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Auto industry makes the case for incentives

Federal and provincial governments should offer incentives to attract new vehicle assembly plants to Canada, Linamar Corp. president Linda Hasenfratz told an economic summit Tuesday.


The federal and Ontario governments need to offer incentives to attract new vehicle assembly plants to Canada, Linamar Corp. president Linda Hasenfratz says.

"A vehicle assembly plant is huge. The payback is immense," Ms. Hasenfratz, chief executive officer of Canada's second-largest auto parts maker, said Tuesday.

Mexico and other countries are offering incentives so "why are we so against it?" she asked.

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Her comments come amid growing evidence that Canada's position in the North American auto industry is eroding as the United States and Mexico grab a much greater share of investment in assembly plants, the country's automotive trade deficit soars, and employment levels stagnate.

Manufacturing is a critical element of a prosperous economy, Ms. Hasenfratz told the Bloomberg Canada economic summit in Toronto, pointing to Germany as a country that has high labour costs, but also a thriving auto industry and is among the world leaders in innovation.

Canada's share of new automotive investment in North America has fallen to single digits from at least 15 per cent annually, according to data from DesRosiers Automotive Consultants Inc. and the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.

The recovery in North America following the 2008-2009 financial crisis is different because it's the first time in living memory that Canada has underperformed compared with the United States and Mexico, Mr. DesRosiers told the meeting.

"If you don't invest, you don't get the future," Mr. DesRosiers said, saying it's easy to place the blame for lack of investment on the rise in the value of the Canadian dollar against the U.S. currency, or on the Canadian Auto Workers for rejecting concessions made by the United Auto Workers at Detroit Three auto plants in the United States.

But the reasons are deeper than that, he noted, including the aggressive incentives being offered by U.S. states and Mexico.

Trade agreements Mexico has signed with several South American countries have led to billions of dollars worth of new investment and helped boost Mexico to fourth among countries that export vehicles, says a recent analysis by the Federal Reserve Board of Chicago.

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The debate about Canada's status in the North American auto industry is occurring as the federal and Ontario governments consider a request by Ford Motor Co. for financial help to rebuild the auto maker's Oakville, Ont., vehicle assembly plant.

Ford has been seeking a contribution of more than $400-million to help cover an investment of about $1.2-billion to install an assembly line that would produce a global platform – or basic vehicle chassis – that can support vehicles that could be exported around the world.

The auto maker is confident it can retain its Canadian footprint, Ford Motor Co. of Canada Ltd. president Dianne Craig told the meeting.

The Oakville plant is the only remaining Ford assembly plant in Canada.

Progress is being made in negotiations with the governments, Ms. Craig said after the meeting, but she refused to provide a deadline for an answer to Ford's request.

U.S. industry sources said Tuesday that the governments will need to move quickly, because the vehicles that will be produced on Ford's CD4 platform, which include replacements for the current Ford Edge and Lincoln MKX, are scheduled to hit the market for the 2015 model year.

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Start of production for those vehicles is scheduled for next June, the sources said.

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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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