Fiat Chrysler assembly workers work on a partially assembled minivan at the Windsor Assembly Plant in Windsor, Ontario, Feb. 9, 2015.© Rebecca Cook / Reuters
The voices in Canada's auto industry calling on the federal government to revamp its Automotive Innovation Fund (AIF) are growing louder.
The fund offers repayable loans that are taxed as income to auto makers building new plants or investing in existing factories. Senior executives in the industry say this discourages investment and makes Canada uncompetitive with Mexico and the southern United States, which give hundreds of millions of dollars in incentives to land auto projects.
Reid Bigland, president of Fiat Chrysler Canada, added his voice to the choir on Tuesday as the company and the Ontario government announced an $85.8-million investment to help defray the costs Fiat Chrysler has incurred in a $1-billion revamp of its minivan assembly plant in Windsor, Ont.
"The way that the AIF has been structured is that it's taxable, repayable loans which have historically not been all that desirable to auto makers," Mr. Bigland told reporters after the announcement at the company's Automotive Research and Development Centre in Windsor.
Ontario offers grants to auto makers and parts companies that qualify for financing under its Jobs and Prosperity Fund. That fund will provide the money to Fiat Chrysler, about $16-million of which will be spent at the research centre.
Auto parts companies and the Unifor union, which represents workers at three of the five companies that assemble vehicles in Canada, have been lobbying the federal and Ontario governments heavily to offer incentives to auto makers to retain the existing vehicle plants and attract new factories.
So far, the federal government has not provided any financial help to Fiat Chrysler to support the investment the company made in Windsor.
"Ontario is here with some very generous support and the federal government verbal support," Mr. Bigland said, "but you'd have to ask them why they haven't elected to get on board with respect to a substantial investment we've made here in Windsor."
A statement from the office of Navdeep Bains, Minister of Innovation, Science and Economic Development, said that it is too early to comment on potential changes, but Ottawa has been "engaging extensively" with stakeholders, including labour, industry, and provincial and municipal governments.
"Although the federal government did not partner on this specific project, the government remains committed to advancing Canada's automotive industry and we have communicated our interest to working with FCA as they move forward," the statement said.
Stephen Carlisle, president of General Motors of Canada Ltd., said last week that a federal government decision on the AIF will affect how GM determines whether its Oshawa, Ont., plants are competitive enough for new investment.
What Ottawa needs to do, he said at an announcement of 750 new engineering jobs last Friday in Oshawa, is change the AIF to "something that's more grant-oriented versus loan-oriented, but also competitive with what's going on in other jurisdictions."
GM's Oshawa plants are No. 1 on the endangered list and the key issue for Unifor as it prepares for negotiations with the company this summer on a new labour contract.
Mr. Carlisle has said repeatedly that no decisions will be made on allocating new vehicles to the Oshawa plant to replace cars that are going out of production or shifted elsewhere until after the negotiations with Unifor.
Mr. Bigland noted that Ontario cannot go it alone when it comes to establishing an automotive policy for Canada, but said he hopes the federal government will take some lessons from the province's leadership.
Ontario Premier Kathleen Wynne, who made the announcement with Mr. Bigland, said she knows the federal government is examining the AIF.
Fears about the future of auto manufacturing in Canada have been paramount in the industry for more than a decade as tens of billions of dollars in new investment bypassed this country and landed instead in Mexico or such southern U.S. states as Alabama, Mississippi and South Carolina.
The fears sparked the creation more than a decade ago of the Canadian Automotive Partnership Council, with representatives from auto makers, parts companies, Unifor and other stakeholders. It was established to advise the federal and Ontario governments on policies that would help make Canada more competitive in attracting new investment.
Last year, the governments appointed Ray Tanguay, former president of Toyota Motor Manufacturing Canada Inc., as a special adviser to assess the health and competitive position of the industry.
"We have to streamline the process for investors; we have to be more pro-active," Mr. Tanguay told auto parts makers on Wednesday at the annual meeting of the Automotive Parts Manufacturers Association of Canada.