Sheet Metal Stamping Simulation

When Lear Corp. (LEA-N109.362.622.45%) turned out the lights nearly two years ago at a plant in Ajax, Ont., that made seats for GM pickup trucks, Steve Batchelor knew it was game over. There was no hope of it ever reopening, he believed. “We were finished.”

In the grim days of May, 2009, leading up the Chapter 11 bankruptcy filing by General Motors Corp., it was hard to see how the auto industry could be turned around.

As it turns out, Mr. Batchelor, the president of local 1090 of the Canadian Auto Workers union, was wrong. Thanks to a Canadian and U.S. taxpayer bailout of tens of billions of dollars for GM and Chrysler, a catastrophic collapse of the auto industry was averted and it is clearly on the road to recovery. And a small piece of that recovery is evident in Ajax, east of Toronto, where the Lear factory is running again, making seats for Chrysler Group LLC.

The mood in much of the industry is buoyant, especially at this week’s North American International Auto Show in Detroit, about a 20-minute drive from Lear’s corporate headquarters in Southfield, Mich.

Ford (F-N18.65-0.03-0.16%) is adding 7,000 factory jobs in the United States, GM has returned to profitability and Chrysler Group would also be reporting profits if not for more than $1-billion (U.S.) in interest payments annually to the governments that bailed it out in 2009. One senior executive at a multinational auto parts maker – an industry veteran who has seen both its slumps and its prosperous times – describes the prevailing sentiment as “almost giddy euphoria.”

The question is how much of that euphoria will translate into new investments by auto parts makers in Canada – creating new jobs here and returning the industry to its pre-crisis days, when the auto sector was an eight-cylinder engine driving manufacturing in Canada.

“It’s not clear we can get back to that eight-cylinder level,” says Doug Porter, deputy chief economist at Bank of Montreal. “Ultimately, the question hinges on whether U.S. auto sales will return to pre-crisis levels on a sustained basis. I think that’s questionable. At the very least, it’s going to take a number of years.”

Before surging gas prices and the liquidity crisis hammered auto makers in 2008, ultimately sending Chrysler and GM into Chapter 11 bankruptcy protection and causing a massive restructuring of the entire industry, auto makers enjoyed sales of 16 million vehicles annually in the U.S. market.

Parts makers went along for the ride, with employment in the sector holding above 87,000 in Canada as late as 2007. Then it began to shrink, and quickly. For every 10 jobs in Canadian parts factories then, only seven still exist today, as employment shrank to 61,235 as of last October.

For 350 workers at the Lear plant, the ride ended on May 14, 2009, when GM closed its pickup truck plant in Oshawa, Ont., the only customer for the seats they put together in Ajax. The Lear plant was up for sale at one point, Mr. Batchelor says.

After it closed the plant, Lear won a contract with Chrysler to provide seats for the auto maker’s redesigned large sedans, which are assembled in Brampton, Ont., northwest of Toronto.

Lear was looking for a non-union supplier paying wages in the $14 (Canadian) to $15 range, Mr. Batchelor says.

CAW negotiators won the work for Ajax by agreeing to cut wages to $19 an hour from the $28 they were earning when they made seats for GM, and by shifting to a mix of defined-contribution and defined-benefit pension plans from a straight defined-benefit plan

Some workers view that as accepting concessions, Mr. Batchelor acknowledges. “I certainly take a different view of that. We were out of work so we went from a wage rate that used to be applied to the GM to zero, to nothing, to not having any work or potential work coming into the plant.”