Chrysler Chairman Sergio Marchionne sits for Chrysler's press conference, Monday, Jan. 13, 2014, at the North American International Auto Show in Detroit, Mich.Tony Ding/The Associated Press
The federal and Ontario governments face a potential cost of more than $400-million if they want to land a major new investment in Chrysler Group LLC's minivan assembly plant in Windsor, Ont.
Chrysler said this week that it has opened the discussions with the two levels of government about an upgrade to the plant, a major economic force in southwestern Ontario that employs more than 5,000 people. The proposal to revamp the factory could be more than $2.3-billion, industry sources told The Globe and Mail on Tuesday.
The going rate for taxpayer contributions to investments at Canadian assembly operations is about 20 per cent, based on the amount the two governments provided to Ford Motor Co., to support a $700-million investment in Oakville, Ont., announced last September.
Chrysler chief executive officer Sergio Marchionne said in revealing the proposal on Monday that a figure of $2-billion was low.
He would not disclose how much the company is seeking from governments, but any such request is likely to be based on the Ford deal, meaning it could be in excess of $400-million.
The proposal raises the question of how willing the two governments are to participate in the North American auto subsidy sweepstakes, which has led to billions of dollars of financial incentives being offered to car companies to land assembly plants.
Ontario Economic Development Minister Eric Hoskins met with Mr. Marchionne at the North American International Auto Show on Monday where the proposal was outlined to him.
The province is working with the federal government to assess the plant, Mr. Hoskins said. He would not reveal specific details of what he was told, but described the project as substantial, and noted that there is a fierce battle among North American governments to secure such investments.
"Chrysler is not going to make this decision out of altruism," he said; "they're going to make the best business decision for the company. What we need to do is to highlight for them and remind them of the competitive advantages that Ontario does offer to them."
Under new Premier Kathleen Wynne, Ontario's Liberal government has been willing to offer money to corporations in return for jobs in the province. In December, the province signed a memorandum to provide up to $190-million to Cisco Systems Inc. for its research and development facilities.
A senior industry executive told The Globe and Mail in Detroit Tuesday that Canadian governments need to work harder than they have in recent years to retain existing auto factories, let alone land new assembly plants.
The federal government offered only a terse comment. "The auto industry is an essential part of our economy. We are committed to working with Chrysler on opportunities to create new jobs and grow its presence here in Canada," Jake Enwright, press secretary to Industry Minister James Moore, said in an e-mailed response to questions about Chrysler's request.
When Mr. Marchionne first revealed the proposal to reporters on Monday, he described it as a multibillion-dollar investment. He pointed out that labour costs will be one factor the auto maker will consider in making a final decision.
Reuters news agency reported him as saying in Detroit on Tuesday that Chrysler may be prepared to move minivan production elsewhere if the governments don't offer enough financial assistance and the Unifor union that represents workers at the plant doesn't provide concessions.
Unifor, which represents about 5,000 hourly employees, has not been asked by Chrysler to reopen the labour agreement it reached with the auto maker in 2012, union president Jerry Dias said Tuesday.
The union will not reopen the contract because it made significant changes in its past two labour agreements with Chrysler that reduced benefits for all members and wages and benefits for newly-hired employees, Mr. Dias said.
Mr. Marchionne has said that plants that perform best in adopting the company's World Class Manufacturing system will be rewarded with new investments, he said, and the Windsor plant is at the top of that list.
The Windsor minivan plant is one of two Chrysler assembly plants in Ontario and its production represents about 15 per cent of total Canadian output of about 2.1 million vehicles annually.
With files from Bill Curry in Ottawa