Canada's auto parts makers are urging the federal government to change the way it offers financing to car companies, saying the current program does not encourage auto makers to invest in Canada.
The Automotive Parts Manufacturers' Association of Canada has joined vehicle manufacturers in recommending that the Automotive Innovation Fund – set up by the previous Conservative government, but extended under the Liberals – offer grants to car companies instead of loans that are taxable.
"In a low-interest world, where healthy [auto makers] have access to cheap and much needed capital growth, the AIF is ineffective," association president Flavio Volpe said in a letter to Prime Minister Justin Trudeau.
Changing the program is urgent, Mr. Volpe wrote, because three of the five auto makers that manufacture vehicles in Canada are in negotiations with the union that represents workers at their factories in Ontario.
The key demand by Unifor in talks that began last week with Fiat Chrysler Automobiles NV (Chrysler), Ford Motor Co. and General Motors Co., is that the companies commit to new investment at vehicle assembly and engine plants. "We need those companies to continue to invest in manufacturing in Ontario or the consequences will be dire and, most importantly, isolated only to Canada and not the USA or Mexico," Mr. Volpe wrote.
"When the companies sit down with Unifor … we ask that you make clear to all parties that Canada remains committed to continued automotive manufacturing in Ontario," he wrote.
The union is seeking a commitment from Chrysler that it will invest in its assembly plant in Brampton, a mandate from Ford for a new engine at a plant in Windsor, and new vehicle mandates from GM that will avert the scheduled closing of one plant in Oshawa and the expected permanent shutdown of another factory in that city.
"It is imperative that your government understands that the effect of an [auto maker] disinvestment in [Ontario] would have an unprecedented negative impact on the country's economy as a whole," Mr. Volpe wrote in his letter.
Mr. Trudeau's office referred questions about the letter to the office of Navdeep Bains, Minister of Innovation, Science and Economic Development, who has responsibility for federal policy regrading car manufacturing in Canada.
A spokesman for Mr. Bains noted that, in this year's federal budget, the government extended the Automotive Innovation Fund to the end of the 2020-2021 fiscal year and said it would assess the terms of the fund as it reviewed ways to "maximize the impact of federal support offered to the automotive sector."
It is too early to comment on potential changes that might arise from that assessment, the spokesman added.
Auto parts makers employ about 81,000 Canadians, the vast majority of them in the heartland of Ontario's manufacturing sector between Oshawa and Windsor, Mr. Volpe wrote. The companies shipped $24-billion worth of parts to auto makers in 2015.
But he pointed to a study on the impact of a potential closing of GM's plants in Oshawa done for Unifor by the Centre for Spatial Economics.
The study said the end of auto production in Oshawa would lead to the loss of more than 32,000 direct and indirect jobs across the country and a loss of $3.5-billion in revenue to the federal and Ontario governments over three years.
The study was commissioned amid GM moves to shift production of the Chevrolet Camaro out of Oshawa to Lansing, Mich., and plans to discontinue assembly of other vehicles made in the two Oshawa plants.
General Motors of Canada Ltd. president Stephen Carlisle said earlier this year that federal help should be in the form of grants, not loans, and that government incentives form part of the business case GM Canada needs to make to its parent company in order to secure new product mandates for Oshawa.
Mr. Carlisle has said no decisions on future products will be made until after the negotiations with Unifor have concluded. He reiterated last week that labour costs represent 7 per cent of GM Canada's manufacturing costs, so they are only one part of the business case.
With a report from Gloria Galloway in the parliamentary bureau