Harper renews $250M auto innovation fund

Prime Minister Stephen Harper was at the Ford Motor Co. plant in Oakville, Ont. today to announce the renewal of a fund to stimulate research and innovation in Canada's automotive industry.

The fund was first established in 2008 as part of efforts to bail out Canada's struggling automotive industry early in the last recession.

The five-year Automotive Innovation Fund required manufacturers to put up some of their own money before applying for funding targeted at specific research and development projects. The subsidy program was touted as an incentive for automakers to keep their Canadian plants open and protect jobs here.

Harper described the government's renewal of the fund as an investment.

"Any analysis of this fund is what we have invested from taxpayer dollars has been paid back many, many times to the taxpayer and will be continued to be paid many, many times to the taxpayer in terms of direct repayments but also economic activity," he said.

The government says its original outlay stimulated some $1.6 billion in innovative projects across the industry, and resulted in half a million spin-off jobs. Harper said Friday that the payoff been six times the amount the government put in the fund.

The announcement Friday commits another $250 million to the fund over five more years.

Under the original fund, the federal government contributed repayable loans to four companies, providing up to:

$80 million to Ford to establish a flexible engine assembly plant and an advanced powertrain research centre in Windsor, Ont.

$54.8 million to Linamar Corporation, to develop advanced components for transmissions, engines and drivelines.

$70.8 million to Toyota Canada to develop more fuel-efficient vehicles, including electric vehicles.

$21.7 million to Magna International to develop energy-efficient components for vehicles and powertrain components for next-generation vehicles.

Despite the government's embrace of austerity and deficit reduction in its spring budget, the renewal of the fund signals the government is still willing to commit to the automotive industry.

In 2009, the government made a huge investment in the car business by bailing out the recession-battered General Motors to the tune of $9.5 billion. Since then, GM has repaid the loan part of the deal, but the government is now a part owner of the automaker.

The Ford plant, where Harper made the announcement, has said recently that it would be starting a third line at its body, paint and pre-trim sector in Oakville, creating 300 jobs which are promised first to laid-off GM workers. Ford said that the third shift was necessary due to a high demand for its products.

According to auto industry analyst Dennis Desrosiers, the new vehicle market in Canada is rapidly recovering. On his website, Desrosiers notes that light vehicle sales in November were 125,000, the second-best number on record. In October, Canada saw the highest number of vehicle sales ever.

Desrosiers has predicted that by the middle of this decade, automotive sales in North America will be back to record numbers.

Friday Harper pointed out that while the Ford plant in Oakville has sold 6,000 of its Edge crossovers to China, and 4,000 to Brazil, the record sales within Canada are coming in large part from resource-producing Saskachewan and Alberta.

"So let us have no doubts about this, friends: a strong resource sector in the West means high-quality manufacturing jobs in the East," Harper said, attacking the idea that a high dollar due to oil revenues hurts manufacturing in eastern regions.

Chris Taylor, president of CAW Local 200, which represents approximately 800 hourly employees at the Ford Essex Engine Plant in Windsor, called the announcement "fantastic" and "quite substantial."

"We obviously want investment," Taylor said. "It’s a hell of a lot better than plant closures. This tells me the government realizes the importance of the auto industry to Canada and wants to partner with us."

While this is good news for the Canadian market, Canada still faces competition from Mexico and from some U.S. states that benefit from generous government subsidies.

A sore point with the government is that General Motors announced in late December that it will move production of the Chevrolet Camaro from Oshawa to a plant in Michigan in 2015.

Ken Lewenza, head of the Canadian Auto Workers union, suggested that the government should pressure GM to make up the loss of 100,000 units it plans to outsource to Michigan in some other way in Canada, given the fact that the government's bailout helped rescue the Canadian plant.

But Lewenza also stressd that the government must play an investor role in the auto industry, because other countries such as China and India are doing so. "If there's no partnership with government whatsoever, there would be no auto industry in Canada," he said.

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