Ford layoffs another hint Canada is heading for peak car: Don Pittis

It is sometimeshard to explain to young people how crucial the automotive industry used to be when I was growing up.

Cars are still a huge part of our lives. The retail portion of theindustry remains an important employer, andwith its glamorousadvertising and gleaming showrooms, persists as a quintessential symbol of consumer lust. A large Canadian auto parts sector is still a global player.

ButFord's latest announcement that it is once again slashing jobs and shrinking its operations in Canada is only the latest signal that the car business is becoming less relevant to the economy and less important to many of our lives.

Almosta year ago, General Motors announced it would be shutting down a plant this December, an unwelcomeChristmas present to Oshawa, Ont., which will likely losethousands of preciousindustrial jobs.

The job losses may be part of a more general movement of industrial employmentfrom the U.S. and Canada to lower-wage countries, as recently described by Canadian economist and author Jeff Rubin.

"The North American Free Trade Agreement might have been a godsend for auto manufacturers, but it has been a nightmare for Canadians on the assembly line, just as it has been for their American counterparts," Rubin wrotein the New York Times earlier this month.

Already peaked?

But according to other analysts, the loss of car jobs is part of a larger global phenomenon sometimes calledthe peak car hypothesis, usually attributed to British academic Phil Goodwin, a longtime transportation policy expert at University College London.

A series of studies publishedsince Goodwin wrote about the subject sevenyears agopurport to show that due to congestion, rising costs, increasingly urban living conditions and the fact that consumer electronics have taken the place of the caras objects of youthful consumer yearning, kilometresdriven per person have peaked and are starting to decrease.

A flurryof media reports in 2012prompted by Goodwin and others likeMichael Sivak, from the University of Michigan Transportation Research Institute, pronounced peak car had happened or was happening.

"Among the 15 economically advanced countries [Sivak] analyzed, he found that places with a higher number of Internet users correlated with lower licensure rates among youths between 20 and 24 years of age including in the United States,"Scientific American magazine reported.

Since then, many critics of the peak car theory have said the decline in North America, at least was due to the recession that followed the 2008 credit crunch. During research fora recent story on mobility as a service, automotive analystDennis DesRosiers told me that although figures show the growth in car sales had been tailing off, "vehicle ownership in Canada is at all-time record levels, and it's been increasing."

But yesterday, a new report from the news wire service Reuters projectedthat numbers out Friday will show that U.S. automotive sales in Octoberdeclined by 1.3 per cent, according to two automotive consultancies, J.D. Power and LMC Automotive. Canada is unlikely to do better.

Growing fears of recession may be contributing to the decline as car-buyers decide to make do rather than splash outon a new vehicle. But the report says rising costs, partly because the cars being sold are pricey SUVs and trucks, are an increasing barrier, forcing automakers to offer large enticements.

"Incentive spending is on pace to exceed $4,000 per unit for the fourth consecutive month as record levels of old model-year inventory persist," the auto analyst reportsays.

It's different this time

Sales of autos, as with other expensive consumer goods, inevitably riseand fallwith the health of the economy. But as I have reported in the past, there is growing evidence that something different may be underway. Whether it is happening now or will happen eventually, the logicpersists that as more people move tocities that are increasingindensity, making roads more congested, the utility of owning a car will fall.

But whether ownership and kilometresdriven have reached a peak, what seems even clearer now is that as Ford and GM reduce their Canadian production, auto industry production here hasbegun to decline, only made worse by the recent GM strike in the U.S. that led to shutdowns in the Canadian parts industry.

Before the Second World War,Canada was the second largest car exporter on Earth. After the war, Canada slipped to number3, and with foreign competition and the export of jobs to low-wage countries, Canada's share has continued to decline ever since. Estimates showproductiondown about six per cent this year, with sales down nearly fourper cent.

In the decades after the Second World War, automotive manufacturing was seen as a keystone industry for the Canadian economy, creating"core employment" that brought money into the community and helping to sustain many more jobs, from shoe salespeople to accountants.

As well as providing core manufacturing jobs in its own right, the sector contributed to jobs in upstream industries such as design, engineering,steel making and mining. With the globalization of the industry, now many of those jobs have moved elsewhere. And if we've reached peak car, it's unlikely they are coming back.

Follow Don on Twitter @don_pittis