Fiat

From Canadian Manufacturing News, a Rogers publication. Some tentatively good news for stampers:

Fiat [which now controls Chrysler] announced plans to resume production at its Brampton and Windsor plants and five other North American factories at the end of June.

In addition, parts stamping, engine and transmission factories that feed those plants also will restart June 29, Chrysler said in a statement.

Tax Funded Head-Start for Low Cost Country Tool & Die Makers

Joe Brown, in his blog, wrote an excellent, fictionalized (I presume) account of what it’s like to be laid off, followed by an excellent analysis of why we’re losing tooling money offshore and how the car companies are encouraging this.

What if we added that not only were taxpayer funds being funneled to China, the very recipients of these taxpayer funds, (GM, Chrysler and hundred’s of Tier 1 parts manufacturers) gave the Chinese competitors to North American manufacturers a 5-9% cost advantage by paying these Chinese suppliers on far better terms than they would pay say a company in Grand rapids, Detroit or Windsor.

Lowered demand

This is the second in a series of discussions of developments over the last 6 months.

How is demand for manufactured goods holding up?

Here’s the picture in Canada.

Real gross domestic product (GDP) declined 0.8% in the fourth quarter, weakening progressively each month. This was the sharpest quarterly decline since 1991.
Declines in the production of goods (-2.4%) were widespread as domestic and foreign demand weakened. Except for agriculture, all other goods-producing sectors receded. Manufacturing (-4.3%) led the downturn, experiencing a sixth consecutive quarterly decline.
Business investment in machinery and equipment contracted 7.5% in the fourth quarter. All categories recorded declines, notably automobiles, trucks, and industrial machinery.

From: The StatsCan web site.

OK. So how are things doing in Britain?

Picture’s not much different there.

Manufacturing output decreased by 6.5 per cent in the three months to February 2009 compared with the three months to November 2008 and was 12.2 per cent lower against the same three month period a year ago.


And how about the US?

The Canadian economy contracted at an annualized rate of 3.4% in the fourth quarter, compared with a 6.2% decline in the US economy.

So, all other things being equal (lots of other things aren’t), it’s tough for a low-margin business like metal stamping to stay healthy in such a volume downturn.

McCain revs up auto workers

Washington Times

Suddenly, it’s important to the US elections to think about jobs and the auto sector. Of course, many smaller stampers make parts directly and indirectly for the auto industry.

Sen. John McCain on Friday told auto workers to have faith that alternative technology vehicles will re-energize their sagging industry and help reduce the nation’s dependence on foreign oil.
‘I believe that this new technology – it’s more than an automobile – will create hundreds and thousands of jobs,’ the Republicans’ presumptive presidential nominee said at a town-hall meeting with about 500 General Motors Corp. employees. ‘This breakthrough has every chance of success.’
Mr. McCain toured a facility where the struggling automaker is designing a new battery-powered hybrid vehicle, and spoke to employees while flanked by several models of GM’s emerging fuel-efficient cars and trucks.

Are jobs coming back from China?

Old Jobs Not Coming Back, McCain Warns Ohio Autoworkers

McCain […] reiterated that message on Friday, saying that the government should provide better worker retraining programs and incentives for companies like GM to create new jobs making environmentally sensitive products.

“The same old jobs aren’t going to be there,” he said. “The new jobs are here at Lordstown.”[where GM makes the fuel efficient Chevrolet Cobalt]

General Motors has announced that it plans to sell a totally electric vehicle in 2010. McCain this week proposed a $300 million award to anyone inventing a radically better electric car battery.

An interesting (if a little irritating) youtube snippet. Like all things youtube, it’s too short to garner context. Maybe he didn’t mean it this way, I dunno. But it sure sounds weird.

JOHN MCCAIN: What we have to do is embrace this new technology, accept the fact and enjoy the fact that there’s new jobs and the old jobs aren’t coming back.

Also on this theme, BusinessWeek had an interesting cover story last month.
Can the U.S. Bring Jobs Back from China?

American factories and supplier networks in many industries have withered in the era of globalization, so it will take lots of time and capital before the U.S. can become a big player again. In electronics, for instance, there has been a mass migration of component makers to China in the past decade. Ditto for suppliers to Midwest heavy-equipment makers and North Carolina’s furniture industry.


The global industrial landscape certainly appears to be in the early stages of a realignment. The euro’s breathtaking rise against the dollar has spurred European makers of cars, steel, aircraft, and more to shift production to the U.S. Now the soaring cost of fuel is making it pricier to send goods across the Pacific.

According to ABC news, at least some jobs are coming back.

As the cost of shipping continues to soar along with fuel prices, homegrown manufacturing jobs are making a comeback after decades of decline.

Furniture designer Carol Gregg used to have her signature Chinese chests assembled in China, but such a luxury no longer seems viable, considering that some of her pieces now cost five times more to ship.

So now Gregg is having the chests made in North Carolina, simply because its cheaper.

“It’s not just about labor costs anymore,” says Rubin. “Distance costs money, and when you have to shift iron ore from Brazil to China and then ship it back to Pittsburgh, Pittsburgh is looking pretty good at 40 bucks an hour.”

Oil’s cargo cushion

The soaring cost of fuel is whittling away at the cheap-labour advantage enjoyed by Asian exporters, giving Canadian firms a welcome edge in their fight to win back business from Asian competitors.

Two bank economists argue in a report released Tuesday that because of higher fuel costs, shipping a standard 40-foot container from Shanghai to the east coast of North America now costs $8,000 (U.S.), up from $3,000 in 2000 when oil was just $20 a barrel.

That higher cost is passed on to North American consumers, making goods from China and other Asian places more costly compared to the offerings of domestic North American producers.

Some Canadian manufacturers are already noticing the effect.


Jeffrey Rubin and Benjamin Tal of CIBC World Markets Inc. say higher oil prices are reversing the world-is-flat effect, in which lower trade barriers and new technologies like the Internet made it cheaper to move goods and services from developing Asia to the markets of the rich world.

“In a world of triple-digit oil prices, distance costs money,” they write. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

Mr. Rubin and Mr. Tal say the steel sector is a prime example of the world-is-round effect.

Chinese steel exports to the United States are falling by more than 20 per cent year over year. China’s costs have risen because Chinese producers have to bring in their iron ore from faraway places such as Australia and Brazil, then ship the finished steel to the United States. As a result, U.S. steel producers actually have an advantage over Chinese rivals.


“This is an environment in which shipping from the Pacific Rim may not make sense any more,” Mr. Tal said in an interview.

“If you’re thinking, ‘maybe we should bring in a container from China,’ you should think again.”

Can Steel Stocks Continue to Climb?

This is from a share-holders prospective, but it’s interesting none-the-less.

Seeking Alpha

We often hear a lot of discussion, and rightly so, about the prices of crude oil and the agricultural commodities. Their moves over the last year have, in some cases, been parabolic. Their effect on produced gasoline and food prices are also well documented. Less talked about, but increasingly visible and important, is steel.

Steel prices are continuing to rise, with the alloy’s average composite weighted price for all carbon-steel products around $1,000 per metric ton […]

While the charts certainly look nice, you have to wonder how long companies can continue to increase prices – not only in response to demand, which could decrease, but also with regard to raw material cost, which have been rising. Will costs get so high that demand destruction will occur? Will raw material cost increase faster than companies can increase product prices, thereby reducing profit margins?

Both customers and companies are beginning to take action, but in some cases they are at the mercy of the markets. In Turkey, a number of construction companies are going on strike, protesting price increases. In India, transportation and housing projects have been put on hold. Other countries are limiting the amount of steel that can leave the country as exports, while at the same time freezing prices and reducing tariffs to increase imports. Even oil companies are beginning to worry that they cannot build or obtain the equipment they need to extract the oil that is in such high demand.

Canadian/American currency exchange

I haven’t written about currency issues here. Mostly I write about general stamping issues. This posting is written more from a Canadian stamping perspective.

The drop in value of the US $ is really starting to hurt us Canadian manufacturers.

On the one hand, it’s nice to get your raw materials cheaper. For instance, copper isn’t hurting us nearly as much as you might think, since it’s basically valued in US $ and we’re buying it in Canadian.

On the other hand, exports are a big part of our economy. It’s hard to say, even for an individual company, what fraction of sales are exported, because not all are direct exports. Some products, especially small metal parts, the area we’re in, get combined with other things by another canadian company before being exported to the US.

But sales to the US are hurting. If we keep the US$ price, we are losing our markup. If we ask for the Canadian price, it varies from one shipment to the next, an unfamiliar situatior for most american customers, who reject the idea. Even if they don’t, it prices us out of the market when compared to similarly qualified US suppliers.

It’s going to be an intesting ride …