GM wants Ajax supplier to cut prices 50%

General Motors is reportedly demanding that sub-assembly contractor Automodular Corp. must cut its prices in half at GM's Oshawa car plant or risk losing its contract.

Automodular said this week that it was "evaluating its options" after receiving written notice from GM.

The Ajax-based company, which sub-assembles components and modules used in the manufacturing of cars and trucks and employs 650 people, said GM has demanded "an approximately 50 per cent reduction in the price of its services" at the Oshawa assembly plant.

Otherwise, it risks "losing the business as early as August 2010."

GM Canada, whose parent company recently emerged from bankruptcy protection in the United States, has been looking to cut costs. The face of the North American auto industry has been changing for years, but the pace accelerated dramatically over the last 18 months with the global financial crisis and recession.

GM and Chrysler both filed for U.S. bankruptcy protection last spring, and managed to survive with the help of tens of billions of dollars in U.S., Canadian and Ontario government loans.

GM Canada pared back its Canadian operations to deal with the new market reality, closing a truck plant in Oshawa, with the loss of about 2,600 jobs.

The company also plans to shut down a transmission plant in Windsor, affecting another 1,400 jobs.

And although the company has begun rehiring some laid-off workers recently, it has also moved to close more than 200 of its 700 GM dealerships in Canada.

Word of the Automodular price squeeze at the Oshawa plant was disclosed on the same day the company reported a return to profitability in the fourth quarter with earnings of $2.1 million or eight cents a share.

That compared with loss of $10.3 million or 40 cents a share in 2008.

Revenue for the quarter was $22.8 million, up from $16.4 million in the year-ago period.

Automodular is a supplier to three original equipment manufacturing plants in Ontario and Ohio. The company has four operating facilities.

The Canadian Press

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