It just doesn't make sense ... This will be a ghost town. It will be another Flint, Michigan ... I don't know what's going to happen ... I just bought a house. Mortgaged up. Got a new vehicle ... I work here. My younger brother works here. And my father works here ...

These were the comments of autoworkers in Oshawa interviewed by journalists outside a General Motors of Canada assembly plant as they left work on Nov. 21. That day the Detroit-based parent, General Motors Corp., announced it was closing 10 North American plants, including one in Oshawa, and laying off 30,000 workers, some 3,600 of them in Canada.

The GM restructuring will likely cost a lot of other people their jobs as well.

Parts manufacturers in Ontario predicted that 5,000 positions, and maybe as many as 11,000, could disappear from their industry.



And one local newspaper estimated that seven other workers depend on every auto assembly job, meaning 25,000 people could find their employment in jeopardy.

Politicians and economists were reassuring, of course. "There's going to be a little bit of contraction, no doubt about it," Ontario Premier Dalton McGuinty said, "but overall this is the fastest-growing jurisdiction in North America when it comes to the auto industry."

Bank of Montreal assistant chief economist Paul Ferley said: "There are likely going to be offsets elsewhere, even within the transportation sector."

Maybe they're right. Maybe you see the world more clearly if you're sitting in the premier's office or behind a desk way up in one of the bank towers in downtown Toronto.

But let's look at some of the problems besetting GM, whose share of the North American market has fallen to 26 per cent from 51 per cent in 1962.

Start with those nervous and bewildered workers at the Oshawa plants. Their facilities are rated among the best in North America in terms of efficiency and productivity, but that doesn't help much if your wages and benefits put you at a competitive disadvantage. Unskilled, hourly GM employees typically earn $65 an hour when benefits and overtime bonuses are included.

One man, a 28-year veteran, told reporters he makes $70,000 a year for driving cars from the end of the assembly line to a parking lot outside.

Another, presumably with less seniority, grosses $50,000 annually in the paint shop.

They also have a very good benefits package that includes company-paid top-up provisions to ensure that they will earn 90 per cent of their salary should they be laid off.

GM Canada does not have to cover health insurance costs for its workers, thanks to this country's public medical system, but its parent is the largest private buyer of health care in the United States. The company spends $5.2 billion annually on 1.1 million active and retired workers, which comes to about $3,500 per vehicle manufactured, and the employees do not pay anything.

"When you buy a Hyundai, you get a satellite radio as your option," says Robert Miller, chief executive of Delphi Corp., the parts manufacturer that GM used to own and which recently sought bankruptcy protection. "If you buy a Chevrolet, you get social welfare as your option. Long term, the customer is going to desert you if you try to price your social welfare costs."

Miller also contends that to be competitive globally, U.S. autoworkers ought to be compensated at a total hourly rate of about $20, including all health-care benefits and pension costs, which would lead to an hourly wage of about $10 per hour.

GM is also facing some other mammoth problems.

The company has an estimated $31 billion in unfunded pension obligations. It lost $4.8 billion in the third quarter of this year. Some analysts say it produces too many models and that its vehicles are not designed or manufactured as well as the competitors from Asia.

They also maintain that this pillar of the North American economy eventually may be forced to seek protection from its creditors in bankruptcy.

It is tempting to think that GM's difficulties are its own. Or that they are peculiar to the domestic auto industry. But that may be wishful thinking. High wages, generous benefits packages and rich pension plans are making many North American industries uncompetitive and jeopardizing our future prosperity.

It is not realistic to think that we can roll compensation packages back to the levels of emerging economies.

But something is fundamentally wrong and needs to be changed when unskilled labour earns $65 an hour plus benefits. And when someone performing the equivalent of a McJob - driving vehicles from the assembly line to the parking lot - earns $70,000 a year.

(D'Arcy Jenish can be reached at jenish@businessedge.ca)