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In this Nov. 9, 2012 worker Michael Keil checks a Golf VII car during a press tour at the plant of the German car manufacturer Volkswagen AG (VW) in Zwickau, central Germany. (Jens Meyer/AP)
In this Nov. 9, 2012 worker Michael Keil checks a Golf VII car during a press tour at the plant of the German car manufacturer Volkswagen AG (VW) in Zwickau, central Germany. (Jens Meyer/AP)

Ottawa dangles $250-million fund to urge Volkswagen to ‘look north’ Add to ...

The federal government is ready to offer financial incentives as part of a pitch to get Volkswagen AG to locate some manufacturing in Canada.

Industry Minister Christian Paradis said he urged senior Volkswagen executives to “look north” during meetings in Berlin this week, offering the prospect of tapping into Ottawa’s newly replenished $250-million auto innovation fund.

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“They listened with a positive attitude,” Mr. Paradis said in an interview. “We are going to stay in touch with Volkswagen.”

The German car maker opened a U.S. assembly plant in Tennessee in 2011 and will soon begin supplying the factory with engines built in Mexico.

“You have a North American expansion strategy. You should look to the north,” Mr. Paradis said he told the Volkswagen executives, including Thomas Schaefer, the company’s vice-president of overseas manufacturing.

“There are investments here that could be profitable for you. We can bring added value in terms of innovation,” Mr. Paradis said he told them.

Canada has a long and mixed history of trying to lure Volkswagen to Canada with subsidies. Ontario lost out to Tennessee in 2008 when VW was in the hunt for a new North American assembly plant location. In the early 1990s, the province made an unsuccessful bid to attract a proposed assembly plant for Volkswagen subsidiary Audi AG.

In the early 1980s, Ottawa gave Volkswagen rebates on auto duties as part of an incentive package for putting an aluminum wheels plant in Barrie, Ont. The duty remission deal was gradually phased out under the Canada-U.S. free trade agreement and Volkswagen sold the plant in 1996.

Earlier this month, Prime Minister Stephen Harper announced a five-year extension of a $250-million research-and-development fund to help the country’s declining auto industry. Companies must invest some of their own cash in projects worth at least $75-million to get the subsidies.

Volkswagen Canada spokesman Thomas Tetzlaff said the company has no immediate plans to open any new assembly or parts plants in North America. But he said Mr. Paradis’ visit helps put Ontario and Canada on the company’s “radar screen” in any future plans.

“We’re pretty excited that the Canadian government reached out,” Mr. Tetzlaff said. “Our global manufacturing division continually assesses our capacity needs. When and if another opportunity comes for development in North America, we hope that Canada will be considered.”

Mr. Paradis insisted there still is a future for the auto industry in Canada in spite of a steady erosion of the country’s share of global output and the massive subsidies offered by other countries.

“When we talk about high tech and innovation, Canadian engineering is there. In terms of productivity, we have work to do … We have to address that gap so that we become more competitive.”

Mr. Paradis, who also visited a Siemens AG training facility in Berlin Wednesday, said Canada has a lot to learn from the Germans about investing in workers. “They put a lot of emphasis on training their workers for the future,” he said. “I was very impressed.”

Mr. Paradis suggested Canada can do more by working with the provinces, and through collaborations with universities and colleges.

Mr. Paradis is headed to Davos, Switzerland, later this week for the World Economic Forum, where he said he would continue to pitch Canada as a good place to invest, alongside other cabinet ministers and Canadian business leaders.

“We’re trying to do a common front, to show that Canada is serious about attracting investment,” he said.

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