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Federal, Ontario governments talking investments with big automakers

Ottawa is open to providing support to the automakers to help expand Canadian footprints


December 6, 2016
The Canadian Press
by Andy Blatchford

OTTAWA—The federal and Ontario governments are discussing major investments in the big automakers that could total hundreds of millions of dollars.

Following the recent conclusion of labour negotiations, the auto companies are now in talks with the governments about investing in a sector critical to the Ontario and Canadian economies.

Federal Economic Development Minister Navdeep Bains said Ottawa is open to providing support to the automakers to help them expand their footprints in Canada.

But Bains did not discuss what a potential deal could look like—nor would he share details on how much federal support the government might commit.

“It’s still early stages, so it’s difficult to lock down a number at this stage, but we’re clearly willing to be at the table,” Bains told The Canadian Press recently in Ottawa. “Right now we’re just in the process of engaging with the auto companies to look at investment opportunities.”

He did say, however, that the Trudeau government has a particular interest in investments within the more-technologically advanced and research-focused areas of the auto sector.

Bains, whose department is overseeing the creation of an innovation agenda that it hopes will eventually boost the economy, said one of the key goals for the government is making sure Canada is on the “cutting edge of the car of the future.”

The three largest North American automakers recently committed to pump more than $1.5 billion combined into their Canadian operations following contract talks with their unionized workers. General Motors Canada and Fiat Chrysler Automobiles Canada each agreed to invest $554 million, while Ford Canada said it would spend about $700 million.

Jerry Dias, president of the Unifor union, said in an interview that he didn’t know exactly how much money has been at the centre of the government talks.

“In it’s entirety, I would expect hundreds of millions,” Dias said when pressed for a ballpark figure of the total government investment. “But I’m guessing.”

He added that the auto companies are only interested in grants and not loans, including those that have been offered in the past through the eight-year-old federal Automotive Innovation Fund.

Dias said the governments have a choice to either build on the momentum created by the union at the bargaining table—or to stay on the sidelines.

“The government sees this as an opportunity to build and I do not think that they have any interest in screwing it up,” Dias said.

“They’ve watched what happened to our industry over the last 10-15 years when everybody took their eye off the ball. So, our industry today is much smaller than it used to be. How much smaller are you going to allow it to get?”

Tony Faria, an expert on the Canadian auto sector, said that in the past the Ontario and federal governments have each come up with 10 per cent of the size of the total investments by the companies.

Faria, a professor at the University of Windsor, said if applied in the current context of the automakers’ recent $1.5-billion investment, then Ontario and Ottawa would each invest $150 million—for a total of $300 million.

A major difference, he added, is that Ottawa has provided loans in the past and has avoided making direct grants. Competing regions like some U.S. states and Mexico have provided grants to auto companies, he said.

“(The automakers) have not been pleased in the past with the federal government making their contribution a low-interest, repayable loan,” Faria said.

Canada’s automotive sector employs about 125,000 people in assembly and parts production.

Asked about the talks, a spokeswoman for GM Canada declined to provide details Monday.

“We continue to work very closely with the federal and Ontario governments in a variety of areas that can support the significant new investments and hiring we are doing across our advanced engineering and manufacturing operations,” Jennifer Wright wrote in an email.

“We are very pleased with these discussions.”

FCA Canada declined to comment on the talks Monday, while spokespeople at Ford Canada, Honda Canada and Toyota did not immediately respond to emailed questions.

A spokesman for Ontario’s economic development minister would only say the department “has worked extremely closely with each of the companies.”