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Magna, Ontario to invest $400-million in R&D for electric vehicles

Electric vehicles will reduce carbon load as long as the electricity used to power them is cleaner than burning gasoline.

Jonathan Hayward/Jonathan Hayward/THE CANADIAN PRESS

Magna International Inc. and the Ontario government are set to announce an investment of more than $400-million in research and development into electric vehicle technologies as Ontario strives to become a hub for the development of environmentally friendly vehicles.

The announcement, which includes about $48-million from the province, is scheduled to be made Monday at a Magna facility in Brampton, Ont., more than four years after then Ontario finance minister Greg Sorbara said he would give the auto parts giant about $50-million to do research into new technologies.

Some of the money will flow to Magna's E-car business, which is a joint venture between the company and its founder Frank Stronach, but it is also likely to be used to develop new lighter weight components by other Magna divisions.

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The province is seeking to maintain Ontario's position among the world's leading auto-making jurisdictions by tapping into the billions of dollars global auto makers are spending to develop battery-powered vehicles, plug-in hybrids that combine electric power with a traditional internal combustion engine and hybrid vehicles powered by electric motors and gasoline.

A news release issued Friday said Minister of Economic Development Sandra Pupatello will announce "support for the development of the next generation of electric vehicle technologies" at the Magna training centre in Brampton.

It will be the third green vehicle project announced in recent weeks by the government, following the plan revealed by Toyota Motor Manufacturing Canada Inc. to build the electric version of its RAV4 crossover in Woodstock, Ont., and an investment of $37-million by Dana Holding Corp. to build heat exchangers for batteries at a plant in Cambridge, Ont.

The plan is to turn Ontario into "a beacon for a new generation of vehicles," Ms. Pupatello said last week after the Dana announcement. The province is contributing $2-million to the Dana program.

Magna, based in Aurora, Ont., is the country's largest auto parts maker, a global powerhouse that spends heavily on research and development. It is sitting on about $1.5-billion in cash.

The most high-profile electric vehicle project Magna has undertaken was the development of a battery-powered compact Focus for Ford Motor Co.

That work is being done by its E-car venture with Mr. Stronach, in which Magna holds 73 per cent, while the Magna founder and honorary chairman holds the remaining 27 per cent.

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But other Magna divisions are doing research into lightweight components such as those made of aluminum and magnesium as auto makers try to cut weight in structural components to offset the heavy battery packs that will provide the power for electric vehicles.

Magna's E-car operation has won other contracts with auto makers, Magna chief executive officer Don Walker said during a conference call on the company's second-quarter financial results earlier this month.

Mr. Walker would not provide details, but noted that "there's lot of activity going on in the hybrid and electric space."

Many of the vehicles being developed are years away from hitting the road, which means profits are also far away.

Magna's E-car division posted sales of $20-million (U.S.) in the three months ended June 30, up from $3-million a year earlier. But it lost $27-million before interest and taxes, compared with $20-million a year earlier.

Vince Galifi, Magna's chief financial officer, was asked about the cash position of the E-car business on the call earlier this month and while he would not reveal the amount, he said that if it does run out late next year, there are options.

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"It is what we can do to get outside financing to fund some of the projects that they've got going. Frank can put more money in, we can put more money in, but if it comes to that point, obviously that would have to be something that the board [of directors]would look at really, really carefully I would expect."

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