Automotive News Canada - November 2020 - 11

* N O V E M B E R 2 020

When 'corporate welfare' becomes necessary investment
THE MULTIBILLION-DOLLAR
investments slated for the
Detroit Three plants in Ontario
underscore an important yet
controversial point: If Canada
hopes to secure major investments, the federal and provincial governments will have to
come to the table with significant funding.
Combined, Fiat Chrysler
Automobiles, Ford Motor Co.
and General Motors plan to
spend more than $4 billion at
three assembly plants. Ford's
Oakville plant, for example, is to
receive upgrades worth $1.8
billion, which includes $590
million in aid from the federal
and Ontario governments, funding that was key to securing the
investment.
It would be easy to view
such largesse as governments
engaging in corporate welfare.
After all, these automakers have
made billions of dollars in
recent years and remain in solid
financial shape, despite a pandemic that ravaged new-vehicle
sales in early spring.

er-cost jurisdictions, such as
Mexico and the southern U.S.
states. For example, Volkswagen
AG's Chattanooga, Tenn., plant,
which opened in 2011, has
received more than US $800
million ($1.05 billion) in federal,
state and local incentives,
according to a 2017 report by
the Tennessean newspaper in
Nashville.
Canada and Ontario proved
they were playing to win when
they promised Ford more than
their typical 20-per-cent contribution to an automaker's investment. The $590 million in combined incentives for Ford Oakville

Ontario Conservative
candidate Doug Ford opposed
auto incentives. Premier Doug
Ford, however, supported
them. P H O T O S : B L O O M B E R G

account for 32.8 per cent of the
overall cost of the project.
The government had no
choice but to dangle that carrot.

Otherwise, Ford might have
invested in another country, risking the closure of the Oakville
factory and potentially endangering the future of auto assembly in
Canada.
Given that choice, " corporate
welfare " doesn't look so bad to
the governments, especially since
foreign governments have shown
no indication that they will back
down on offering incentives to
auto investments anytime soon.
While Ontario and Ottawa
were correct to tout the transformational potential of the Oakville
investment, it might have also
behooved them to level with tax-

payers about the necessity for
government involvement. As
Aaron Wudrick, federal director of
the Canadian Taxpayers
Federation, said during an
October appearance on
Automotive News Canada's
weekly podcast:
" Why can't they just say: 'We
hate to do this, but we don't
have any choice. If we don't give
them the money, they won't
come here.' "
That's a perfectly defensible
position given the situation, and
it's a dynamic that governments
and the auto industry should be
honest about. - ANC

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And critics would be justified
in pointing out the folly of committing hundreds of millions of
dollars from the public purse to
future assembly of yet-to-be-unveiled products that currently
make up a tiny percentage of
overall new-vehicle sales in
Canada. Taxpayers are, in
essence, taking
financial risk
Governments on
on behalf of the
realize that car companies.
But such polattracting
icies, while selinvestments dom politically
is almost
popular, don't
appear to genimpossible
erate the level
without
of opposition
that prompted
opening
FCA CEO
their wallets. former
Sergio
Marchionne to
withdraw a request for government aid for a multibillion-dollar
investment in the maker's
Ontario plants in 2014.
Look no further than the
apparent about-face of Ontario
Premier Doug Ford. In the 2018
Ontario general election, the
Conservative leader accused the
governing Liberals of embracing
" corporate welfare. "
But fast-forward to
September 2020, and Premier
Ford's Conservative government
was eager to work with Prime
Minister Justin Trudeau's federal
Liberals to invest hundreds of
millions of dollars in a profitable
company's plant.
It's clear that Canadian governments of all political stripes
realize that attracting large-scale
investments is almost impossible without opening their wallets.
Automakers have long been
aggressively courted by low-

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Automotive News Canada - November 2020

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