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GM’s decision to close Oshawa plant raises fears for future of making cars in Canada




The sudden announcement that General Motors will stop making cars in Oshawa, Ont. after next year sent shockwaves through the industry on Monday. The impact of GM’s move could extend far beyond the borders of the community east of Toronto that has been synonymous with auto manufacturing for the past 65 years.

Joe McCabe, CEO of Pennsylvania-based consultancy Auto Forecast Solutions, said the news caught him slightly by surprise, even if he’s had concerns over the plant’s future for the past number of years.

In its heyday, the Oshawa facility produced almost a million cars a year. Multiple shifts of workers used to crank out more than one type of vehicle every day when the plant was operating at full capacity.

But in recent years, output has been limited to two gas-powered sedans (the Chevrolet Impala and Cadillac XTS) along with putting finishing touches on two trucks — the GMC Sierra and Chevy Silverado — that came up to Canada after being primarily built at a plant in Fort Wayne, Indiana.

McCabe said Oshawa was mainly producing “orphan products” — vehicle types that the company doesn’t really want to keep making.

It was buried in Canada by the Oshawa news, but GM also announced it will stop making a number of car models entirely, primarily gas-powered sedans that are no longer selling much and aren’t very profitable even when they do.

By the time the changes are fully implemented, GM plans to reduce its global workforce by about 15 per cent. And the company said three quarters of its sales will come from just five different types of cars. 

(Scott Galley/CBC)

It’s part of a push by GM to invest in places it thinks can make more money — electric, autonomous vehicles, and larger trucks and SUVs with high profit margins.

“When you look at a crossover, or an SUV, or a light truck, they are highly profitable vehicles for these manufacturers,” McCabe said. “It’s more beneficial for them from a financial standpoint to build what the consumer wants.” 

One of the Oshawa plant’s biggest selling points was the flexibility of its assembly line, making it more nimble and attractive as a place to produce future models. While GM could theoretically have rejigged the plant to build different types of cars, that didn’t happen because the company has enough under-used factories elsewhere.

“There’s really no product to retool it for,” McCabe said. “They’d just be shipping from another underutilized plant [and] it would leave them with two.”

Independent automotive analyst Jon Gabrielsen said the Oshawa plant fell victim to forces that are impacting the entire industry.

He notes that the company didn’t just drop the axe on Oshawa, but also singled out two assembly plants in Detroit and Ohio, along with two propulsion plants in Maryland and Michigan.

The Detroit-Hamtramck Assembly plant also makes the Impala, “and they’re closing it too,” Gabrielsen notes. The closure of the Hamtramck facility is significant because it’s GM’s last car assembly plant in Detroit — a city even more associated with automaking than Oshawa.

“If they had only cut Oshawa I would say we should expect more shoes to fall because that’s not enough to realign your footprint,” Gabrielsen said. “They think they’re done now.”

The GM plant in Oshawa losing production of the Camaro was a sign of trouble ahead, Charlotte Yates said. (Frank Gunn/Canadian Press)

Charlotte Yates, principal investigator at McMaster University’s Automotive Policy Research Centre, said the last round of negotiations with GM’s union were the first hint that the Oshawa plant faced trouble. The company refused to commit to a new product for the plant, after moving Chevy Camaro production.

“That suggested [Oshawa] wasn’t part of the long term plan,” she said.

The loss of GM’s presence in Oshawa, if it comes to pass, will reverberate through Canada’s entire economy, but the impact will be most acute locally. “That plant is like the centre of a manufacturing ecosystem,” she said. “[It’s an] anchor of the economy [so] with that gone it’s a real disruption.”

Reason for optimism?

That’s not to suggest the industry in Canada is now doomed.

Oshawa may be the Canadian city most associated with auto making, but many others have major parts or assembly plants and their futures aren’t looking quite as bleak.

Ford’s assembly plant in Oakville, Ont., should be safe, Gabrielsen suggests “because it makes SUVs which Ford is keeping.” And GM also runs the CAMI plant in Ingersoll, Ont., where it makes the Equinox, another SUV.

“That’s right in the middle of the type of vehicles that they feel consumers are moving towards for the next five years,” he said, calling the plant’s future “pretty safe.”

Beyond the car companies themselves, Canada is home to a cornucopia of auto parts firms, most of whom are members of the Auto Parts Manufacturers’ Association, led by Flavio Volpe.

GM alone spends $3 billion a year on parts and tools from suppliers across Ontario, Volpe said, money that supports thousands of jobs beyond those working for GM itself.

GM’s moves on Monday stem from a desire to shift away from gas powered sedans and into big trucks and SUVs, plus fully electric vehicles such as the Chevy Bolt shown here. (General Motors)

GM “deciding there may not be a path forward in the Toronto region is going to be felt across the country,” he said. Areas of the industry that have gotten the most investment in recent years include anything to do with autonomous vehicles and electric-powered cars.

Barely two years ago, GM announced plans to hire up to 1,000 engineers at a new facility in Markham, Ont. to work on software that will control self-driving cars.

Volpe said Canada has the right mix of companies and skilled workers to see more investments like that — moves that can filter down to assembly line workers, too.

Regardless of what advanced technology those next generation cars have under the hood, “they still have doors, and windows, and engines and body panels,” Volpe said. “Somebody’s got to make them.”

While Canada still has a role to play as a link on the North American automotive supply chain, Gabrielsen said Monday’s news from GM should serve as a warning to anyone associated with the industry. Other companies may soon “have to make the same type of decisions which may or may not impact Canada,” he said.

For now, his advice to Canadian car workers is blunt: Even if you don’t work for GM, “you need to worry.”


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Real Estate

5 ways to reduce your mortgage amortization




Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know




Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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Real Estate

5 common mistakes Canadians make with their mortgages




This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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