fallacy big enough to drive a truck through
Basil "Buzz" Hargrove
Monday, June 06, 2005
The conventional wisdom states that when a company or an industry is in
trouble, government should stay out of the picture. Attempts to save a
company or a plant will only postpone the inevitable, or so the story
I've never accepted that logic. Sometimes a company or facility is
fundamentally unviable, and no rescue effort is possible. But there are
many other instances where jobs and facilities can be saved, with a
little time, a little flexibility, and a little outside help. When this
is true, all stakeholders -- including government -- have a role to
There are several important examples in Canadian history of so-called
"bailouts" that worked. The federal government helped save Chrysler in
the early 1980s, and it subsequently became one of the most important
industrial producers in the country. The Ontario government helped to
successfully preserve the deHavilland aerospace plant in Toronto in the
In these and other cases, government participation was repaid many
times over, in income taxes and other revenues paid by the surviving
company, its employees, its suppliers, and its customers. These weren't
"bailouts." They were a solid investment.
I recently participated in what is already another example of
government's positive potential to play a healthy, important role in
economic restructuring: a new investment at the International Truck and
Engine plant in Chatham, Ont.
Three short years ago the days seemed numbered for this facility. The
North American heavy truck industry was in a cyclical downturn.
International had too much capacity, and was shifting production to
Mexico. The company announced the closure of the Chatham plant. This
would have been another painful blow for Canada's auto industry.
Thankfully, all stakeholders in the Chatham operation -- including the
Canadian Auto Workers, the company, and the federal and provincial
governments -- refused to lie down and watch this facility die, along
with the thousands of jobs it supports.
The effort started with unprecedented negotiations between the CAW and
the company, led by its energetic and visionary CEO, Dan Ustian.
Although we had just experienced a bitter strike in Chatham (during
which a CAW member, Don Milner, was run over and almost killed by a
security van), we put our past differences aside and focused on saving
the plant. We made far-reaching changes to enhance productivity and
reduce costs, by tens of millions of dollars per year.
Then International came to the table with $270-million in investment,
both in hard capital and in research and development. The investment
includes two heavy truck research and development centres, which will
study cleaner diesel engine technology and improved truck assembly
efficiency. The City of Windsor and the University of Windsor are
helping to fund these centres.
The federal and provincial governments also committed $65-million worth
of investment and training support. All of this was enough to convince
International to reverse its plant closure decision. Already the
Chatham plant has called back all laid-off workers (a cyclical rebound
in heavy truck sales also helped), and is planning to launch a new line
of truck cabs. It's the company's first new heavy truck design in
nearly 20 years -- and it will be produced in Canada, thanks to the
willingness of all stakeholders to modernize and strengthen our
This investment is another important step forward for Canada's auto
industry. By modernizing its production facilities in Canada,
International solidifies its presence here -- for a decade or more. The
R&D initiatives associated with the project will put us at the
forefront in developing environmentally friendly diesel technologies
and state-of-the-art manufacturing techniques.
Fiscally, the project is a great deal for government. Together, the
federal and provincial governments collect $20-million a year just in
direct income taxes from International's Canadian workforce -- let
alone other revenues from spin-off jobs, consumer spending, and
corporate taxes. Their investment in the Chatham plant will pay off for
taxpayers in less than three years.
Throughout this whole process, I could not help imagining what would
have happened if the federal and Ontario governments had stuck to the
old conventional wisdom that governments should never get involved in
economic rescue efforts. We would have one more major plant closure to
deal with, thousands of job losses, a devastated community, and another
blow to our most important export industry.
Fewer people ascribe these days to the "laissez-faire" view that
government should relinquish all important economic decisions to the
private sector. But Conservatives (in both Ottawa and Queen's Park) are
still of the view that government has no business meddling in projects
like this one. If they were running the show, there's no way the
International Truck story would ever have had this happy ending.
So as our economy continues to grapple with globalization and
technological change, governments have a responsibility to use every
tool at their disposal -- from more creative use of employment
insurance funds, to targeted investments, to research and training
resources -- to give our companies and industries a fighting chance to
survive and thrive.
Basil "Buzz" Hargrove is national president of the Canadian Auto
© National Post 2005