John Mutton

New Opportunities Replace GM

Mindset Reading Investment: 2 minutes

John Mutton

One of the darkest day in the history of Oshawa and Durham Region was the day General Motors announced the cessation of all production at the GM Oshawa plant.

While looming for many years, people never thought the long history of General Motors and Col. Sam McLaughlin would ever come to an end. How could it with the billion-dollar government bailout and wind tunnel at the University and a center of automotive excellence?

The answer is quite simple: it costs too much to build a car here.

  • For years, GM has been coming to warn Oshawa and Durham about the level of taxation. Indeed, in 2005 we reduced their property tax ratio as a sign of good faith, but a promise to further look at savings fell on deaf ears for the past 13 years.
  • The cost of power is astronomical in Ontario vs anywhere else.
  • Water and sewer rates have continued to rise year after year.
  • The wage rate for an hourly worker combined with the above factors cannot produce a cost-effective vehicle.

Now. when we look at Windsor and the former GM plant there, no physical structure is left from the former giant and a large parking lot exists where the former transmission factory once stood.

Unless we have a large purchaser of the 3M sq ft in Oshawa, we will be looking at the same demolishing of the buildings which will greatly affect the property tax revenue in Oshawa and across the Region.

GM was the largest taxpayer in Durham and the loss of revenue will cause a massive tax increase across Durham and in particular Oshawa, which is already the highest taxed municipality in the Greater Toronto and Hamilton Area.

The negative economics will be that of feeder plant closure and a tomahawk cruise missile right through the supply chain. Many more jobs will be lost than the approximate 2800 union and management positions. Also, the deconstruction of feeder plants to move to the more attractive vacant land tax vs the current occupied industrial tax will further transfer property tax increases across Durham Region.

Recent rumors of Tesla locating to the plant are false hope for the community. Having worked with infrastructure projects in Nevada and California and with academia in these states provides me enough information and facts that Elon Musk was currying favor in a recent press interview.

Consider the following: assembly workers at Tesla earn between 15 and 20 dollars an hour; mechanics earn 15 dollars less an hour than a regular car mechanic, as there is less “mechanical” in a Tesla than a regular combustion engine. Will Musk want to locate where Unifor commands $35 per hour at an assembly plant, complete with the highest taxes and power costs one can find in North America? I don’t think so.

There is a very tight window to do something with the GM infrastructure.

I do know one emerging sector that has the finances and has the connections in Detroit to make something happen and is interested. Let’s hope that repurposing of the former automotive giant will deliver a renewed drive for a diversified economy, with a community that has had most of its eggs in one basket for a century.

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