Wednesday, August 23, 2006

Ships versus Cars

After a bit of a delay, your humble scribe is back from the hell that comes from moving one’s abode in the midst of a Toronto heat wave, just in time to ponder a couple of recent business announcements.

General Motors this week decided to prep their Oshawa, Ontario, facilities for the production of the new Chevrolet Camaro, slated to begin rolling off the line in 2008 and assuring some 2700 jobs. To do so, GM is planning to invest $740 million (Canadian), a hefty sum of money that comes just a year after the company announced a $2.5 billion reinvestment in their Canadian operations, the largest such expenditure in this country’s automotive history.

Pretty impressive, eh? (I mean the money involved, not the Camaro’s lines.)

Well, not compared to what’s going in shipbuilding circles. As most North Americans enjoyed their summer holidays, Hyundai Heavy Industries (HHI) quietly announced a record set of newbuilding orders for vessels at their Korean shipyards. HHI is one of three Hyundai operations based in Ulsan, on the southeast coast of the Korean peninsula, and the recipient of $2.3 billion (US) in orders in just one month. That’s for 22 vessels. Things are so hectic at the Ulsan yards that they've run out of dry docks to construct ships in and are crafting some of them on the quays, to be later side-launched into the harbour.

What should be of interest here is that GM’s massive investments are for vehicles that have no pre-determined buyers – they’re betting there will be a market for the Camaros once production commences. Hyundai, on the other hand, is merely responding to the continuing – almost insatiable - demand for new vessels by eager buyers.

The auto industry is considered a key market indicator in North America, but are muscle cars really the panacea needed for our economy? Canada – and the U.S. and Britain – long ago wrote off shipbuilding as a viable industry worthy of the support it needed. Too bad, because a couple of billion dollars worth of orders in a single month is nothing to sneeze at.