The fate of more than $2-billion worth of auto industry investments and thousands of jobs hangs in the balance as Ontario voters assess how the two leading parties will treat one of the province’s key sectors.
In the blue corner, Conservative Leader Tim Hudak proposes to eliminate all subsidies to business – including the auto industry – using a regime of low corporate taxes and reduction of red tape as a way to attract new investment to Ontario.
In the red corner, Liberal Leader Dalton McGuinty, who led the province’s participation in the bailout of General Motors and Chrysler in 2009, wants to continue using public money to encourage auto investment. That’s a policy carried on by Ontario governments of every political stripe since the Tory government of Bill Davis helped land a Ford Motor Co. engine plant in Windsor in 1981 with a $60-million grant.
The approach taken by whichever party is elected this Thursday will play a critical role over the next four years in determining the future of an industry that employed about 90,000 people and accounted for almost one-third of Ontario’s exports in 2010. Auto assembly and parts making account for 3.3 per cent of the province’s gross domestic product – not including the contribution from auto sales, marketing and suppliers that rely on it, such as the steel and plastics industries. Polls show the race is a dead heat between the Tories and Liberals.
While the auto industry is a key engine of the Ontario economy, the plants supply a North American market that is no longer growing. All five companies making vehicles in the province are pouring money into countries with higher growth, notably China, Brazil, India and Russia.
“The automotive business is a global industry where capital does not require a passport. It often goes where it can get the greatest return,” noted a senior industry executive who spoke on condition of anonymity because he does not want to seen as trying to influence the outcome of the election.
It’s a fact of life, the executive pointed out, that governments throughout North America and around the world heap incentives on auto makers to land their plants. The recently opened Volkswagen AG plant in Chattanooga, Tenn., for example, received government incentives worth $577-million (U.S.).
In play in Ontario over the next four years are a plan by Ford Motor Co. F-N to begin production of a new global vehicle in Oakville, Ont., at an estimated price tag of $1-billion (Canadian) and a Chrysler Group LLC decision to revamp a paint shop in Brampton, Ont., at an estimated cost of $350-million. A significant investment by General Motors Co. GM-N at its Cami Automotive Inc. plant in Ingersoll, Ont., will likely be required by the middle of the decade to keep it competitive.
A new paint shop at Chrysler’s Brampton plant would likely lead to the addition of a third shift of workers and 1,000 jobs. The addition of a successful global vehicle to Ford’s Oakville operation could mean the addition of a third shift there as well.
Ford has said publicly that further investment in Oakville depends on government support.
Mr. McGuinty has spent much of his time on the hustings visiting manufacturers to highlight what his party has done to create jobs, including a trip to auto parts giant Magna International’s plant in Concord, Ont.
Magna chief executive officer Don Walker acknowledged in August that Magna did not need a $48-million grant it was receiving to develop electric vehicle components. But he said if another jurisdiction offered to finance the work, Magna would do it elsewhere.
“In this industry, you have to be retooling and winning new products and installing new technology all the time,” said Jim Stanford, the economist of the Canadian Auto Workers union. “If we’re not [providing government help], our industry is going to die a slow death.”
But Mark Milke, a senior fellow at the conservative Fraser Institute, responded that subsidies to business don’t make sense. The bailout of Chrysler and GM by the federal and Ontario governments in 2009 hurt other auto makers that didn’t seek help, he said.
“You’re not creating new jobs and you’re not saving jobs,” he said. “You’re simply redistributing them from one company to another with the help of taxpayer dollars that keep weak companies alive and thus punish healthy companies like Ford that over the past decade have made some smart choices.”
With files from reporter Karen Howlett
