Liberals near deal with Ford worth $300M as part of electric-car push
Ontario to help with green transition by matching contribution, source says
The federal government is readying a nearly $300-million funding package for Ford Motor Company in an effort to help the firm transition toward electric vehicle production at its Oakville, Ont., plant, a source familiar with the matter says.
The Ontario government is set to match the federal contribution under an arrangement worth almost $600 million, which would mark the largest public investment in the Canadian auto space in years. An announcement is expected as early as Monday, according to the person, who spoke on condition of anonymity due to commercial sensitivity.
The federal and Ontario governments did not deny the details of the arrangement, but cautioned that negotiations were still ongoing and that contributions were subject to change. A date for the announcement has not been confirmed, officials said.
The funding comes after the feds offered the automaker up to $500 million in subsidies as a way to encourage new investments in electric vehicles, according to a report by the Toronto Star last month. On Sept. 28, Ford officially announced a $1.8-billion plan to begin manufacturing electric vehicles at its Oakville plant, where it currently assembles the Ford Edge and Lincoln Nautilus. Another $150 million will go toward its operations in Windsor, the company says.
The subsidies are part of a broader effort by federal Industry Minister Navdeep Bains to spur electric vehicle production in Canada, as conventional automakers increasingly wind down their Canadian operations in favour of cheaper labour markets.
Bains, along with Ontario officials, had already been in discussions with Fiat Chrysler Automobiles (FCA) before the global pandemic over a potential funding package that would encourage the firm to shift toward electric vehicle manufacturing at either its Windsor or Brampton facilities, according to one person familiar with the discussions. Those plans were said to have been temporarily shelved as COVID-19 began to spread.
Unifor, the union that negotiated the Ford deal, kicked off a new round of labour talks with FCA on Thursday, with a deadline set for Oct. 14. Observers say those discussions are likely to use the Ford model as a template.
Negotiations between Unifor and FCA come amid increasingly uncertain times for the Canadian auto industry, particularly after General Motors announced in 2018 that it would be shuttering its Oshawa, Ont. assembly plant. Unifor will begin labour talks with GM later this year.
Adding to those worries, Fiat Chrysler last summer cut 1,500 jobs at its Windsor facility, where it manufactures the Chrysler Pacifica minivan. The company's Brampton assembly plant, where the Chrysler
300, Dodge Challenger and Dodge Charger are built, is also facing a tightening market as consumers opt for more fuel-efficient cars and sport-utility vehicles.
Ford has cast the Oakville investment plans as a new era for the company in the Canadian market.
“By introducing battery electric vehicle production at Oakville Assembly Complex, we are cementing our Canadian operations as a leader in advanced automotive manufacturing,” Dean Stoneley, president and CEO of Ford Canada, said in a statement late last month.
The company said it would shift to EV manufacturing in 2024, potentially beginning with the Ford Mustang Mach-e, its new all-electric crossover. The company mentioned the electric Mustang among several other new lines of vehicles in its latest quarterly reports, saying “there is a lot more for customers to get excited about” in coming years.
Jerry Dias, president of Unifor National, told media the new agreement with Ford would create five lines of electric vehicles at its facilities. Ford has not confirmed those plans.
The funding for Ford would amount to roughly 30 per cent of the total planned investment by the
company, well higher than the 10 per cent industry standard that is typically provided by government coffers. But some industry insiders say immense public funding will be necessary in order to reinvigorate Canada's moribund auto sector, and to reposition it for the next generation of auto manufacturing.
Canadian auto manufacturing reached its peak in 1999 when production surpassed three million vehicles per year, but has since slumped to around 2.3 million today. Canada has lost a net of five assembly plants since that time, according to a 2019 report by the Canadian Centre for Policy Alternatives.
Worries about shutdowns have accelerated in recent years, as automakers increasingly bolster their operations in foreign markets, where labour and electricity inputs are less costly.
Fiat Chrysler last year announced a Us$4.5-billion investment to build out new and existing assembly plants in Michigan, where the company will expand production of the latest iteration of the Jeep Grand Cherokee, Ram trucks and plug-in hybrids, among other models.
At the same time, massive bail
outs for major Canadian automakers in recent years have proven costly for taxpayers. In 2018, the feds quietly wrote off $2.6 billion in Chrysler debt that was deemed unrecoverable, part of the bailout money provided to the company following the 2009 financial crisis. The Ontario government then separately wrote off $445 million in unrecoverable loans.
And calls for more public supports could only grow as increasingly redundant product lines face market pressure. In the 2019 CCPA report, Charlotte Yates and John Holmes said the future of the Brampton plant in particular was “uncertain,” unless new lines of production were introduced.
“If these two assembly plants do close, no doubt followed by the parts network that depends on them, the damage to Canada's auto industry will be severe.”
The Liberal government has apparently tried to fill the gap in recent years, including a decision in 2018 to tap its $2.4-billion Strategic Innovation Fund to provide Toyota Motor Manufacturing with $110 million to help the company modernize its Cambridge and Woodstock plants.