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Unifor President Jerry Dias raises his fist to members of the bargaining committee after announcing a three-year labour agreement with Ford at news conference in Toronto on Tuesday, September 22, 2020.Chris Young/The Canadian Press

The Canadian and Ontario governments will partner with Ford Motor Co. of Canada Ltd. to invest $1.8-billion in its auto plant in Oakville, Ont., Unifor president Jerry Dias said on Tuesday, a significant step toward creating an electric-vehicle industry in Canada that would include manufacturers and suppliers.

The deal is part of a tentative three-year labour contract that was signed at about 5 a.m. on Tuesday after marathon talks between the union and the automaker. The $1.8-billion will be largely dedicated to retooling the Oakville plant to build five electric vehicle models, the first of which will be scheduled to roll off the line in 2025, Mr. Dias said. Batteries will also be assembled at the plant.

The electric-vehicle investment was part of a $1.95-billion package Unifor announced that will also include upgrades to build engines at Ford in Windsor, Ont. Neither Ford, Unifor, Ottawa or Ontario would reveal how much of the funding would come from governments.

Unifor targeted Ford for bargaining earlier this month because production of the Ford Edge and Lincoln Nautilus crossover SUVs, which are manufactured in Oakville, is reported to be winding down by 2023, which would leave the future of the plant and its 4,250 unionized employees uncertain.

Mr. Dias said in an interview that focusing on electric-vehicle and battery assembly is an investment not just in future generations of Oakville autoworkers, but the broader Canadian economy.

“The future is really going to be with battery electric vehicles, so you’d better get in on the ground floor – and we did,” Mr. Dias said. Not doing so, he added, “would have been the death of the industry.”

At a news conference on Tuesday morning, he said the tentative deal could spill over into not only parts manufacturing, but also the resource sector because of the need for material for the batteries: “Today, the discussion starts about how we use our lithium in Quebec; our nickel in Sudbury; our cobalt in northern Ontario; our aluminum from Quebec and British Columbia – to put Canadians to work.”

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Mr. Dias did not name which vehicles would be built, but said they would launch between 2025 and 2028, and that the plant would shut down for a period to retool.

Not all workers would necessarily return. Mr. Dias said Ford told him the retooled plant would employ about 3,000 people – about 30 per cent fewer than at present.

Kristin Dziczek, vice-president of industry, labour and economics at the Center for Automotive Research in Ann Arbor, Mich., called the announcement a “really big deal” that could encourage Canadians to adopt electric vehicles and entice other companies to make greener cars here.

“It’s not just Ford’s supply chain,” Ms. Dziczek said. “This will enable other producers to locate electrified vehicles in their plants in Canada as well.” Before, she said, the only electric vehicles made in Canada have been hybrid editions of the Toyota Rav4 and the Chrysler Pacifica.

University of Toronto professor Dimitry Anastakis, who studies business history and the automotive sector, called Tuesday’s news “game-changing.”

“If Ford is going to build and assemble the whole thing here, that could have a huge impact across the whole supply chain in Canada, and the secondary and tertiary jobs from that could be really tremendous,” Prof. Anastakis said. “... We are in the game in a way that we haven’t been in a long time.”

The union represents nearly 6,300 Ford workers in Canada, 3,400 of them at the Oakville plant. They were poised to strike on Tuesday if contract talks broke down.

At a news conference on Tuesday, Ontario Premier Doug Ford declined to say how much the province would contribute to the Ford plant deal – saying: “We’re in the midst of negotiating.”

But on Monday, the premier said that his “big ask” was for Ford to manufacture batteries in Ontario with raw materials sourced locally – a request Mr. Dias said was at least partly heeded with a promise from Ford to assemble batteries in Oakville.

John Power, a spokesman for Industry Minister Navdeep Bains, declined to clarify the federal government’s contribution. But if ratified, the deal “would position Canada’s auto industry as a global leader in a growing market, and help us meet our climate ambitions,” Mr. Power said in an e-mail.

A source familiar with the negotiations told The Globe and Mail on Monday that governments were considering investing about half a billion dollars combined. The Globe is not identifying the source because they were not authorized to speak publicly about the matter.

Prof. Anastakis said that, due to the jobs that would be created directly and indirectly from the Ford plant, “the income taxes alone will pay for whatever the federal and provincial governments put forth as an investment.”

The deal also includes a contract to assemble 6.8-litre engines in Windsor for F-150 trucks and Mustang cars, Mr. Dias said. He added that Unifor’s Ford workers are scheduled to vote on the three-year deal this weekend. Ford declined to comment on Tuesday’s tentative agreement because it had not yet been ratified.

In June, Ford said it would attempt to reach carbon neutrality by 2050, and that it would invest more than US$11.5-billion in electric vehicles by 2022.

In Europe, the company has said it hopes to have 18 models of electric vehicles for sale by the end of 2021, including hybrid and battery-powered. Ford offers hybrid and all-electric versions of some models, including the Escape, Fusion, Explorer and Mustang.

Unifor’s next target for negotiations, Mr. Dias said, is Fiat Chrysler Automobiles N.V., which makes vehicles in Brampton and Windsor. Talks with General Motors Co. are expected to follow.

The Oakville plant opened in 1953. Car manufacturers have in recent years been fleeing to lower-cost jurisdictions such as Mexico. General Motors’s Oshawa plant employed 20,000 people in the 1980s, but that figure had sunk to about 2,300 as layoffs began before its final auto-making shift in December 2019. (The company started to manufacture masks at the idle facility after the pandemic began.)

Ontario and Ottawa have subsidized Ford facilities several times in recent years, including $143-million combined for the Oakville plant in 2013, and $102-million each in 2017 for research and development in Ottawa, Windsor, Waterloo and Oakville.

Editor’s note: Due to an editing error, an earlier version of this story said that General Motors's Oshawa plant had 2,300 employees after layoffs. In fact, the plant employed 2,300 people prior to layoffs.

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