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Prime Minister Stephen Harper speaks in front of Ford of Canada production workers at the Oakville, Ontario assembly plant, where he announced a five-year, $250-million auto industry subsidy renewal, on Jan. 4.STRINGER/Reuters

Governments will have to provide more money than the $250-million auto innovation fund announced by Prime Minister Stephen Harper if they want to win the big prize of vehicle assembly plants, industry officials say.

The federal government's announcement that it is setting aside the money for car companies and their suppliers – renewing a fund it created in 2008 – "is a good start to facilitate innovation," Joe Loparco, co-president of Toronto-based auto parts maker AGS Automotive, said Friday.

But "more significant funds would be required to attract new assembly plants and those need to be specifically targeted," Mr. Loparco said.

Assembly plants are juicy targets because they typically involve investments of $1-billion or more that provide 2,000 or more direct jobs and thousands of spin-off jobs that generate millions of dollars in tax revenues.

Canada's position among the leaders in vehicle assembly has been declining in recent years. Five assembly plants have closed in Canada since 2000 and only one new one has opened, while auto makers have spent tens of billions of dollars in Mexico and southern American states.

"It's absolutely important to have the assembly plants here," said Steve Rodgers, president of the Automotive Parts Manufacturers Association of Canada, who also attended the announcement and echoed Mr. Loparco's view that additional funds will be required. "Parts suppliers have a tendency to locate around the assembly plants. It just drives a whole bunch of additional investment," Mr. Rodgers said.

But competition for new assembly plants is fierce, as Mr. Harper acknowledged on Thursday at a Ford Motor Co. assembly plant in Oakville, Ont., which was turned into a modern, flexible assembly plant with about $200-million in government help from Ottawa and Ontario in the 2000s.

The previous version of the fund, Mr. Harper noted, led to about $1.6-billion worth of investments by Ford, Toyota Motor Corp., Linamar Corp. and Magna International Inc.

Only one of those investments, however, was in an assembly plant – the paint shop at the Toyota plant in Cambridge, Ont.

Mr. Harper did not discuss the federal government's position on Ford's request for more than $400-million in financial assistance from Ottawa and Ontario as part of a $1.2-billion plan to retool the Oakville plant again.

Joe Hinrichs, Ford's executive vice-president, said negotiations are ongoing. "Our partnership with the government of Canada and the Government of Ontario is critically important to the success of this plant and to its future and we've talked about a global platform, which involves more investment but also more possibilities," he said.

"When you look specifically at industrial policy around the world, there's competition for major automotive investments like we're talking about here for Oakville, that's the reality of the business," he said.

In addition to the fund, set up in 2008, Ottawa also jumped directly into the auto industry by spending about $14-billion with the Ontario government to participate in the bailouts of Chrysler Group LLC and General Motors Corp. in 2008.

Canadian Auto Workers president Ken Lewenza said Friday the bailout and the renewal of the innovation fund indicate Ottawa understands how critical the industry is to the Ontario and national economies. He said he's grateful for that recognition. "But we have to take a look at a longer-term approach to how we sustain it … Investment comes and goes. Let's think longer term through public policy."