Toronto, Ontario – Canada’s automotive manufacturing industry has been “uniquely and strongly profitable in recent decades,” according to a new study from the Canadian Auto Workers Union (CAW). The report said that while the industry is financially fragile at the moment due to the global credit freeze and resulting sales collapse, its long-run economic record indicates that the sector has been a lucrative component of Canada’s economy.
The report views the longer-term financial performance of the manufacturing sector in Canada from 1972 to 2007, the last year for which industry-wide profitable data is available. On an industry-wide basis, automotive manufacturing has generated positive net after-tax income in every year but one since 1972, and after adjusting for inflation, it has generated cumulative net after-tax profits of more than $100 billion during that period. In the long run, this makes it more profitable by far than other sectors of heavy industry in Canada, including primary metal industries, metal fabrication and machinery, chemical and electrical products, and aerospace.
The Canadian arms of General Motors and Chrysler were also profitable in most of those years, with cumulative profits over the period, expressed in 2008 constant dollars, of more than $30 billion for GM and $5 billion for Chrysler, which was a much smaller company during the period.
“Today’s retired auto workers are the ones who provided the real economic foundation for the long-term financial success that this industry has enjoyed for several decades,” said CAW economist Jim Stanford, the author of the study. “Their work produced the value-added which created the profits which GM, Chrysler and other auto manufacturers enjoyed almost every single year for the past 35 years.”
In the report, Stanford argued that legacy costs, the continuing expense for retiree pension and health benefits, are in fact deferred compensation for the work which underwrote decades of sustained and lucrative profitability. The work was completed on the basis of a compensation contract which included promises of pension and health benefits, to be paid after the workers retired.
The full report can be found at.