Posts Tagged ‘economy’

Last week’s threat by Chrysler to close Canadian plants if it doesn’t win big concessions from the CAW is possibly one the most troubling announcements since the beginning of the auto industry meltdown.

Tom LaSorda, Chrysler president, said the company needs to lower its labour costs by about 25%, reducing wages from the current estimated to $75/hour to $55/ hour. LaSorda also said the company would require $2.3 billion USD in government bailout funds for Chrysler to continue manufacturing in Canada.

Currently, Chrysler directly employs an estimated 10,000 people in Canada. This number does not factor in the parts suppliers, dealerships and distribution centres who deal with the auto giant. The withdrawal of Chrysler would possibly force some parts companies and distributors to close entirely. And since suppliers usually sell parts to more than one auto maker, it would send other car makers clambering to find parts, eventually slowing production lines to a halt.

Some argue that over the long term, the loss of Chrysler might not be the worst thing to happen and prove advantageous for Ford and GM. The two remaining companies could theoretically pick up the slack for Chrysler in their absence.

Many are shaking their heads, calling it an idle threat. Shutting down operations in Canada would cost millions of dollars, not to mention a lot of time. While the auto industry as a whole would likely endure such a move, the move could potentially have severe impacts and pose countless problems across the board. Chrysler would have to shift production lines from Windsor and re-open their US minivan plant, should the current Windsor plant (where approximately 4,000 Canadians are employed) face closure. This would be an extremely costly endeavour.

And what of the effect this would have on the CAW, the very people Chrysler is demanding the concessions from?

Pundits and industry analysts say the threat is very real and not to be taken lightly, as Chrysler could very well transfer Canadian production to plants in the U.S. in a matter of months.

But historically, Chrysler has also made similar threats before (to varying degrees), and yet, are still here. CAW president Ken Lewenza has also recently asserted that Chrysler will not pull out just yet, anyway, as they have a three-year collective agreement with terms that prevent them from selling or closing plants for the duration of the agreement.

Readers: what are your thoughts?

The current economic recession has proven to hit even harder than many economists anticipated. An estimated 129,000 Canadians lost their jobs in January alone, of which Statistics Canada reports that Ontario workers lost a staggering 71,000. Alberta, once a thriving, profitable province, is even feeling the blow, having recently announced another 15,000 jobs lost. Forecasters predict a loss of yet another 250,000 manufacturing jobs over the next five years if the Canadian manufacturing sector follows similar trends occurring within the developed industrialized nations.

For several industries, there is little to no chance of a significant sales increase in the near future. With businesses grasping at straws to stay afloat in this downturn, it is more critical than ever to find a way to increase revenue.

Canada is internationally heralded as a leader in R&D funding for domestic-owned small to medium sized enterprises. The SR&ED program (Scientific Research & Experimental Development) is one avenue that businesses, especially manufacturers, can pursue to improve their bottom line. The goal of the federal SR&ED program is to encourage experimentation and technological advancements within Canadian companies, and this is of particular benefit in the recovery of our economy.

“Companies need to sit back and assess their individual circumstances. It’s time for a second look at the SR&ED process, whether you’ve claimed previously or not.” says Ajay Sinha, VP Operations with Northbridge Consultants. “That old adage is true – knowledge is power. In regards to capitalizing on the benefits of SR&ED, it is worthwhile to seek assistance from a reputable SR&ED consultant.” Sinha is reminding clients that the CRA has hired more auditing staff and made many revisions to the T661 and filing process. He emphasizes that navigating the maze of technicalities correctly is imperative to maximize the size of your claim, and increase the rate of approval to enlarge the dollar amount of returns or tax credits. “It’s a sink or swim situation.”

Sinha mentions that “For those who have had a negative experience or have been disappointed with the results, it is often due to qualifying activities that have been overlooked, and thus not claimed for, resulting in a much smaller return, or in some cases, rejection of the claim.”

Many companies use their SR&ED returns of offset incurred development costs. Alternatively, funds can be invested in new equipment and materials, new hires, or even facility expansion. Sinha adds “We also teach our clients how to track their future eligible activities to make documentation for claims easier and more substantial. This promotes repeated success with the program in the future. The extra resources to put towards the advancement of technology also give Canadians that edge above competitors internationally.”

A short while back, Heather Reisman (President and CEO of Indigo books) was interviewed on The Hour, and brought up a couple of points that piqued my interest. According to Reisman,

• 40% adult Canadians functionally illiterate
• That 40% of Canadian adults are the biggest drain on social services, hospitals, and are more likely to end up in jail
• By increasing literacy in adult Canadians by 1%, we would be adding $17 billion to our economy

In all honesty, I was a little surprised and greatly skeptical about the figures Reisman brought forth, especially about how increasing literacy could help our economy. So I’ve done some research, and have uncovered some facts. But first, the United Nations Educational, Scientific and Cultural Organization has defined literacy as

the ability to identify, understand, interpret, create, communicate, compute and use printed and written materials associated with varying contexts. Literacy involves a continuum of learning to enable an individual to achieve his or her goals, to develop his or her knowledge and potential, and to participate fully in the wider society.

United Nations Educational, Scientific and Cultural Organization (UNESCO)

In other words, if you aren’t literate you can’t communicate well enough to survive well in the Canadian job market.

In 2003 a survey was done by the Government of Canada, among other organizations, called the Adult Literacy and Life Skills Survey. This survey tested over 20,000 Canadians on their literacy, and it discovered that only 58% of adult Canadians had good literacy skills. So, that leaves 42% who don’t have good literacy skills. Wow!

But how would improving literacy skills help out economy?

• Studies have been done that show that low literacy skills can be related directly to poor health, social assistance, poverty and unemployment.
• If people are more literate, they will be more likely to get better paying jobs. This would decrease the amount of government spent on employment insurance and social assistance.
• More people with good literacy help with economic growth.

I don’t know exactly how money much that would save or make, whether Reisman’s figure of $17 billion is right, but it is some food for thought.

Stores opened even before the crack of dawn, but many Boxing Day shoppers were lining up as early as the night before, some admittedly even forsaking Christmas dinners to be first in line and take advantage of the savings. As the day wore on, the dangerously icy roads and miserable rain still didn’t stop shoppers from flocking in droves.

While many retailers were hopeful that this Boxing Day would provide a much needed boost to year-end sales, and for some it did, many have already been offering low post-Christmas prices since as early as late November in an effort to draw crowds.

The decline in our dollar was predicted to lessen the competition with American online competitors for our retailers this Christmas season. Nevertheless, in spite of the weakened loonie and overall economic recession, online shopping held strong. Amazon is reporting that the 2008 holiday season has been the online retailer’s best yet. On its peak day, December 15th, 2008, Amazon received over 6.3 million orders. E-commerce giant PayPal is also reporting better sales for 2008. An Ipsos-Reid survey to over 1,000 consumers commissioned by PayPal Canada concluded a 40% increase in online shoppers from two years ago.

However your shopping was done, whether you chose to stay inside and spend time with family or brave the crowds and shop til you drop, we at Northbridge hope your holiday season has been safe and happy. All the best in 2009.

Things may seem bleak at the present; however, the Canadian economy will eventually recover.  Dungan and Steve Murphy at the Policy and Economic Analysis Program expect that the Canadian governnment will run deficits for a few years and they urge Ottawa not to repeat the mistake of raising employment insurance premiums before a recovery.

Low prices for oil and other natural resources will slash corporate profits and government tax revenues, forcing Finance Minister Jim Flaherty to revise numbers in his recent economic update. But Dungan says a dollar near 80 cents (U.S.) next year and U.S. spending on infrastructure should give manufacturers breathing room before oil and other commodity prices rise again and lift the dollar back above 90 cents by late 2010.

Dungan’s forecasts assume Canada will still have an auto industry. But its export value has already fallen from about 10 per cent of Canada’s total economic output in 2000 to about 4 per cent, he says. Meanwhile, his economic model suggests the fall of the dollar to 80 cents would normally be enough to offset most of the effects of a U.S. economicslowdown.

For Canadian businesses, this means that good times will eventually return.  The challenge is to hang on until we can see the light at the end of the tunnel again.