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Ford seeks government aid to retool Ontario plant

Ford Motor Co. of Canada Ltd. has approached Ottawa and Ontario for financial incentives to retool its assembly plant in Oakville, Ont., once again raising the issue of how willing the governments are to provide such financing in the post-auto bailout world.

The auto maker is seeking help to begin producing vehicles off a global platform (or basic underbody), a development that would enhance the security of the Oakville factory, because it would be capable of producing more vehicle types than the crossover utility vehicles it manufactures now.

The cost of the project ranges between $500-million and $1-billion, said one industry source, which would mean the request of the governments is in the range of $100-million to $200-million, based on past government programs, which have provided about 20 per cent of the total cost of a project.

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But the bar has been raised by the $141-million the federal and Ontario governments are providing to Toyota Motor Manufacturing Canada Inc., which represents close to 30 per cent of the $545-million total investment at its Cambridge and Woodstock facilities. If the Ford project ends up costing $1-billion and it seeks 30 per cent of the total, the governments could be asked to provide as much as $300-million.

The Canadian governments are also competing against aggressive U.S. states, which are offering hundreds of millions of dollars in incentives to land new auto plants. In the case of Volkswagen AG, for example, Tennessee and two other levels of government combined to offer more than $500-million (U.S.) to land a $1-billion assembly plant.

Ford spokeswoman Lauren More said company officials meet regularly with government representatives to discuss issues, including possible future investment in Oakville. "Future investment for the plant is contingent on government support," Ms. More said.

Provincial officials would not comment.

Neither Ford nor Toyota sought or received government help during the 2008-2009 recession and auto crisis when Ottawa and Ontario bailed out Chrysler LLC and General Motors Corp. by contributing about $13-billion (Canadian) to a U.S. government-led rescue of the largest and third-largest Detroit auto makers.

The two Canadian governments have received partial repayments of that amount and still own equity shares in Chrysler Group LLC and General Motors Co., the companies that emerged from the Chapter 11 filing that wiped out billions of dollars in debt.

The federal and Ontario governments each gave Ford $100-million when the auto maker rebuilt its Oakville operations to begin producing the mid-sized Edge and Lincoln MKT crossovers in 2006. That $200-million incentive was 20 per cent of the $1-billion retooling of the plant to assemble those vehicles and the Ford Flex and Lincoln MKT, larger crossovers that were added later.

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The Edge is the no. 3 seller among Ford crossovers and sport utility vehicles. The MKX is the best-selling Lincoln crossover or SUV.

But the Edge and MKX are being redesigned and migrating to a new platform in 2013, several industry sources said, They will come off Ford's CD4 platform that will also serve as the basic underbody for the Fusion, Taurus, Mondeo, MKZ and MKS passenger cars.

Ford's strategy is to reduce the number of platforms, but produce several of what it calls top hats off each platform. Its C1 compact platform, for example, provides the base for the Ford Focus compact car, but also such derivatives as the C-Max minivan and several small crossovers.

There are questions about what Ford will do about the Ford Flex and Lincoln MKT, large crossovers assembled off a different platform. They are not the hits Ford hoped they would be.

George Pipas, Ford's manager of U.S. sales analysis, said on a conference call earlier this month that it's fair to say that MKT sales have been disappointing. Sales of MKT slumped 37 per cent in the first six months of the year in the U.S. market. Flex sales tumbled 30 per cent.

Ford agreed in contract talks with the Canadian Auto Workers union in 2009 to allocatea new generation of products to the Oakville plant based on a new global vehicle platform.

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The company also agreed to add a third shift of workers to the Oakville plant when market conditions permit, but the slow sales of the Flex and MKT have so far kept Ford from doing that.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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