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Sergio Marchionne, president and CEO of Fiat Chrysler Automobiles takes the podium at the Fiat Chrysler show floor during the media preview of the Canadian International Auto Show on Feb. 13 2014.

Fred Lum/The Globe and Mail

Ontario risks reducing its competitive position in the auto industry even further with policies such as a provincial pension plan and a cap-and-trade system for pollutants, Sergio Marchionne, chief executive officer of Fiat Chrysler Automobiles says.

"These are all things that add cost to the running of an operation," Mr. Marchionne told reporters Friday after speaking at a conference in Toronto.

"They don't come for free. They cost money. You start adding up the bill."

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He made his comments after sitting beside Ontario Premier Kathleen Wynne during the conference luncheon.

"This is not what I would call the cheapest jurisdiction in which to produce," he added during a question-and-answer session after the luncheon.

His comments come as Ms. Wynne's government and the federal government seek to land new automotive investment – and retain existing assembly plants – amid a flood of new spending by auto makers in Mexico.

The governments recently appointed former Toyota Motor Manufacturing Canada Inc. chairman Ray Tanguay as a special adviser on the auto sector to come up with ideas to help Ontario attract new automotive investment.

One of the actions Ontario could take, Mr. Marchionne said, is to create a mini Silicon Valley to develop ideas and startup companies that could develop new technologies.

"Let the kids run," he said. "Give them the toys and let them play."

Fiat Chrysler Automobiles NV operates two vehicle assembly plants in Canada, one of which was the recent recipient of about $2.6-billion in new investment to build a new generation of minivans, one of the products that has generated billions of dollars in profit for Chrysler's North American operations since the early 1980s.

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Mr. Marchionne noted that the Windsor plant can produce close to 400,000 vehicles annually and if there's $1,000 of costs built into those minivans that isn't found in other jurisdictions, then they're not competitive.

"It's a very large number," he noted. "It will drastically change your ability to retain capital."

The costs to FCA Canada of the cap and trade system and the potential addition of another pension plan aren't known yet, Mr. Marchionne said, but he pointed out that it makes little sense to add another pension system to the existing defined benefit plan that already exists for unionized workers represented by Unifor at the company's manufacturing plants in Ontario.

Ms. Wynne was "incredibly responsive," Mr. Marchionne said. "I think we had confirmation that the argument is not falling on deaf ears."

What has so far fallen on deaf ears is a plea the Italian-Canadian executive made in April for the auto industry to consolidate in part to help reduce the cost of new environmental technologies and provide a decent return on capital to investors.

FCA has approached General Motors Co. and other unnamed auto makers and received several rejections of proposals – at least in public.

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A combination of FCA and GM makes the most sense, Mr. Marchionne said Friday, noting that he outlined his proposal in a three-page letter to GM CEO Mary Barra, who has said the GM board of directors considered the idea but declined.

Those two companies combined would generate the highest level of savings of any of the combinations FCA officials examined, he said.

The auto industry's destruction of capital is one reason why such technology giants as Apple Inc. and Google Inc. likely won't make their own vehicles, he said.

"Don't overestimate Google's interest, he said. "These are very smart people."

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