Investment fund for auto sector gets five-year extension from Ottawa

OAKVILLE, Ont. – Ottawa has renewed the $250 million investment fund that puts cash aside for car companies and their suppliers, part of a five-year plan to help keep the auto manufacturing industry thriving in Canada.

Prime Minister Stephen Harper, speaking at the Ford plant in Oakville, Ont. on Friday, said the Automotive Innovation Fund has helped Canada’s auto sector become more innovative, agile and competitive.

“The rebound of our auto sector in this country is one of Canada’s biggest economic and industrial success stories of the last five years,” said Harper, while cautioning the “global economy remains troubled.”

“Therefore I’m pleased to announce today that our government will make another significant five-year investment in the automotive innovation fund.”

The fund, established in the 2008 federal budget, requires companies to invest their own money to access government cash, which must be paid back in full. Only large-scale research and development projects valued at more than $75 million are considered.

Ford, Canadian auto parts maker Magna International (TSX:MG) and Toyota Motor Manufacturing Canada are among the companies that have drawn money from the fund for projects.

Harper noted the automotive industry — “the engine of southern Ontario’s manufacturing economy” — was hit especially hard during the 2008-9 recession.

“For a while it seemed like its very existence was in real danger.”

Canadian Auto Workers union president Ken Lewenza, who attended the announcement, said he’d like to see conditions added to the funding, specifically for “employment levels to remain consistently high, if not enhanced.”

Lewenza said the loan agreements “ought to have a commitment to jobs because the last time the Ford Motor Co. got a huge boost at this Oakville facility it coincided with significant job loss in Windsor.”

The five-year renewal to the innovation fund comes after a controversial government bailout of the auto industry — including billions to help General Motors and Chrysler get through court-supervised restructurings.

The CAW complained last month when GM Canada said it will shift production of the Chevrolet Camaro from Oshawa, Ont., east of Toronto to a plant in Michigan in 2015. The CAW says the move will cost 1,000 jobs at the Oshawa complex.

Ontario has seen traditional Detroit Three carmakers — GM, Ford and Chrysler — cut tens of thousands of jobs in the last decade as their parent companies restructured in the United States.

In 2011, Ford closed its St. Thomas, Ont., while investing in plants in the U.S.

Canada faces growing competition from both the U.S. and Mexico, where labour costs are cheaper for both automakers and auto parts manufacturers, partly due to the strength of the loonie. Some U.S. states have also launched government grants and other financial assistance programs to drive manufacturing into their regions.

The federal and Ontario governments contributed $10.6 billion to the U.S. government’s bailout of General Motors during the recession. GM has repaid the loans but the Canadian governments continue to own shares received for some of the funding provided to keep the company from going out of business in 2009.

When asked about the renewal in the context of the GM move, Harper defended the fund.

“What we have invested from taxpayer dollars has been paid back many, many times to the taxpayer and will continue to be paid many, many times to the taxpayer back in terms of direct repayments but also economic activity,” he said.

“These have been very good investments for Canada.”

“Our objective remains to sell those shares in a way that … attempts to maximize the value for the Canadian taxpayer,” he added.

The renewal of the fund mark a further recognition of the importance of the domestic auto sector, said Canadian Vehicle Manufacturers Association president Mark Nantais in a statement.

“Canada’s auto industry is better positioned to compete and win new investment which will help to drive the economy and create more opportunities for Canadians,” he said.