General Motors (GM) has announced it will officially close its Oshawa assembly plant in 2019 as part of the company's global restructuring plan.
According to GM Chairman and CEO Mary Barra, “The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future. We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.” Barra also told reporters that the industry is changing rapidly and GM wants to make changes while the company and the economy are strong.
Unifor, the union representing GM's workers, has reported there are no vehicles allocated to the plant past December 2019. Unifor National President Jerry Dias said, "Unifor does not accept the closure of the plant as a foregone conclusion. Oshawa has been in this situation before with no product on the horizon and we were able to successfully make the case for continued operations. We will vigorously fight again to maintain these good-paying auto jobs.” According to CBC News, it is not currently known how many of the Oshawa plant's 2,500 workers will lose their jobs.
How will the plant's closure affect real estate in the Oshawa area? REIN Senior Research Analyst Don R. Campbell shares his comments and insights:
The news is not good for Oshawa, that is for sure. In fact, I'm willing to bet that there is a LOT of backroom scrambling by politicians and GM reps at the moment (including union reps), hoping to save or salvage something from nothing. This would be a political black eye on the federal and provincial governments as it will become a 'test case' for how the auto industry will act under the new NAFTA2 agreement. All of the other manufacturers will be watching the federal government's response very, very closely.
However, back to the real estate reality of the announcement.
"The multi-phase reality": After an announcement such as this, we often witness an immediate softening of purchase demand in the city and its surrounds, while the shock and reality of the situation settles in. This slow down doesn't hit the stats immediately as there are a lot of deals that are already in the process of closing in the next couple of months. However, come February, the numbers begin to reflect the new reality. That is phase one.
Phase two is when average sale prices begin to fall as confidence in the market begins to slip further. In other scenarios, it is just a sign of a move 'down-market' or to lower priced properties. However, in today's world, the existing 'stress test' will be combined with this lack of confidence to exacerbate the normal situation.
Phase three is often eight months to a year out after the actual closing (rather than the announcement of the closing), when Employment Insurance (EI) benefits begin to run to the end of their course, confidence in a 'potential return' of the jobs begins to fade and families have to start making big decisions of relocation to find new appropriate jobs.
In other words, the announcement of and the subsequent closing of the plant kicks off a predictable, but sad, ripple that will last for years.
A saving grace, if there is one hidden in this news, is that Oshawa and its surrounding area is more diverse in its economy than it has been in the past, which will help slightly buffer the pain. However, the pain is coming, and it is real and far reaching.