Do Canadian auto industry jobs rely on government support?

This week Prime Minister Justin Trudeau was in my hometown Windsor, Ontario to announce that his government was giving more money to Stellantis, the automaker that owns the former Chrysler minivan plant in Windsor. Along with Doug Ford, the premier of Ontario, Mr. Trudeau said the two tiers of government would give the company about CAD 1 billion to help reorganize that factory and the one in Brampton, Ontario as they move to. the production of electric vehicles.

It was just one in a series of recent federal and Ontario government announcements revealing funding for auto manufacturers. At the end of March, Stellantis and LG, the South Korean electronics giant, received $ 5 billion to build an electric vehicle battery factory in Windsor, IN as the government called it “the largest investment in the Canadian auto industry”.

But that’s not all: About a month ago, General Motors was given $ 518 million two Ontario factories, one of which was converted to make fully electric delivery vans. And in March, the two governments gave $ 263 million for The two Ontario Honda assembly lines.

“With the agreements we have made with car manufacturers in recent months, we are supporting automotive workers across the country”, Mr. Trudeau he said on Twitter Thursday. “We are securing more than 16,000 good middle-class jobs.”

It is not uncommon for governments around the world to heavily subsidize jobs in the auto industry, as Ontario and the federal government have done, as auto factories can boost the economy, generate tax revenue, and generally pay well. employees.

This week I spoke with Greig Mordue, chair of advanced manufacturing policy and associate professor of engineering at McMaster University, who offered some warnings about the help that the government, both federal and provincial, has been providing to the industry and the implications. of the latest announcements.

He pioneered the grants process both as a government consultant and as the general manager of Toyota Motor Manufacturing Canada, which operates two factories in Southern Ontario.

“All the actors spend a lot of time talking about the rebirth of the car in Canada and I understand why they do it,” he told me. “But no matter how you cut it, the industry has gone back in the past 20 years and all of these recent announcements, while welcome, add nothing.”

For an upcoming contribution to an academic book on the North American auto industry, Mr. Mordue calculated that Ontario and the federal government have donated CAD $ 9.1 billion to automakers since 2000. he calculated is not encouraging, he said. In 2000, Ontario’s auto factories employed 54,000 people, which produced three million vehicles. In 2020, despite government investments, the factories employed just 37,000 people, making around 1.1 million vehicles.

The future of the Canadian auto industry is clouded, Mr. Mordue told me, about 22 years ago, when automakers realized they could produce their most expensive luxury models in Mexico at the same quality levels as the factories. anywhere else in the world, including Canada. Since then, he said, “Canada has been looking for its source of competitive advantage.”

Mexico, on the other hand, has an overwhelming advantage in terms of labor costs. The money given to Honda, he estimates, will cover six months of wages and benefits for the 4,000 workers in Alliston, Ontario. Conversely, it would take six to 10 years for a plant in Mexico to collect a similar labor bill.

He said Canada’s approach to how it subsidizes auto jobs differed greatly from the American states’ approach. In the United States, he said, state governments usually only offer a one-time incentive to build plants. Canada, on the other hand, generally subsidizes the reorganization of factories as new products arrive every five or six years.

“The US approach is: one and done,” Mordue said. “But we are: one and then every five years. I am not convinced that Canada should do this. “

Also, it’s not necessarily a given that Canadian factories would close without regular government cash infusions. It’s much easier and cheaper to reuse an existing factory than to open a new one, a process that involves hiring and training large numbers of workers and building a supplier base close to the factory, Mordue said.

Mr. Mordue said it was also impossible to determine whether car companies’ investments in Canada would have gone ahead without government money or even if investment decisions had already been made before the automakers sought help from governments.

“You don’t know what the truth is, no one will ever tell you,” he said, adding that neither the Ontario government nor the federal government were willing to bet that the automakers’ investments would come without subsidies.

“This is the gamble the government has to play,” he said. “And so far, they haven’t taken any risks in Canada.”

This week’s Trans Canada section was compiled by Vjosa Isai, a Canadian reporter for the New York Times.

  • The American Museum of Natural History in New York reopens its oldest gallery on May 13 after a five-year renovation. Artifacts created by indigenous groups in Canada are among the 1,000 items on display. The exhibit was co-curated by an indigenous leader of Vancouver Island, although he is among critics who claim that to store the works of colonized societies in museums it is an outdated practice.

Born in Windsor, Ontario, Ian Austen studied in Toronto, lives in Ottawa, and has spoken about Canada for the New York Times for the past 16 years. Follow him on Twitter at @ianrausten.

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