Feds out of touch on auto strategy

The federal government needs to change how it assists automotive manufacturing by creating business conditions that will do a better job of attracting investment, much of which is flowing south to lower-cost jurisdictions.

That’s where Jaguar Land Rover Ltd. is heading rather than Windsor, Ont., which The Globe and Mail reported was under serious consideration. The UK automaker will break ground elsewhere because the federal government’s incentives aren’t competitive.

The five-year $100 million Automotive Innovation Fund announced in the 2015 Federal Budget provides taxable loans, while other jurisdictions are forking over hundreds of millions in non-repayable funding.

The no-strings financing attracted Audi and Mazda to make massive investments in Mexico, and Ontario’s non-repayable support likely played a role in attracting both Ford and Honda to commit to their operations last year.

Canada’s automotive sector has been challenged since the devastating economic crisis of 2008-09, but has managed to achieve record production and sales figures in the past two years despite rapidly vanishing investment from auto OEMs.

Yet RBC Economics reports investment in 2013 was less than a third of what it was in 2007. In 2014 alone, Mexico won more than US$7 billion in investment compared to Canada’s $750 million, according to the Centre for Automotive Research.

Securing the future
The Ontario government was key to securing Ford’s future in Oakville, Ont., where it will produce the Edge crossover for more than 140 markets. And Honda has invested almost $600 million at its Alliston, Ont. operations to manufacture its popular Civic sedan, thanks in part to commitments from the province.

But the industry needs a national focus on investment strategy.

The Canadian Automotive Partnership Council (CAPC), headed by Magna International CEO Don Walker, is actively lobbying the federal government to appoint an auto czar to raise Canada’s profile as an automotive manufacturing superstar.

Ontario is also in search of an auto adviser that would work to provide critical intelligence about the sector as it tries to convince more automakers to invest in the province.

Economic development minister Brad Duguid told The Globe and Mail that person would be in charge of assessing threats to current investment and determining how Ontario could benefit from the shift towards higher-tech and greener vehicles.

If the Harper government needs a rationale for a national strategy, it can refer to the role the automotive industry has played in Canada’s economic prosperity, how it’s responsible for the largest share of manufacturing GDP, the jobs it supports and the jobs that will be lost if it’s allowed to wither.