Oshawa and Windsor: Company Towns Looking for New Life

UNCLAS SECTION 01 OF 02 TORONTO 000161

SIPDIS

STATE FOR EBB/TPP/MTAA
PASS TO USTR

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV EIND PREL PGOV CA
SUBJECT: Oshawa and Windsor: Company Towns Looking for New Life


1. (U) Summary: Ontario's auto manufacturing sector has been deeply
affected by the current economic downturn, resulting in the
province's highest unemployment rate (9.6%) in 15 years. Oshawa and
Windsor are two Ontario cities that are heavily dependent on the
auto sector. Both cities are looking to develop alternative
industries in an attempt to diversify their economies and to help
increase stability. End Summary.

--------------
AUTO SECTOR PAIN ACUTE
--------------


2. (U) Employment at auto assembly plants in Ontario fell 13.4% in
the past year to fewer than 37,500 workers, the lowest level since

1973. Manufacturing jobs in the province are expected to shrink to
26,400 by 2013, according to the Conference Board of Canada.
Parts-sector jobs in Canada have shrunk by 23.7% to about 62,200,
the lowest number since 1982.


3. (U) Two of Ontario's major manufacturing centers, Oshawa and
Windsor, have been especially hard hit by the current economic
downturn despite being hundreds of miles apart. Windsor, where
Chrysler Canada is based, is considered the automotive capital of
Canada. Located next to Detroit, 23% of all jobs in Windsor are in
manufacturing, most of which are auto-related, compared with 13%
province-wide. 230 miles southwest of Toronto, Windsor has a
population of 208,402. In Oshawa, 40 miles east of Toronto, where
General Motors Canada (GM Canada) is based, about 18% of the economy
is made up by the auto sector. With a population of approximately
152,000, Oshawa is the dominant economic center of largely-rural
Durham Region.


4. (U) In May 2009, 42,000 Ontario jobs disappeared, mostly in
manufacturing. Many of these losses were the result of structural
economic change, and are unlikely to ever return, according to an
auto industry expert. At 14.4%, Windsor currently has the highest
unemployment rate of any metropolitan area in Canada. In March,
12,550 Windsor residents collected employment insurance (EI),an
increase of 92.2% compared to a year ago.


5. (U) In Oshawa, unemployment increased to 8.7% in June 2009, up
almost a percentage point since May. Though that is above the
national average (8.6%),Oshawa's rate remains below the provincial
average (9.6%). The lower-than-expected unemployment rate is in
part due to the fact that many Oshawa residents continue to commute
to Toronto for work. Some laid off workers from GM's Oshawa
facility had commuted from nearby communities such as Peterborough
and Cobourg, and thus are not counted in Oshawa's unemployment rate.
Still, the number of EI claims in the Oshawa area was up 36% to
8,200 in May.

--------------
AUTO-RESTRUCTURING AFTERMATH
--------------


6. (U) Although some industry experts speculate that the auto sector
will recover in Ontario, Oshawa and Windsor are looking at new
possibilities in the industrial and service sectors to boost their
respective economies. The University of Windsor has commissioned a
C$110-million engineering innovation center and will start
construction this fall. The center will continue to service the
area's traditional industries, specializing in mechanical and
automotive engineering. In 2006, the Windsor-Essex region was named
one of the top 20 research communities in Canada by Research
Infosource, indicating potential for advancing innovation and
commercialization of life sciences in Windsor.


7. (U) Even though Windsor currently has no nuclear power
production, with its highly skilled manufacturing workforce, it
could be a strong candidate for developing alternatives to the
area's traditional industries, possibly including energy production
(nuclear, solar and wind). Glenna Carr, chair of Atomic Energy of
Canada Ltd. (AECL) said in March 2009 that the region could expand
into the nuclear sector by creating partnerships between government,
educational institutions and the private sector to create
transitional learning for skilled workers. (Note: The future of
Canada's nuclear program is unclear since the GOC is considering
privatizing government-run AECL. End Note.)


8. (U) The Ontario government, in conjunction with Oshawa-based
University of Ontario Institute of Technology (UOIT),has committed
to using nuclear power to produce hydrogen as a sustainable source
of energy for automobiles. The future of this project is also
uncertain until a decision is reached on the future of AECL. Still,
Oshawa-based Durham College and UOIT will receive a combined total
of C$65-million of stimulus from the provincial and federal
governments, C$45-million of which will be used to construct an
energy systems and nuclear science research center at UOIT. GOC

TORONTO 00000161 002 OF 002


officials hope that the center will ensure UOIT's place as Canada's
leading university for energy research.


9. (U) Comment: Both Windsor and Oshawa remain heavily dependent
upon auto manufacturing for their prosperity. Although Windsor has
the potential to develop alternative industries, including
manufacturing and nuclear energy production, AECL's uncertain future
privatization weakens its economic prospects. Like Detroit, Windsor
may be too closely tied to the automotive sector to come out of its
economic troubles ahead of a larger recovery by the Detroit Three
automakers. Oshawa has a chance of rebounding if it can capitalize
on its strengths in the energy and manufacturing sectors by focusing
on renewable energy. With its more diversified economy and role as
a bedroom community for Toronto, Oshawa is likely to recover more
quickly if the Province can maintain a relatively healthy economy.

BYSFIELD