Automaker withdraws requests for government’s financial assistance
Chrysler’s refusal to be used as a "political football" could become a fumble for the province of Ontario.
In a statement that blindsided government officials, the automaker announced its intention to withdraw all requests for financial assistance in the development of assembly plants in Windsor and Brampton, Ont.
Chrysler plans to develop and industrialize its next minivan in the Windsor location while the Brampton facility is scheduled to benefit from a substantial product intervention on the Chrysler 300 and Dodge family of products it currently produces.
More than $3 billion could have been invested, said Unifor’s national president Jerry Dias. As much as $700 million of that was expected to be provided through government financial assistance.
Chrysler has not confirmed the numbers, saying only that it would be the company’s biggest investment in Canada since the recession.
In February, Ontario Progressive Conservative leader Tim Hudak accused Sergio Marchionne, chairman and chief executive of Chrysler Group LLC, of holding the provincial government for "ransom" by requesting financial assistance.
"It is clear to us that our projects are now being used as a political football, a process that, in our view, apart from being unnecessary and ill-advised, will ultimately not be to the benefit of Chrysler," the company said in its statement. "As a result, Chrysler will deal in an unfettered fashion with its strategic alternatives regarding product development and allocation, and will fund out of its own resources whatever capital requirements the Canadian operations require."
The automaker confirmed the Windsor and Brampton plants will continue to build its flagship minivan and sedans, respectively. But the decision to walk away from financial assistance has many worried the company will soon look outside of Canada for its industrial needs.
"It has to be salvaged," Dias said of the talks between Chrysler and the provincial and federal governments. "Think of the jobs that are impacted. There’s a half a million jobs in Ontario tied to the auto sector. And it’s not just the direct jobs, it’s the indirect jobs. That’s why every country in the world is clamouring for a strong auto sector, because of the significant impact."
Financial assistance from the government could set up Chrysler’s Windsor and Brampton plants for decades and provide job security, Dias said. Auto workers are purchasers, and their presence in Ontario means a significant portion of their paycheques go back into the community.
Dias said Chrysler has pumped more than $85 million into the auto industry every year for the past decade.
"When you’re looking at those types of investments, the government’s portion probably would have been paid off in three years," he said. "So then you’ve got another 25 or 27 years of straight gravy. A guy like Hudak wants to be premier, for crying out loud, he doesn’t get it."
The political commentary being lobbed about — like so many footballs — in combination with the slow pace of talks ultimately led Chrysler to step away from the table, Dias said.
The comments made Chrysler "furious, absolutely furious… and they are absolutely re-evaluating their long-term footprint. That’s a problem," he said.
Mexico and the United States — both lower-cost jurisdictions — offer automakers millions of dollars in incentives.
"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," Marchionne said in Chrysler’s statement. "Some of the shots across the bow following our initial approaches to the federal and provincial governments reveal, apart from political convenience, a somewhat restricted view of Canada as an industrial player in what has become a borderless economy. It is clear that we, at Chrysler, need to do more to explain ourselves and our choices going forward."
While critics question Chrysler’s future in Canada and call foul on Ontario’s political atmosphere, Minister of Industry James Moore plans to gut it out.
"It certainly came as a surprise to us," Moore said of Chrysler’s decision following the release of the company’s statement. "They made a decision to push away from the table for now principally because of concerns with the political dynamic in the province of Ontario… We have a very different policy approach at the Government of Canada."
This year’s Automotive Innovation Fund commits $500 million to the industry in addition to the $250 million previously committed, he said. "Our support for the auto industry is strong," Moore said. He invited Chrysler back to the table to discuss moving forward together.
"I think there’s every reason to stay in Canada and I think Chrysler knows that," Moore said. "We’ve made Canada a very attractive place for the auto industry to set down roots and to build."
Moore’s refusal to step away may yet win over Chrysler’s CEO. Though Marchionne called this time out, the company’s statement made it clear he is not yet ready to call it quits.
"Our commitment to Canada remains strong."
