Chrysler Group LLC is withdrawing its request for funding from the federal and Ontario governments, but says it could begin making new investments for a new minivan assembly line at its Windsor, Ont. factory.
The auto giant had asked for some $700-million in public funds to expand its operations in the province, most crucially at a minivan plant in Windsor. Chrysler had been willing to sink $3.6-billion into Windsor and Brampton, Ont.
But the company has now walked away from that request.
"It is clear to us that our projects were being used as a political football, a process that, in our view apart from being unnecessary and ill-advised, will ultimately not benefit Chrysler," the company said in a statement.
"Our commitment to Canada remains strong," said Sergio Marchionne, CEO of Chrysler Group LLC.
"Chrysler has also confirmed its intention to begin to allocate to our Windsor, Ontario plant the development and industrialization of the next "people carrier" architecture (the so-called next minivan and derivatives)," the company said.
Chrysler said it would "fund out of its own resources" any capital expenditures its Canadian operations require, including the development of the new minivan platform at the Windsor plant and work on the 300 and Dodge vehicles at its factory in Brampton, Ont.
In the press release, Mr. Marchionne urged all "stakeholders" to work to keep Ontario and the country a competitive place to make automobiles.
And he warned the company reserves the right to "reassess our position as conditions change."
"On a personal note, as a Canadian," he said, "I regret my failure in having been unable to convey the highly competitive nature of markets that offer manufacturing opportunities to carmakers that operate on a global scale.
"Some of the shots across the bow following our initial approaches to the federal and provincial governments reveal, apart from political convenience, a somewhat restricted view of Canada as an industrial player in what has become a borderless economy. It is clear that we, at Chrysler, need to do more to explain ourselves and our choices going forward."
"Of particular importance for this evaluation will be the outcome of our collective bargaining negotiations that will be carried out in 2016 with UNIFOR (the merged entity of the CAW and CEP)," Mr. Marchionne said.
The head of Unifor said it is pleased with Chrysler's decision to invest in the Windsor plant but it was regrettable that a "long-term" strategy for the auto industry could not be reached.
"The bottom line is that the people of Ontario and our leaders need to understand the importance of developing a long-term strategy, including public investment, if we want to have a strong, competitive advanced manufacturing sector," said Jerry Dias, national president of Unifor.
"We are deeply concerned, however, that in the long-term we are going to lose an incredible opportunity to secure Ontario's manufacturing industry well into the future," he added.
The union, which represents more than 39,000 members in the auto sector, said it will wait to hear more detail about Chrysler's plans for the Windsor and Brampton plants.
In a written statement, the office of Ontario Economic Development Minister Eric Hoskins cheered Chrysler's announcement, but did not explain the auto giant's sudden about-face.
"We welcome Chrysler's decision that it will begin to invest in the next generation of vehicle production at its plants in Windsor and in Brampton," the statement read. "Chrysler's CEO has spoken about his commitment to Canada and Ontario, and this announcement is evidence of that. Since Chrysler announced that it is considering an investment in Ontario, our government, in conjunction with the Federal Government, has been actively engaged in negotiations."
Chrysler had said it would spend $3.6-billion expanding the two Ontario plants if the province and federal governments contributed $700-million. Stopping short of threatening to pull out of the province, Mr. Marchionne noted U.S. states and Mexico had expressed interest in winning the company's investment.
Mexico, with its low wages and proximity to the U.S. and Latin American markets, has seen rapid growth in its auto sector. Companies expanding or opening new plants there include Mazda, Honda, Nissan and General Motors.
Ontario also faces stiff competition for auto investment from Alabama and Tennessee, states that have given hundreds of millions of dollars to auto makers there.
Chrysler's bid for aid became an election issue in Ontario. Tim Hudak, Ontario leader of the Progressive Conservatives, criticized it as corporate welfare and said the company was holding the province "hostage."
"Should we pay a nine-figure ransom to Chrysler? Of course not," Mr. Hudak last month. "We should use the money to lower taxes so all companies can create jobs, not handouts for the very few."
With files from the Canadian Press