Ford Reportedly Looking For $400 Million From Canadian Government As Belts Tighten Across Canada

Derek Kreindler
by Derek Kreindler
ford reportedly looking for 400 million from canadian government as belts tighten

The Globe and Mail’s Greg Keenan explored an interesting conundrum that Canadian governmental officials are facing; is it worth subsidizing auto industry manufacturing facilities, even with austerity programs in place?

The closure of the Oshawa consolidated line last week brought into focus the issues facing Ontario’s once bouyant auto manufacturing sector. On the one hand, there’s the instinct to preserve the auto plants, and the stable, well-paying jobs that come with them, even if it means “investment” from both the provincial and federal government (at a rate of 15 percent of the total cost from each level of government). But with governments imposing wage freezes and layoffs on public employees, subsidizing profitable private businesses goes beyond just poor optics.

Keenan cites upgrades to Ford’s Oakville plant, which builds vehicles like the Edge and Flex, as having the potential to require a total of $400 million in government money. While the sum is steep, the upgrades would preserve the 2,800 jobs currently at the plant, and allow for a global platform vehicle to be built, increasing the potential for exports beyond the U.S. market.

States like Tennessee and Alabama are courting car companies with what Keenen describes as “… incentives worth hundreds of millions of dollars at auto makers to finance training, infrastructure and real estate purchases and provide tax holidays to land the thousands of jobs created by assembly plants.” Of course, those states tend to have plants that aren’t unionized. Foreign automakers tend to build in the South more than the Big Three, but GM recently moved some production of the Chevrolet Equinox from Oshawa to Tennessee in part because they could pay new hires $14 an hour rather than the $32 an hour paid to Oshawa employees.

High CAW wages and a strong Canadian dollar give the automakers the potential for an easy way out when it comes to packing up and moving their plants elsewhere. Bringing production back to America, at $14 an hour would not only cut costs but provide good optics for American manufacturers. Moving production to Mexico, already a trend among a number of automakers, would provide further costs savings, and if the last generation Ford Fusion is anything to go by, no major drop in quality.

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  • Jkross22 Jkross22 on Jun 07, 2012

    So much for Ford trumpeting the 'we didn't take bailout' line. They are tramps just like the tools at RenCen.

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    • Carbiz Carbiz on Jun 08, 2012

      @NulloModo Recent studies show that since 2001, Ontario has lost 100,000 auto-related jobs. That figure gets lost in the shuffle as Toyota opens a shiny new plant in Woodstock, hiring 900 people, as Ford laid off 2,400. The CAW has dug its own grave in terms of credibility, but that does not make ALL their alarmist rants untrue. Kia/Hyundai are poised to overtake Honda and Toyota in terms of sales in Canada, yet they don't build a single thing in Canada. We've already seen our net trade surplus evaporate since 2008. Kia/Hyundai's sales have pretty much doubled since then. Coincidence?

  • Carbiz Carbiz on Jun 08, 2012

    There are real costs to running a business in the Great White North that go far beyond arguments about socialism or corporate welfare. For starters, we have the population of California in a land mass larger than the entire United States. Transportation costs are higher here. Look at the cost of twinning highway 69 north from Toronto: the blasting of rock and filling in of bogs, as compared to an interstate through Pennsylvania or Arizona. Secondly, although southern Ontario may be farther south than the Dakotas or Washington state, we have abysmal weather: 90 degree summer days and 10 degree winters. Cities like Toronto and Montreal can shell out $100M in a bad winter just to move snow around. Atlanta and Nashville don't face those challenges. Then there's the lifespan of bridges, roads, etc. I'd wager a sidewalk in Houston lasts forever. In Toronto, the freeze-thaw cycle destroys them in 40 years or so. Or the cost of heating/cooling a factory or warehouse in Toronto or Montreal, as compared to St. Louis or Raleigh. I am no fan of unions, but I am not a big fan of free trade or globalization, either. With perhaps the exception of fresh tomatoes in January, Canada is self-sufficient in everything it produces and if not for the petty east-west bickering, we could have closed our borders decades ago and gone our own way. We have done well by trading with our Southern neighbors, but Japan Inc threw a monkey wrench into that relationship, and Korea Inc is about to finish it off. Our trade surplus with the U.S. is overshadowed by our trade losses everywhere else. Amongst other financial challenges, Canada carries a huge current account deficit, in no small part thanks to swelling trade deficits in Asia for autos and auto parts. Everyone is quick to slay other people's jobs at the altar of choice, but other than 40 types of patio lanterns to choose from at Wal-Mart at prices my father would have paid 40 years ago, I see no advantages to offshoring everyone else's jobs. Sooner or later, everyone will be working for Chinese wages.

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    • Carbiz Carbiz on Jun 08, 2012

      @Roland You really think that Europe/North America (minus Mexico) with a measly billion people and 0 population growth (we even have to import that) can compete with the 3.5 billion in Asia/South Asia that have a birth rate of 3-4%? Do you think their labor market will EVER be saturated? Even Brazil, doing as spectacularly as it has been, will never get out of the R%/hr rut until their poor stop popping them out. My spouse is one of 8! And the alternative is worse: if the 3.5 billion souls in Asia/South Asia achieve even 50% parity with the West's standard of living, the planet just cannot sustain that. War, disease, famine: pick one, because unless the Rest of the World gets its act together, or we circle the wagons, its gonna get very, very ugly. BTW, weren't those pictures of Putin and the Chinese Premier the other day a cute photo op? That sends more of a chill up my spine than any Freddy movie.

  • Dukeisduke Yikes - reading the recall info from NHTSA, this sounds like the Hyundai/Kia 2.4l Theta II "engine fire" recall, since it involves an engine block or oil pan "breach", so basically, throwing a rod:"Description of the Safety Risk : Engine oil and/or fuel vapor that accumulates near a sufficiently hot surface, below the combustion initiation flame speed, may ignite resulting in an under hood fire, and increasing the risk of injury. Description of the Cause :Isolated engine manufacturing issues have resulted in 2.5L HEV/PHEV engine failures involving engine block or oil pan breach. In the event of an engine block or oil pan breach, the HEV/PHEV system continues to propel the vehicle allowing the customer to continue to drive the vehicle. As the customer continues to drive after a block breach, oil and/or fuel vapor continues to be expelled and accumulates near ignition sources, primarily expected to be the exhaust system. Identification of Any Warning that can Occur :Engine failure is expected to produce loud noises (example: metal-to-metal clank) audible to the vehicle’s occupants. An engine failure will also result in a reduction in engine torque. In Owner Letters mailed to customers, Ford will advise customers to safely park and shut off the engine as promptly as possible upon hearing unexpected engine noises, after experiencing an unexpected torque reduction, or if smoke is observed emanating from the engine compartment."
  • Dukeisduke In an ideal world, cars would be inspected in the way the MoT in the UK does it, or the TÜV in Germany. But realistically, a lot of people can't afford to keep their cars to such a high standard since they need them for work, and widespread public transit isn't a thing here.I would like the inspections to stick around (I've lived in Texas all my life, and annual inspections have always been a thing), but there's so much cheating going on (and more and more people don't bother to get their cars inspected or registration renewed), so without rigorous enforcement (which is basically a cop noticing your windshield sticker is out of date, or pulling you over for an equipment violation), there's no real point anymore.
  • Zipper69 Arriving in Florida from Europe and finding ZERO inspection procedures I envisioned roads crawling with wrecks held together with baling wire, duct tape and prayer.Such proved NOT to be the case, plenty of 20-30 year old cars and trucks around but clearly "unsafe at any speed" vehicles are few and far between.Could this be because the median age here is 95, so a lot of low mileage vehicles keep entering the market as the owners expire?
  • Zipper69 At the heart of GM’s resistance to improving the safety of its fuel systems was a cost benefit analysis done by Edward Ivey which concluded that it was not cost effective for GM to spend more than $2.20 per vehicle to prevent a fire death. When deposed about his cost benefit analysis, Mr. Ivey was asked whether he could identify a more hazardous location for the fuel tank on a GM pickup than outside the frame. Mr. Ivey responded, “Well yes…You could put in on the front bumper.”
  • 28-Cars-Later I'll offer this, offer a registration for limited use and exempt it from all inspection. The Commonwealth of GFY for the most part is Dante's Inferno for the auto enthusiast however they oddly will allow an antique registration with limited use and complete exemption from their administrative stupidity but it must be 25 years old (which ironically are the cars which probably should be inspected). Given the dystopia being built around us, it should be fairly simply to set a mileage limitation and enforce a mileage check then bin the rest of it if one agrees to the terms of the registration. For the most part odometer data started being stored in the ECU after OBDII, so it should be plug and play to do such a thing - this is literally what they are doing now for their emissions chicanery.