Chrysler bailing on potential deal for government dollars: politics or business?

TORONTO – Ontario said it was blindsided by Chrysler’s abrupt decision to bail on a potential deal that could have seen hundreds of millions of government dollars invested in two of its plants — a move that could hurt the province’s hard-hit auto industry.

Chrysler Canada had asked Ontario and Ottawa for a reported $700 million as part of a $3.6-billion dollar investment in its Windsor and Brampton facilities, saying other jurisdictions like Mexico had approached it about their expansion plans.

Nothing had been finalized, but talks between federal, provincial and Chrysler representatives were going well, Premier Kathleen Wynne said Wednesday. She had no idea Chrysler had changed its mind.

“I was very taken aback by the letter I received yesterday morning,” she said.

“I was taken aback because in all of the conversations with my officials — which were daily, because obviously this is a very important issue for us — I had no warning that that was going to happen.”

Chrysler still plans to invest in Brampton and Windsor, including a new minivan assembly line, but it has withdrawn its request for government funds because it said the issue had become a “political football.”

The federal Conservatives piled on, blaming the “political dynamic” in Ontario for Chrysler’s decision — implicating their provincial cousins and exposing what appears to be some discord within the Tory family on providing public dollars to big corporations.

Ontario Progressive Conservative Leader Tim Hudak, who’s itching for an early election, recently condemned Chrysler’s request for government cash as “ransom” and “corporate extortion.”

The province could be plunged into an election as soon as this spring if the minority Liberals table a budget that doesn’t satisfy at least one of the opposition parties.

“If there’s any political football going on at all, it’s not coming from the government,” said Ontario Economic Development Minister Eric Hoskins.

“It’s coming from one person and one party — the quarterback of the PC party.”

Jerry Dias, national president of Unifor, which represents more than 39,000 autoworkers, said Chrysler told him that it didn’t like its name dragged through the mud by Hudak.

“They were really furious about it … that somebody like Hudak may very well be the premier, and what does that mean about the long-term investments that they’re planning on making,” he said.

“This is a situation where they’re going to need ongoing support. So they were really spooked.”

Conservatives dismissed it as a lot of hot air, incredulous that Hudak’s comments two weeks ago would change a multinational company’s mind about a government handout.

Hudak said he was happy to hear that Chrysler wasn’t coming to taxpayers for money that it apparently didn’t need.

“At the end of the day, how do you attract jobs? You get taxes down. You get energy rates under control,” he said.

“You make sure you have a pro-business government that knows you need to create jobs.”

Dias said Chrysler was also frustrated with the pace of talks with government officials, but didn’t specify which level.

Ontario has talked about grants, while Ottawa said it was looking at a loan. But government help usually has strings attached.

Both taxpayers and the government expect that in exchange for their help, “there will be guarantees with regards to both job creation and sustaining the existing jobs, and accountability measures throughout the term of the agreement,” Hoskins said.

It’s fair to say the province would have had more leverage if it provided Chrysler with public money, he said.

Now there are “question marks” about the future of those plants because Chrysler hasn’t said what it will do after 2016, said Wynne. But Ontario is still willing to talk with Chrysler and work with Ottawa to support the industry.

The automaker made it clear that decisions about the future of the Windsor and Brampton plants will be made with a number of considerations in mind, including the outcome of its next collective bargaining talks with Unifor in 2016.

“There’s no question that they’re going to bargain hard, they always do,” said Dias.

“Between the $700 million from the government and the monies that they were going to put in, there’s not a whole heck of a lot I can do at the bargaining table to make a sizable dent in that, I can assure you.”

It looks like Chrysler is scaling back from the originally multibillion-dollar plan, he said.

It talked about redoing the entire Windsor assembly plant, a complete “global platform” that would have allowed it to build everything from minivans to Fiat 500s, Dias said. It would have kept the plant going for another 30 years.

“They were talking about a $2.3-billion platform, now all of a sudden they’re just talking about doing the next generation of minivans,” he said. “That’s a huge difference.”

It makes little sense for Chrysler to abandon its award-winning Windsor plant, which is No. 1 in North America, Dias said. They also have the advantage of a low Canadian dollar and publicly funded health care, which reduce costs.

“That’s pretty tough to walk away from,” he said.

Ottawa and Ontario spent billions in bailouts for Chrysler and General Motors after the recession hit in 2009. The province says Chrysler paid back its loan in full.

The auto sector has rebounded, but large government incentives to build plants in the U.S. and Mexico, favourable trade agreements between Mexico and other countries and higher labour costs continue to hurt Canada’s chances to win production.