Ford to Build Electric Cars in Canada as Part of Labor Deal

The auto maker and union set three-year pact that includes $1.5 billion investment in Canadian plants

Ford Motor Co. has reached a tentative labor deal with its 5,400 unionized employees in Canada that also secures a nearly $1.5 billion investment in two plants and a commitment to build electric cars in suburban Toronto.

The promise from the Dearborn, Mich., auto maker represents a shot of confidence for Canada’s auto sector.

Factories in the country produce roughly two million vehicles annually, but that is down 25% from 2000 as car makers invested in lower-cost regions such as Mexico and the U.S. Sunbelt.

The president of Unifor, Canada’s largest private-sector union, revealed the details of the Ford pact covering wages and benefits at a news conference Tuesday.

Ford’s Canadian unit issued a brief statement, saying the three-year agreement is still subject to ratification by union members. Until ratification, the company said it wouldn’t comment further.

Unifor President Jerry Dias said the settlement, which was reached early Tuesday, will be put to a vote by members starting Sunday.

He said the biggest accomplishment of the deal was an investment of 1.95 billion Canadian dollars, the equivalent of $1.46 billion, in two Ford Motor factories in Ontario—an engine plant in Windsor and a vehicle-assembly factory in Oakville.

The latter will be retooled to build five models of electric vehicles, with production starting in 2025, Mr. Dias said.

Last week, Ford said it would spend $700 million to expand its largest and oldest factory to make electric pickup trucks in Michigan, which is next door to Ontario, Canada’s most populous province.

Canada’s federal government and Ontario are expected to contribute toward the investment package, Mr. Dias said, but didn’t disclose how much.

An Ontario government spokeswoman said the province was negotiating the terms of its contribution with Ford and the Canadian government, and that Ontario was prepared to make a sizable contribution.

A spokesman for Canada’s minister for industrial policy didn’t address questions about a financial contribution from Ottawa.

He said the government has a record of supporting auto workers and it would continue to do so in partnership with unions and industry.

Canada’s government is set to make investments in clean technology—such as batteries for electric vehicles—a component of its post-pandemic recovery plan to be unveiled Wednesday.

Research published this year by KPMG suggested Canada was a laggard in electric-vehicle production, accounting for just 0.4% of global manufacturing.

Mr. Dias said the settlement, including the investment in plants, was the result of months of talks involving Ford, Canadian Prime Minister Justin Trudeau and the Ontario government.

At the start of negotiations with Ford, Mr. Dias said Unifor was concerned about the future of the employees at the Oakville factory because of the company’s lack of long-term commitment to build another vehicle there beyond the Ford Edge.

“We were determined to ensure we solidified a product for our Oakville plant. I think it is fair to say as an organization we hit a home run,” he said.

Mr. Dias added the agreement also secures production in Oakville of the batteries required for the electric cars, which could add an additional 300 jobs.