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A Chrysler auto worker uses an ergo-arm to load the seats into Chrysler minivans at the Windsor Assembly Plant in Windsor, Ont., Jan. 18, 2011.

REBECCA COOK/Reuters

The federal government has commissioned a $2.1-million study of the auto industry that will assess policies affecting the sector.

Charlotte Yates, dean of social sciences at McMaster University in Hamilton, Ont., will establish the Canadian Automotive Policy Partnership, a five-year project that will be assisted by Toyota Motor Manufacturing Canada Inc., Ford Motor Co. of Canada Ltd. and the Canadian Auto Workers union.

The project will look at the current state of the industry to determine which Canadian policies need to be examined more fully and determine if new policies prescriptions should also be assessed.

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"Five years gives us a good slice of time to look at some things and to get a handle on some of the dynamics," Prof. Yates said.

Canada has lost some assembly capacity in recent years and there are projections that more could disappear during the next 15 years, she said.

"If we don't start thinking now and we lose assembly, we lose the rest of the industry because the parts [industry] follows [assembly]," she said.

The study will examine which government policies affect capital investment decisions by auto makers; technology; actions taken by governments elsewhere; and the effect of environmental regulation on the industry in Canada.

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