Ontario, Federal Governments Drop the Ball As Ford Gives $2 Billion Investment To Mexico, Not Windsor

Ford Engine, Windsor, Ontario Government, Mexico

A potential $2 billion investment by Ford to produce a new generation of engines has gone to Mexico, not Windsor.

A major Ford Motor Co. engine investment that the federal and Ontario governments were trying to land for Windsor, will instead go to Mexico.

Unifor, Canada’s largest private-sector union, represents workers at Ford Windsor. In a statement, Unifor president Jerry Dias said that Ford was asking Ontario for a cash grant and the federal government for a loan, but would not specify the dollar amounts. “It was a very aggressive proposal by Ford,” he said.

In the end, Dias added, the Mexican government effectively outbid Canada: “Mexico will subsidize heavily and did, just like every other country that wants a strong auto industry.”

While the union president said he wasn’t interested in “finger-pointing,” he said Windsor was close to landing the engine deal. “We almost captured this project. It was an uphill battle all the way. Am I disappointed? Absolutely I’m disappointed. I’m furious actually.”

A group of local NDP MPPs declined to hold fire, indirectly criticizing the Liberal government for costing Ontario jobs. “We are deeply disappointed that Windsor will not be the home of Ford’s new engine line. The plant could have created 1,000 new auto jobs in Windsor, but we are watching as they go to Mexico,” wrote Lisa Gretzky (Windsor-West), Percy Hatfield (Windsor-Tecumseh) and Taras Natyshak (Essex).

“We need a strategy and policies in place so that we’re not caught flat-footed the next time Ontario has an opportunity like this.”

In a written statement Friday, Ontario Minister of Economic Development, Employment, and Infrastructure Brad Duguid confirmed that the Windsor deal had fallen through. “Our Government is committed to partnering with business in a fiscally responsible way, but we will not invest taxpayer dollars in any partnership that doesn’t provide a strong return for Ontarians,” Duguid said.

Mexico has won billions of dollars worth of new investments in auto assembly plants in recent years, but the proposal for Windsor, known as the Dragon project, appeared to represent a chance for Ontario to secure a project that would have produced about 1,000 jobs, some of which would have gone to some of the 483 workers now on layoff.

Canada’s decline and Mexico’s rise are evident in vehicle production figures for 2014. Factories in Mexico cranked out 2.396 million vehicles as of the end of September, up 7.5 per cent from a year earlier, while Canadian production fell 0.6 per cent in the same period to 1.745 million vehicles.

The jump in Mexican production and drop in Canadian output come amid a robust recovery in U.S. sales – the destination for many of the vehicles produced in both Canada and Mexico – and a record-setting sales pace in Canada.

The investments in Mexico, which include assembly plants announced this year by BMW AG, Kia Motors, Honda Motor Co. Ltd. and Mazda Motor Corp. factories that have begun production this year, highlight how essential it is for Canada to retain the existing Detroit Three and Japanese plants located in Ontario.

Ford has two engine plants in Windsor, both make V8 engines, which are going out of favor because Ford has invested in turbocharged V6 engines that get better fuel economy and produce similar or better power.

Over the last several weeks, Ford had been in talks with the two levels of government to invest close to $2 billion in its Windsor engine plants for global production of 1.5- and 1.6-litre engines that would go into such vehicles as the next-generation Ford Fiesta subcompact sedan.

Ford’s original proposal for Windsor’s engine plants “made the investment attractive: lots of jobs, research and development, establishing an Ontario supply chain,” an Ontario government source said.

Although Ford’s funding request “was unprecedented,” the two levels of government were willing to work with the automaker because “the terms we started with represented a strong return on investment for taxpayers,” the source said. Ottawa and Ontario have traditionally contributed about 20 per cent of an automaker’s investment, and the source said Ford’s “ask was significantly above that level.”

As negotiations progressed, Ford officials kept changing the terms of their original proposal and dramatically reduced their commitments, the source said. For example, the number of net new jobs originally promised plunged by about 75 per cent, the source said. “The numbers really changed in terms of jobs, supply chain, research and development. There was a significant claw back in each area.”

The size of Ford’s funding request, however, did not change, the source said.

Windsor Mayor Eddie Francis expressed disappointment, but insisted all parties did everything they could to bring the investment to the city.

Francis, who received confirmation of the bad news Friday, said the municipality offered $8.5 million in tax savings to Ford under its Community Improvement Plan. “From our city’s perspective, this is devastating news because those 1,000 jobs are not only good paying jobs, those are significant jobs, and certainly held a significant level of promise for the future.”

A disheartened Chris Taylor, president of Unifor Local 200, which represents Windsor Ford workers, called the news “very, very devastating for our members and our community.”

Taylor said he had heard rumblings earlier this week that talks had gone awry, but received confirmation from his national union and Ford officials Thursday.

“As of right now, it’s not coming to Windsor,” he said. “The value to us was a future with a good product, jobs for the people on layoff and a bright light for a community that sorely needs good news.”

“As a local, we’re not going to bury our heads in the sand,” he added. “We have to have some discussion with the government to find out where this went sideways and decide how we progress going forward.”

Car companies and Unifor have long been pressing Ontario and Ottawa to up their game in the global competition for automotive investment or continue watching vehicle assembly plants and jobs move to Mexico and the U.S. south. Some jurisdictions typically fund at least 60 per cent of a carmaker’s investment, while Ontario and Ottawa have covered a total of about 20 per cent through a combination of grants and low-cost loans.

“We have called for an automotive strategy for this very reason,” said Matt Marchand, president and CEO of the Windsor-Essex Regional Chamber. “Other jurisdictions have one, they have top talent executing them. And we need to adapt to the hyper-aggressive marketplace. The status quo is not working. Investment is flowing out of Ontario, and we need to reverse that.”

That concern was echoed by Ford of Canada president Dianne Craig Thursday at the Ontario Economic Summit in Niagara-on-the-Lake. According to Marchand, who was attending the summit, Craig said she was worried about Canada’s shrinking manufacturing sector. In the U.S., there has been a strategic decision to have auto investment, she said. “The supply base goes with the manufacturing base.”

In the recent provincial election, the Liberal government campaigned on a 10-year, $2.5 billion jobs program that has not been put in operation and apparently was not a factor in the discussions with Ford.

The Chamber of Commerce and Unifor agree on very little so when they both call for government to up their game and implement an effective auto strategy, the Harper Conservatives and the Wynne Liberals should listen hard.

The truth of the matter is that both the federal and provincial governments dropped the ball on the Ford Engine plant investment and because they dropped the ball, Windsor lost a thousand good paying jobs.

We need an effective auto strategy here in Ontario and we need it now.

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