Automaker to go it alone and will be weighing future investment against competitive factors.
WINDSOR, Ont. – Ontario Progressive Conservative leader Tim Hudak is to blame for Chrysler Canada’s intention to withdrawal a $700-million federal and provincial funding assistance request, Unifor president Jerry Dias says.
The automaker says it will no longer seek government financial assistance to revamp its two Ontario assembly plants, and instead will go at it on its own.
Lou Ann Gosselin, head of communications at Chrysler Canada says the company will move forward with its plans, but points out that “[Chrysler] never committed to a number” – referring to the $3.6 billion attached to the projects.
“For [Chrysler CEO Sergio] Marchionne to tell both levels of government to forget it and that [Chrysler] will go at it alone is a major cause of concern,” says Dias. “[To mention Hudak], they’re obviously concerned that this province may end up in the hands of someone who doesn’t have a clue about industrial strategy.”
Mathew Wilson believes Chrysler sent a warning when CEO Sergio Marchionne pulled the funding assistance request.
“[Chrysler’s] decision should encourage the governments to sharpen their pencils and get to work to make sure that Canada is a lot more competitive at attracting manufacturing investments,” says Wilson, vice-president of national policy at Canadian Manufacturers & Exporters (CME).
According to a Chrysler statement, the projects in Brampton and Windsor, Ont. were being used as a “political football” that would not benefit the company. The announcement comes hours after Marchionne told a press conference at the Geneva Auto Show that an official announcement on the fate of its Windsor plant would be made by March 6.
“This isn’t about making investments in two assembly plants, this is about the long-term impact on the entire Chrysler supply base in Canada,” says Wilson.
Steve Rodgers, president of the Automotive Parts Manufacturers’ Association (APMA), says Chrysler’s decision is related to perceived “corporate welfare,” a term used by the right-leaning Fraser Institute and Progressive Conservative leader Tim Hudak, who called on the Ontario Liberals not to hand Chrysler any “ransom” money.
“Jurisdictions in the southern US and Mexico see these opportunities as wise investments that return huge economic value over the long term. That hasn’t been the case in Ontario.”
Hudak cited the automaker still owes the province $800-million bailout it received during the 2009 recession.
“Should we pay a nine figure ransom to Chrysler? Of course not,” he told The Canadian Press. “We should use the money to lower taxes for all, so all companies can create jobs, instead of giving handouts to the very few.”
Dias says he is especially concerned about the future of the Brampton assembly facility, pointing out that the company currently has no long term vision for the plant.
“[Marchionne] is firing a salvo right through the House of Common and Queens Park,” he says.
The company says it will continue with plans to invest in both facilities, including its new line of minivans, which are produced in Windsor. The Brampton plant builds the Dodge Charger, Challenger and Chrysler 300.
“Chrysler will fund out of its own resources whatever capital requirements the Canadian operations require,” the company said.
“I hope Chrysler finds value in the investments it will do on its own; there’s going to be a real problem if they don’t,” says Wilson.
But Marchionne warned that capital allocation will be continuously monitored to determine the company’s future in Canada. Collective bargaining negotiations with Unifor in 2016 will also be a factor.
The investments would have been an excellent opportunity for Chrysler to add a global platform to either facility now that the EU free trade deal has been ratified, Rodgers adds.
Dias says the decision shows a need for a long-term automotive strategy.
“We’re pleased that Chrysler will invest in Windsor…but we’re deeply concerned in the long-term that we will lose an incredible opportunity to secure Ontario’s manufacturing industry well into future. We’ve got to get everyone in a room and hash this thing out.”
Marchionne, who holds Canadian citizenship, expressed disappointment in having to make the decision.
“As a Canadian, I regret my failure in having been unable to convey the highly competitive nature of markets that offer manufacturing opportunities to carmakers that operate on a global scale.”