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The spectacular unravelling of Canada’s $100 billion bet on electric vehicles offers a masterclass in how even well-intentioned strategic decisions can lead companies to the brink. For executives across any sector, the automotive industry’s current predicament provides six crucial lessons in avoiding the kind of crisis that forces painful restructuring… or worse.
Our restructuring, Allan Rutman works extensively with automotive suppliers and manufacturers. Over time he has watched this slow-motion disaster unfold from the front lines. The insights he shares aren’t just about cars and tariffs. They’re about the fundamental disciplines that separate resilient companies from those caught flat-footed when markets shift.
Lesson 1: Never Bet the Company on One Future
Canada’s singular focus on electric vehicles, to the near-exclusion of hybrid and internal combustion engine development, exemplifies a classic strategic error: concentration risk masquerading as bold vision.
“The truth is, you can’t put all your eggs in one basket,” Rutman states plainly. “Two years ago, three years ago, the economy was looking EV. So GM and a lot of the other companies invested huge amounts of money in EV.”
The problem? Markets rarely move in straight lines. What looks inevitable in a boardroom presentation can evaporate when consumer behaviour, policy incentives or economic conditions shift. The Japanese manufacturers, by contrast, maintained what Rutman calls a “more astute” approach – investing in EVs whilst continuing to develop ICE and hybrid technologies.
The takeaway for executives: portfolio discipline trumps concentrated bets. Maintain optionality. Hedge your strategic risks. The cost of diversification is vastly lower than the cost of being comprehensively wrong.
Lesson 2: Government Incentives Don’t Equal Market Demand
The billions in subsidies and tax credits that fueled Canada’s EV investment created a dangerous illusion: that policy-driven economics reflected genuine consumer appetite.
They didn’t.
When subsidies expired and governments stepped back, demand collapsed. North American EV penetration forecasts fell from 17% to 8% almost overnight. Consumers, it turned out, weren’t willing to absorb higher upfront costs, expensive battery replacements and inadequate charging infrastructure.
“A lot of the subsidies were initially introduced worldwide; however, they were most significant in Canada and the U.S. They have now expired and no government has indicated desire to continue with the programs,” Rutman explains.
For business leaders, the lesson is stark: distinguish between artificial demand created by temporary incentives and genuine, sustainable market appetite. Build your five-year capital plan on fundamentals, not subsidies that can disappear with the next election cycle. Investment needs to be diversified given long planning cycles prior to production. Joint ventures with other OEMs or Tier Ones is an obvious way to maintain that diversity if markets change and volumes are not as predicted. Cost reductions to accommodate can only put a dent in overheads.
Lesson 3: Scenario Planning Isn’t Optional
Automotive manufacturers face a particular challenge: investment decisions must be made five years before vehicles reach the market. That’s five years of potential policy shifts, consumer preference changes and macroeconomic shocks.
“You have to make a decision five years in advance in terms of what the economy is going to look like,” says Rutman. “You’ve got to be investing in tooling, engineering, R&D, a lot of different things.”
Trump’s tariffs, now at 35% on Canadian vehicles, weren’t in anyone’s five-year plan three years ago. The result? Billions in sunk costs and strategic decisions that now look catastrophically wrong.
The solution isn’t a crystal ball. It’s robust scenario planning and stress-testing. What if tariffs hit? What if demand drops 50%? What if our biggest customer relocates? Companies that game out tail risks aren’t paranoid… they’re prepared.
Lesson 4: Fixed Costs Are the Killer
For Canada’s automotive suppliers, the crisis is particularly acute because of their cost structure. These businesses operate large manufacturing facilities with heavy fixed overhead. When volume drops, the math becomes brutal.
“You have less volume to amortize your costs over that plant because your volume has dropped and the demand has dropped for your product,” Rutman explains. “I remind you that these are basically overhead-centric facilities.”
The automotive sector is “extremely volume sensitive,” he notes. “It’s less gross margin sensitive. Executives regularly think: I need to keep my operations running 24 hours a day to get my margins.”
For executives in any capital-intensive business, the lesson is to relentlessly question fixed costs. Can facilities be subleased? Can landlord rents be renegotiated? Can logistics be restructured? The time to ask these questions is before the crisis hits.
“Can I rent out part of my facility? Should I renegotiate with the landlord if I’ve got a lease?” Rutman asks. “You know, all those kinds of things that you look at.”
Lesson 5: Squeeze Every Penny Before You Need To
Rutman’s advice for automotive suppliers facing reduced demand is brutally pragmatic: conduct a comprehensive operational analysis of every input cost.
“What can I cut? What can I streamline? Logistics – can I get a better deal on my trucking business? Can I approach my union or my employees and see if I can reduce costs somehow?” he asks.
But here’s the critical point: these analyses shouldn’t wait for crisis. The companies that emerge strongest from sectoral downturns are those who’ve already optimized their operations before the storm hits.
“You’ve got to reduce your costs somehow. Reduce or eliminate production where volumes and margins are low if price adjustments are not possible. Are you a sole source supplier giving you added leverage. Are you a niche supplier?” Rutman advises. That’s far easier to do proactively than reactively, when cash is burning and creditors are circling.
Lesson 6: Collaboration Beats Isolation
Perhaps the most interesting strategic response to the automotive crisis has been the proliferation of joint ventures. Stellantis is exploring partnerships with Nissan. The traditional model of vertically integrated manufacturers bearing all investment risk alone is giving way to shared-risk platforms.
“They’re looking around to do joint ventures going forward,” says Rutman. “Not any one company can really carry the full load of investing in EV to the exclusion of everything else.”
For smaller companies and suppliers, this lesson is even more critical. Ecosystem participation, strategic partnerships, and collaborative approaches to innovation and market risk can mean the difference between survival and insolvency when macroeconomic headwinds hit.
From Crisis to Foresight
The automotive sector’s travails aren’t unique. Every industry faces disruption, policy uncertainty, and the risk of strategic bets that don’t pay off. The difference between companies that navigate these challenges and those that require painful turnarounds often comes down to discipline, diversification, and preparedness.
As Rutman’s experience demonstrates, the warning signs are usually visible well before crisis becomes inevitable. Volume sensitivity, fixed cost structures, concentration risk, subsidy dependence, inadequate scenario planning – these vulnerabilities exist in most businesses. The question is whether leadership teams have the discipline to address them before external shocks force painful restructuring.
Canada’s automotive sector placed a $100 billion bet that the future was purely electric. Consumers, it turned out, wanted options. Markets wanted flexibility. Governments changed their minds.
For business leaders watching from other sectors, the message is clear: learn early, act decisively, diversify risk. Because by the time you’re calling a restructuring specialist, your strategic options have usually narrowed considerably.
Have a question for Allan? Contact him directly or email us at info@zeifmans.ca.
