Chrysler commits to Ontario plants, but withdraws request for government aid

Chrysler is no longer seeking $700M from the federal and Ontario governments

TORONTO – A decision by Chrysler Canada to commit to bringing a new minivan assembly line to Windsor, Ont. was greeted with caution Tuesday, as the auto giant said it was no longer looking to the federal and Ontario governments for funding.

The car maker said in a statement that it will bring the new minivan line to the Windsor plant, while its facility in Brampton, Ont., will also “benefit” with “substantial product interventions” that will come to market as early as the second half of this year. No further details were made available.

The Brampton assembly plant currently builds the Dodge Charger, Challenger and Chrysler 300.

In January, Chrysler had asked both levels of government for a reported $700 million of funding, as part of a $3.6 billion upgrade to the two plants.

Although it still owes the province $800 million from the bailout it received during the recession in 2009, it argued that it needed an incentive package that would help it offset higher costs in Canada.

But Chrysler said it notified officials this week that it was no longer seeking the money because the projects were being used as a “political football.”

“The thing I really regret most about this issue in Canada and province of Ontario is that unfortunately it has been picked up as a political football in the country,” said Fiat Chrysler Automobiles chief executive Sergio Marchionne.

“It is being bandied around as if it has become an ideological albatross.”

Last week, Ontario’s Progressive Conservative leader Tim Hudak urged the Liberal government to refuse Chrysler the funds, likening it to a “ransom” and a “corporate welfare” program.

At the time, Ontario Premier Kathleen Wynne called the remarks “irresponsible” and said the province was aware that the car maker was also open to setting up shop the U.S. or other countries.

Automotive analyst Peter Mateja said Chrysler’s decision is short on details of its investment in Ontario.

“It’s good news, the fact that they’re keeping the investments here,” said Mateja, co-director of the office of automotive and vehicle research at the University of Windsor.

“But the question is — how much?”

He noted that Chrysler’s announcement makes no reference to the number of jobs that will be kept or generated.

“Ultimately, it can still have an impact on jobs, which all of us worry about, because if they are going to be retooling, modernizing facilities, that typically means more efficiencies. Typically with that, goes job loss,” said Mateja.

Marchionne, who is a Canadian citizen, said Chrysler will begin upgrading the Ontario factories with its own capital but cautioned that the extent of its investment will depend on Canada’s competitiveness with other global markets and cooperation with the union, whose contract ends in 2016.

“We will do what we can to preserve and nurture the competitiveness of our operations, but we reserve the right, as is true for all global manufacturers, to reassess our position as conditions change,” he said.

Canada’s largest private sector union, Unifor, said it was regrettable that no specifics were given about the Brampton plant, which is in dire need of renovations. But it also lamented the lack of a “long-term” strategy for the auto industry.

“What Chrysler has announced, to me, doesn’t have a long-term vision and herein lies the problem,” said Jerry Dias, national president of Unifor.

“In the auto sector, you make decisions for years and years ahead. This announcement to me doesn’t have a long-term strategic vision, so I’m concerned.”

The union, which represents more than 39,000 autoworkers, urged both sides to restart negotiations.

“Our message to the two levels of government is that they better get back to the table and they better tie this thing up quickly,” said Dias.

But according to the Ontario government, the Chrysler decision to invest in the province is evidence that negotiations were actually a success.

“Our negotiations with Chrysler were consistent with our past level of support for major auto investments,” said Eric Hoskins, Ontario minister of economic development, in a statement.

“We will continue to work positively and proactively with Chrysler and with other auto companies to partner in a fiscally responsible way to attract new investment, new jobs, and new product lines to Ontario.”

In Ottawa, federal Employment Minister Jason Kenney blamed politics in Ontario for the Chrysler decision, and suggested that the federal government’s money is still on the table if Chrysler wants to tap into it.

“It’s pretty clear Chrysler has pushed themselves away from the table for now, which is a surprise to us because the conversations were going along quite fine,” he said.

Kenney said he had spoken to Chrysler Canada chief executive Reid Bigland and was told the company had serious concerns about “the political dynamics” in the province, particularly in what could be an election year.

“I think there is every reason to stay in Canada and I think Chrysler knows that. We’ve made Canada a very attractive place for the auto industry to found roots and build,” he said.

Follow @LindaNguyenTO on Twitter

— With files from Julian Beltrame and The Associated Press