The decline of America’s car industry has hurt the Canadian economy too. Revival depends on making it easier to cross the border—or on seeking markets elsewhere

Illustration by David Simonds

FOR almost a century the fate and fortune of Windsor, Ontario, have been intertwined with those of Detroit, Michigan. General Motors (GM), Ford and Chrysler made cars on both sides of the Detroit River, sending parts and vehicles back and forth at will. Windsorites worked in the car plants, loyally bought the cars, followed American sports teams, and thought nothing of driving over the Ambassador Bridge or popping through the Detroit-Windsor tunnel for a night on the town.

So the collapse into bankruptcy of GM and Chrysler has brought Windsor down along with Detroit. A blue-collar city of 273,000 people, Windsor now has the highest jobless rate in Canada (14.4%) and faces an uncertain future. Its decline is visible on Ouellette Avenue, the main commercial artery. On some blocks, more shops have shut down than are still open. The brightest sign on the street announces the grand opening of Dollarama, a deep discount store. On the riverside promenade the headquarters of Chrysler Canada, opened with much hoopla in 2002, stands partly empty, a “For Rent” sign on the plate-glass window of its showroom. Truck traffic between Windsor and Detroit—the busiest crossing-point on the Canadian border—fell by a third in the first six months of this year compared with the same period in 2008.

Windsor's woes are echoed across southern Ontario, the heartland of industrial Canada, which depends on exporting to the United States. Tighter security at the border after the terrorist attacks of September 2001 and a stronger Canadian dollar constrained the region's economy even before the American economy plunged into recession in late 2007, with Detroit leading the decline.

Between them, Canada's federal government and Ontario's provincial administration contributed C$14.5 billion ($13.4 billion) to the bail-outs of GM and Chrysler. That was enough to deter them from pulling out of the country. But they will cut a slimmer figure. Output and employment in Canada's car industry will end up at least a third below the 1999 peak of 3m vehicles and 160,000 workers at assembly plants and parts-makers, says Dennis DesRosiers, an industry analyst. It helps that Toyota and Honda, with factories in Ontario, are keeping most of their workers.

Ontario's problems go wider than cars. Recession has curbed demand for its minerals and forest products. Nortel, a telecoms firm that was once Canada's leading high-tech company, recently entered bankruptcy. Bits of it are being sold off piecemeal. Two-thirds of the 370,000 jobs lost in Canada between October 2008 and June 2009 were in Ontario, most of them in manufacturing.

Ontario's economy is still the biggest in Canada. But it is no longer the richest. Indeed Ontario is now classified as a have-not province, making it eligible for handouts from a federal fund to equalise public spending across the country. It has even been granted its own federally funded economic development agency.

Some pundits reckon that rather than bailing out industrial dinosaurs government should be encouraging new technologies. Supporters of Dalton McGuinty, the province's premier, say that he had no choice but to help to bail out the car industry because of its size. (He also offered a subsidy of C$10,000 to each purchaser of an electric car.) Critics contrast this largesse with the government's failure to help Nortel. Stephen Harper, Canada's Conservative prime minister, faces nationalist pressure to veto a bid of $1.1 billion from Sweden's Ericsson for its wireless technology division and find a Canadian buyer.

Even in car-mad Windsor people are starting to realise that change is inevitable. Eddie Francis, the mayor, says he hopes to make the municipal airport a processing centre for perishable cargo. He says that some of the city's car-parts makers have started supplying oil companies and Quebec's aerospace industry.

But diversification is not easy. Caesars Windsor, a massive casino, convention centre and hotel aimed at the 17m Americans who live within a three-hour drive, is suffering along with the car industry. Its workforce has shrunk from a peak of 5,400 before 2001 to 3,800 today. “It's not true that casinos are recession-proof,” says Keith Andrews, the casino's spokesman. He is sitting in the hotel's 10,000 square-foot (930 square-metre) lobby, where statues of Roman gods and goddesses outnumber guests.

Canada's economy, like that of the United States, shows signs of recovery. Though weakened, the car industry will survive. The biggest headache for places like Windsor may be the thickening border. Since June 1st those returning to the United States from Canada have been required to show a passport (or another approved identity document), where a driving licence was always sufficient. Janet Napolitano, the secretary for homeland security, talks of treating America's northern border more like its southern one with Mexico (where the building of a fence on long stretches continues).

Security measures are not the only impediment to travel between Detroit and Windsor. The privately owned Ambassador Bridge and the public road and rail tunnels that link the two cities are old and narrow. Plans to build a new bridge, or add a span to the existing one, have bogged down in lawsuits. The owner of the Ambassador Bridge wants to protect his near-monopoly.

Like it or not, Canada is uncomfortably dependent on the United States as a market, with 76% of its exports going to its southern neighbour. Mr Harper's government has tried to open new markets. It is now negotiating a free-trade agreement with the European Union, for example. But places like Windsor, just a short stretch of water from the flickering beacon that is Detroit, can only hope that the American economy is quickly restored to health.