TORONTO - If the North American auto industry was the featured character in a hospital drama, it would have spent most of the year surrounded by doctors and nurses frantically shocking its chest with a defibrillator.
Finally, after months of desperate life-saving work in the emergency room, the industry's pulse, faint as it may be, has returned. But it will take years for the patient to recover and it will probably never be the same again.
"It's going to be a dog-eat-dog world, every single day forever. I don't see light at the end of the tunnel," said Ken Lewenza, president of the Canadian Auto Workers union.
There is no doubt 2009 was the most dramatic year the North American auto industry has ever struggled through. Years of tough times resulting from a weak product mix and fierce competition from overseas automakers like Toyota and Honda meant that when the recession hit in late 2008, the North American industry was already on its knees.
The most dire predictions at the beginning of 2009 foresaw two of the so-called Detroit Three going out of business, taking hundreds of suppliers with them and further devastating the Canadian and U.S. economies.
Luckily for the two most troubled automakers, General Motors and Chrysler, governments on both sides of the border decided the industry was too important to let that happen.
In the spring, the federal and Ontario governments said they would invest a combined total of more than $14 billion in GM and Chrysler, while the U.S. government contributed billions more, making all three governments partial owners of the two companies. Workers also gave significant concessions to the automakers, with the CAW helping them cut labour costs by approximately $20 per worker per hour in exchange for production guarantees.
Both GM and Chrysler filed for bankruptcy protection in the U.S. and have since emerged to pursue wholesale restructuring plans which have already seen Chrysler partner with Italian automaker Fiat and GM overhaul its management and revamp its product lineup.
How successful they will be remains an open question, but there's no doubt that whatever happens will have a major impact on all stakeholders in the Canadian industry - workers, parts suppliers, dealerships and government.
Due in large part to troubles at the Detroit Three - Ford (NYSE:F), even though it avoided a government bailout, has not been immune to the difficulties plaguing the industry - employment in Canadian assembly plants plunged to approximately 35,500 in 2009, its lowest level since 1963.
"Think about this for a minute: we've wiped out all the employment gains from the Autopact, the FTA, NAFTA, the move into Canada by Honda, Toyota and (former GM-Suzuki joint-partnership plant) CAMI," wrote auto analyst Dennis DesRosiers in a recent commentary.
"Forty-four years of employment growth wiped out in a matter of months."
In the parts sector, employment fell by almost 25 per cent in the last year alone, and overall employment in the industry is down 37 per cent from its high in 2000. In addition, hundreds of Canadian dealerships have closed due in large part to GM's decision to cull approximately 250 stores in an attempt to cut costs.
All of Canada's assembly plants and most of its parts makers are located in southern Ontario.
This sharp decline in employment was the result of falling demand for new vehicles during the recession. Overall vehicles sales in Canada were down 12.5 per cent year-to-date in November, and the decline in the States is almost double that. U.S. sales are even more relevant to the Canadian manufacturing industry than domestic sales, as 62 per cent of parts and 80 per cent of finished vehicles manufactured in Canada are exported to the States.
Despite this, 2009 has had a few bright spots for Canada. Due in large part to a push by the federal and Ontario governments and the CAW, Canada has secured a very popular mix of vehicles for its assembly plants, which led to increased employment in the last few months of the year.
"The fact of the matter is we've got some pretty hot products, and we've got new products coming in, so I'm feeling better, but it can't get worse," the CAW's Lewenza said.
"Worse means bankruptcy, worse means liquidation, worse means tens of thousands of workers out of jobs and retirees out of pensions."
However, this doesn't mean the entire industry is out of the woods yet.
"The area of biggest vulnerability for Canada is automotive suppliers, because of the very high level of supplier employment related to exports, primarily to the U.S.," said Bill Pochiluk, president of industry adviser AutomotiveCompass. "They're disadvantaged right now because of cost-structure issues and the exchange rate."
The parts sector employs almost twice as many Canadians as the assembly sector, but tends to receive less attention because it consists of several small employers rather than a few major ones. Still, Canada's supplier industry does include a few big-name companies, including Aurora, Ont.-based Magna International (TSX:MG.A), which was in the news this year for its role as failed suitor to GM's European division, Opel.
The fact that Magna was unsuccessful in its bid to move into the auto assembly business in a major way is probably good news for the Canadian supplier industry, as its biggest employer can now turn its attention back to its main business. But there is little doubt other, smaller suppliers will continue to go out of business as the industry adapts to a "new normal," said Tony Faria, co-director of the automotive research centre at the University of Windsor.
"In addition to the market still being slower than it has been in the past, the suppliers still have tremendous difficulty getting financing to operate their businesses," Faria said. "Cash-flow-wise they're still suffering badly."
While 2010 will see "relatively modest or slow growth" in North American vehicle production rates, the industry will probably never return to the "extraordinary years" of 1999 through 2007, which saw production rates of around 20 million units a year, Faria said. This compares to total light vehicle production of 7.7 million units in the first 11 months of 2009.
"Now, the anticipation is that the market is going to grow back to levels of 16 million or 17 million units in the future, by about 2015 or 2016, but we're not going get up to that 20 million-unit mark," Faria said.
"So the industry will have to get along with smaller volumes in North America than we've had in the past."
The key will be for governments to encourage innovation through funding for research and development to ensure Canadian suppliers stay on the cutting-edge of the smaller industry. If Canadian governments don't support innovation in the parts industry, the Canadian-made content of vehicles built in North America will continue to erode, Pochiluk said.
"Our quantitative review of Canadian content says that we need to be increasingly aware of the erosion of Canadian content to possibly find strategies to improve that content, and the best way to do that will be to increase the competitiveness of the supply chain," he said.
With Scotia Economics predicting Canadian vehicle output will jump 89 per cent in early 2010 compared to a year earlier, there is no doubt next year will be a time of convalescence for a sickly industry. But the recovery will be a long - and sometimes painful - one, and it's unlikely the Canadian auto industry will ever return to the full health it experienced in the first part of this decade.
"If you said to me, what do I expect in 2010, I expect to wake up in the morning and have as many challenges as we had this year," Lewenza said.