The third in a three-part series on the auto industry.

The threat of more layoffs by the big car companies, plus the possibility that autoworkers’ pensions will be reduced, is creating an aura of doom and gloom in auto communities such as Windsor, Ont. But as grim conditions are, desperation is not part of the picture for autoworkers in general, says Linda Brackell, senior financial advisor with Manulife Securities Inc. in Windsor.

“There’s a certain resolve in the air,” she says, “a resolve based on the belief that they will adjust as they have in previous periods of plunging auto sales, like 1979-82,” she says.

Windsor is the headquarters of hard-hit Chrysler Canada Inc. The company cut 1,200 jobs in the city in March at a minivan plant, which reduced its Canadian work force by about 15%.

Autoworkers are frustrated because they feel they are being blamed for causing the auto sectors’ woes and that they are expected to make huge sacrifices to fix the problems, when those problems are the result of auto company strategies in which they had no voice, Brackell says.

There’s a similarly dismal atmosphere in Oshawa, headquarters of General Motors of Canada Ltd., according to Glenda Baker and Sheila Munch, senior financial planning advisors at Assante Financial Management Ltd. in Oshawa. GM Canada laid off 700 workers in February because of the elimination of a third shift at an Oshawa assembly plant. It is also is closing a truck factory in Oshawa in May affecting 2,600 workers.

What exacerbates the situation in Oshawa is the development of two camps that hold fundamentally different views of the industry crisis. In one camp are those whose jobs are not related to the auto industry and believe assembly workers are paid too much and that GM has not been well managed and should be allowed to go bankrupt. In the other camp are those working for GM Canada who feel their wages and pensions are justified and blame the company for not taking full responsibility for pensions by underfunding them.

The worst hit among laid off workers are likely those in their late 40s or early 50s who have 10-15 years on the job, no transferable skills and haven’t been making RRSP contributions, says Brackell, who has many auto worker clients. They are a long way from receiving pensions, which may not be as big as they expect. They are at an age when retraining or moving to another location is difficult.

Young, energetic workers can restart their lives elsewhere. Brackell notes that there has been migration of some of these workers to Western Canada. Baker and Munch have also heard about younger skilled workers searching for jobs across Canada, pointing to one who had an interview in Alberta and another who applied for work in New Brunswick.

Also hard hit are households in which both spouses worked for auto companies or suppliers, says Munch. Families in which one spouse has been laid off from a job in the auto sector are less hard hit, particularly if the other spouse is a teacher, given the higher pensions teachers receive. But, the advisors say, because these families expected both spouses to have pensions they have to readjust their expectations.

The plight of retirees is also serious. “The retirees in our city are really being affected by all of this,” Baker says. They thought could rely on good pensions and great health benefits. Now, she says, they are uncertain of these benefits — particularly because information is difficult to find and seems to change quite frequently — and are very scared.

“They are very aware of the fact that the Ontario Pension Benefit Guarantee Fund is already in a deficit,” says Baker. “The sentiment of many GM employees and retirees is that the union let them down [first], then the company and now the government.”

Many retirees in Oshawa are former lifetime GM Canada workers who left work as soon as they had 30 years under their belts. “Most did not live extravagant lifestyles,” says Munch. They knew that they would have to adjust their standard of living in retirement but felt they could do so. Now they face the prospect of having to sell their homes — in what is a depressed market — and try to live on the proceeds. “I would not want to sell my house in the next little while if I lived in Oshawa,” says Munch. “These are very troubled times.”

@page_break@Baker adds that Oshawa has a substantial commuter population that works in Toronto and will be affected by downward price pressure on their homes. At the same time, many GM employees live outside Oshawa, so other communities will be affected as well.

Laid-off workers with longer service, and especially those who have built up RRSPs, are in better shape. Brackell says that many autoworkers have made RRSP contributions, although probably on average only about half of the $6,000-$9,000 that would have probably been their contribution ceiling. Baker and Munch say their clients have tended to make contributions, although not generally to the maximum. However, they note that those who seek financial planning advice are not typical GM workers.

Brackell says it is difficult to convey a sense of urgency to people who had what they viewed as secure pensions to save additional funds for retirement in prosperous times — even though autoworker pensions generally provide only 40%-50% of what was previously earned.

Some listened, says Brackell, but many didn’t. Those laid off workers who didn’t listen are now struggling; for them the biggest issue is to reduce spending quickly enough so that it doesn’t eat up the severances that have been provided.

Brackell says some severance packages are being offered to auto assembly workers. Those who opt for these packages and do not yet have 28 years experience and have not yet reached the age of 55 can take their share of pension monies and transfer them to a locked-in retirement fund. They can also shelter the severance money to the extent that they have unused RRSP room and also put some into tax-free savings accounts.

The companies are offering $90,000-$125,000 for workers more than 28 years of service with the company, with their pensions kicking in the day they retire. In the case of GM Canada, the package includes a $35,000 car voucher, which is a taxable benefit.

The more older workers take these packages, the more hope there is for younger workers who are raising or about to raise families to keep their jobs, says Brackell.

Wednesday: How low will U.S. auto sales go?

Thursday: The auto industry’s shrinking footprint

Friday: The view from the assembly lines

IE:TV: Auto sector clients planning for cash flow shortfalls



Linda Brackell, a senior advisor with Manulife Securities Inc., discusses her client base in the auto manufacturing sector, the packages her clients have been offered and their financial challenges. She spoke at her office in Windsor, Ont.

IE