Introduction: The Automobile and Its Industry in Canada

The automobile and its industry intersect with Canadians' lives in innumerable ways. Regulating automobile safety and emissions, the way consumers use their vehicles, and public policy toward the auto industry are significant and ongoing concerns of federal, provincial, and municipal governments. Without question, production and consumption of autos remains a pervasive element of the Canadian economic, political, and social experience, though an often understudied one.¹ The market and the state interact in a myriad of ways when it comes to issues such as automobile safety, emissions, the built environment, traffic, and employment and investment decisions, and this interaction has undergone tremendous change in the last few decades.

This can be seen most dramatically in the recent upheaval in the auto industry itself. In the summer of 2009, Canadians witnessed the history-making collapse of much of the American-owned part of the industry. After a prolonged decline in market share, the eventual bankruptcy of General Motors, formerly the world's largest and most profitable company, and that of Chrysler, long one of the ten largest global firms, marked a milestone in North American economic history. Once the exemplar of technological, business, and industrial innovation and entrepreneurship, the American sector was now a failure. The subsequent $75+ billion bailout of these firms by the American, Canadian, and Ontario governments was one of the greatest peacetime interventions in the marketplace, especially for the manufacturing sector. It resulted in tremendous economic dislocation and unemployment on both sides of the border.

The Canadian auto sector bore a fair share of that meltdown, and thousands of Canadians were directly impacted by this massive restructuring. In 1999 automotive manufacturers in Canada assembled just over 3 million light vehicles and the country was the fifth-largest vehicle maker in the world, behind only the United States, Japan, Germany, and France and ahead of traditional auto powers such as Italy and the United Kingdom.² Plants in Canada built nearly one in every five vehicles in North America, and Ontario had even overtaken Michigan as North America's most productive automotive jurisdiction. Along with a vibrant parts industry, which accounted for the bulk of the sector's employment in Canada, the industry boasted approximately 150,000 direct jobs, and hundreds of thousands of indirect jobs.

Today, the landscape in automotive production is dramatically different. Canada no longer ranks among the top ten vehicle producers in the world, having been passed by countries such as China (in 2009 the world's biggest car market), South Korea, and Mexico. The sector faced tremendous challenges even before the crisis of 2009: Canada was forced to abandon its core automotive trade policy, the 1965 Auto Pact, by the World Trade Organization in 2001; it faced massive restructuring by the Big Three American producers; greenfield investments in North America have been concentrated in the US South for more than a decade; and the historical exchange rate advantage of a lower Canadian dollar disappeared in the mid-2000s. By 2008, Canadian output had fallen to just over 2 million vehicles. In 2009, when the American credit crisis compounded a sharp cyclical downturn, Canadian production plunged to 1.5 million vehicles, less than half of the 1999 high watermark. Employment plummeted to less than 100,000 as months of headlines told a story of plant shutdowns and bankruptcies, and prophesized the demise of the Canadian industry.

In response, Canadian governments spent billions and took direct ownership stakes in General Motors and Chrysler, with the federal government accounting for the bulk of approximately $14 billion in public funds directed toward resuscitating a bankrupt General Motors. Whether or not this was an apt public policy initiative is a matter of debate, and the question of subsidies (though not outright public ownership) for automotive firms is a theme that is addressed in this special issue. The strong concentration of manufacturing in the highly cyclical automotive sector, especially in Ontario following the 1965 Auto Pact, is clearly not without macroeconomic risk. Equally noteworthy, there was virtually no public discussion in the House of Commons or from Canadian political leadership on whether...