The federal and Ontario governments will contribute about $135-million to an investment Ford Motor Co. will make in its Oakville, Ont., operations that will secure the future of the company's only Canadian assembly plant and 3,000 jobs into the next decade.
Ford will spend between $675-million and $725-million to retool the Oakville plant, which will assemble mid-sized crossover utility vehicles for North American and global markets, said sources familiar with an announcement scheduled to be made on Thursday by Ford executives and senior government officials.
The auto maker has been negotiating with the two governments for more than two years on the future of the Oakville factory, which occupies a prominent location in Ontario's industrial heartland.
The contributions by the two governments underline the importance of the auto industry and its high-paying jobs and what appears to be a commitment by Ottawa and Ontario to try to retain existing assembly plants, where every job generates an estimated 10 more spin off jobs throughout the broader economy. The government contributions to the Ford plant represent about 20 per cent of the total investment.
The auto industry is a particularly crucial part of the Ontario economy, which is home to all of the vehicle assembly plants in Canada and most of the 150,000 jobs in assembly and parts manufacturing. Vehicle manufacturing and auto parts represent about 2.4 per cent of the province's gross domestic product directly and as much as 10 per cent when the contribution of other industries such as steel making, transportation and warehousing is included, according to Bank of Montreal estimates.
Although the two governments contributed more than $13-billion to the bailouts that saved Chrysler Group LLC and General Motors Co. from liquidation during the 2008-2009 recession, Ontario has been watching enviously since then as billions of dollars of investment by Ford, its Detroit rivals and other global auto makers flooded into the United States and Mexico.
The U.S. and Mexico investments, some of which involve the construction of new plants in Mexico, were also aided by government subsidies.
The plan to redevelop Oakville represents one of the largest single investments Ford has made since the end of the recession, which the company weathered without going into Chapter 11 bankruptcy protection and without bailouts by Washington, Ottawa and Ontario.
A study done on Ford's Michigan Assembly Plant in Wayne, Mich. by the Center for Automotive Research, an industry think-tank in Ann Arbor, Mich., shows that Ford invested $8.9-billion (U.S.) at its U.S. and Canadian operations between 2010 and May 2012. Since then, it has also spent $555-million to add production of Fusions at an assembly plant in Flat Rock, Mich.
The investment in Oakville will enable the company to assemble the Ford Edge and Lincoln MKX crossovers on a global platform that also serves as the base for the mid-sized Ford Fusion and Lincoln MKZ sedans and is expected to be extended to other new vehicles.
Production of the current versions of the Edge and MKX will end late next year and assembly on the new platform will begin early in 2015, according to industry consulting firm AutomotiveCompass LLC of West Chester, Penn.
Assembly of the current versions of the larger Ford Flex and Lincoln MKT crossovers will continue on their current platform through 2018 and production of Edge and MKX will rise as the two larger vehicles are phased out.