ntario Premier
Dalton McGuinty wasn’t shy about supporting Ford
Motor Company‘s proposed US$818-million expansion. In fact,
after his province authorized $82 million in incentives for Ford
in mid-April of 2004, the premier threw down the gauntlet.
“We have put our money where our mouth is,”
McGuinty said. “Now it’s time for the federal government to pony
up.”
Seven months later, Canada answered. The federal
government promised another $82 million in subsidies for Ford’s
expansion of its auto and minivan assembly plant in Oakville, Ontario.
That aid, Canadian Human Resources Minister Joe Volpe explained,
“will not only be worth its value, but will transform into many
more hundreds of millions of [Canadian] dollars for the economy
of our province and our country.”
The Canadian two-step of provincial and federal
support was a milestone move. In one fell Maple Leaf swoop, the
nation’s site-selection landscape was transformed, leaving behind
Canada’s long-standing reluctance to grant major expansion incentives.
That pronounced change in attitude is reaping
a very substantial payoff.
Ford will now retool and renovate its 51-year-old
Oakville operation, which employs a whopping 3,900 workers and will
now likely add several hundred more. By fall 2006, the Ontario site
will host Ford’s third flexible manufacturing factory and a new
R&D center focused on fuel cells. The Oakville project will create
more than 3,700 supplier and spin-off jobs, Ontario officials estimate.
Ford’s cost-shredding “Revival Plan” added great
weight to the decision. Announced in early 2002, that initiative
will close seven existing plants and cut 35,000 jobs, 10 percent
of the worldwide work force. The expanding Oakville operation, in
fact, sits next to one casualty: Ford’s 39-year-old pickup assembly
plant, which employed 1,200 workers when it was shuttered in June
of 2004.
“This investment not only strengthens the future
of the Oakville plant, but the future of the community, the province
and the country,” then-Ford of Canada President and CEO Alain Batty
explained on Oct. 29 inside the vast 3.9-million sq.-ft. (351,000-sq.-m.)
complex. “The flexible manufacturing plant will bring a new vitality
to the economy, and the R&D center will help discover better ways
to apply environmentally friendly fuel-cell technology.”
In December 2004, Batty took over the directorship
of Ford of Europe sales, handing over the Canadian mantle to Joe
Hinrichs, former director of manufacturing for Dearborn, Mich.-based
Ford Motor Co. Such a move could say a lot about the importance
of the Oakville expansion to Ford’s overall success, given Hinrichs’
experience with both vehicle launches and union negotiations, which
Ford will enter with the Canadian Auto Workers in fall 2005.
Ford openly defined its incentive requirements.
The automaker took its ambitious Oakville plan public in March of
2004. But without Canadian subsidies of $139 million to $208 million,
the project was a no-go, Ford cautioned.
By April, one response had materialized: the
Ontario Automotive Investment Strategy (OAIS). The provincial program
specifically targets auto-industry manufacturing projects that involve
a capital investment of at least $245 million or create or retain
at least 300 jobs.
“It’s a real, positive change that will strengthen
our economy,” the premier said of the new subsidies. “By investing
in our workers and their skills, we can attract new investment and
create high-wage jobs in the province’s largest manufacturing sector.”
Ontario’s auto industry includes 16 assembly plants and some 400
parts manufacturers.
After protracted negotiations, the federal government
signed on, matching Ontario’s contribution. “We need to ensure that
companies like Ford see Canada as a place to invest, a place to
innovate and a place to do business,” said Volpe.
Long-Term Focus
Canada, however, isn’t wading willy-nilly into
the incentives game. It’s sharply focused on long-lasting benefits.
The federal and provincial agreements, for
example, contain strong claw-back clauses. Ford must return part
of its subsidies if it doesn’t meet required job and investment
targets into the next decade for its entire 16,000-employee operations
in Canada. (Those targets hadn’t been made public at press time.)
More significantly, Canada and Ontario laid
out the kinds of investments they’ll support.
Total OAIS assistance, for example, depends
on how well a project meets guidelines in five categories —
innovation and research and development, infrastructure, energy
efficiency, environmental technology, and training and skills development.
Canada’s strategy is similar. Ford’s project, said Canadian Minister
of Industry David Emerson, “will bring benefits in terms of innovative
process technologies, skills development, and research and development
— all consistent with government priorities.”
Canada’s long-term strategy for supporting its
auto industry remains a work in progress. Undeniably, though, a
major sea change is mounting.
“I’m making no apologies for aligning myself
closely with the auto sector,” said McGuinty. “When the auto sector
does well, we do well.”