The Ontario government will unveil a $500-million assistance program for auto makers today that is designed to attract leading-edge assembly plants and compete with lavish subsidies that have turned Alabama and Mississippi into Detroit South.
The money, which will be available over five years, is a key part of Ontario's automotive policy. The program will be announced in Hamilton by Premier Dalton McGuinty.
It comes after years of pleading by the Canadian Auto Workers union and the country's parts makers to get in the game against southern U.S. states that have won billions in new auto assembly plants and thousands of jobs in recent years. Five new plants are operating or under construction in Alabama, Mississippi and Texas.
Auto makers building new assembly plants in the province can apply for the money, but it is also designed to protect the 50,000 jobs at existing assembly plants by providing financing for redevelopment of those sites, auto industry sources familiar with the announcement said yesterday.
The program appears aimed initially at Ford Motor Co., which is proposing a $1-billion redevelopment of its assembly operations in Oakville, Ont., to build a flexible manufacturing operation.
Flexible manufacturing is emerging as a key trend in the hyper-competitive North American auto industry because it allows companies to build multiple models in a single plant and react more quickly to changes in consumer tastes.
Ford is considering, for example, using a plant in Oakville to assemble minivans and at least two models of sport utility vehicles off the same platform, or basic auto underbody. Ford wants $200-million in financial help from Ottawa and Ontario.
Media officials in Mr. McGuinty's office refused to comment yesterday, but issued a notice late in the day saying that he will make "an important announcement" in Hamilton before speaking to the Automotive Parts Manufacturers Association annual convention.
The Ontario move, which also comes after DaimlerChrysler AG twice backed away from proposals to build plants -- one of which would have been a flexible operation -- in Windsor, Ont., puts the pressure on the federal government to participate in the incentive battle as well.
Joe Fontana, parliamentary secretary to Prime Minister Paul Martin, said Ottawa is poised to unveil a new auto strategy that will address such issues as skills training and technology. That strategy won't likely be tied to Ontario's moves, he said.
However, Mr. Fontana said the two governments are working with the industry toward the same goals.
"We are putting together a proposal," he said. "At the end of the day, it's going to be a three-way partnership."
Sources said Ontario's program will be tailored more closely to what auto makers have been seeking through a joint industry-government committee called the Canadian Automotive Partnership Council -- financial help to build new plants or rebuild existing operations, but to spend it in ways auto makers see fit. The requirements under the Liberal program will be less stringent than those under the $500-million package offered by the previous Conservative government of Ernie Eves.
Auto makers want Canadian governments to level the playing field with southern states that have been offering hundreds of millions of dollars in subsidies in recent years to lure assembly plants.
That doesn't mean the Ontario and federal governments have to offer the same amount of money, because much of what Alabama, Mississippi and other states offer is financing for such basic infrastructure as highways and interchanges, connection to an electrical power grid and water and sewer services to assembly plants.
Ontario Economic Development Minister Joe Cordiano discounts the value to auto companies of the large subsidies that have been provided by southern U.S. states. He said such subsidies are not necessary in Ontario because these states don't have the public infrastructure -- roads, sewers, community colleges -- that Ontario offers.
"They have to offer those incentives because they don't have the public infrastructure that we do," Mr. Cordiano said.
Auto makers agree, but they think Canada needs to participate in the incentive game, one industry source said yesterday.
"They also have to be a lot more aggressive in their marketing," the source said of the Ontario and federal governments.
Mr. Cordiano offered no details yesterday about the future shape of the province's auto sector strategy but he dropped hints that it would not involve subsidies for individual companies.
He said the government would unveil "a new approach" that emphasized investments to keep the industry more competitive. He suggested that this would centre on training for workers and more efficient use of electricity along with the provision of adequate public infrastructure.
"Those things are going to be legacies for Ontario and they're going to be investments for the long term, not short-term handouts," Mr. Cordiano told reporters on his way into a caucus meeting.
"It's about ensuring those companies are innovative and can compete with the rest of the world."
