Canada's updated C$500-million auto incentive fund called 'better' than Mexico's, U.S.
Canada now has a government-funded incentive program available to the automotive industry that is at least as good as Mexico’s and perhaps better than those available in the Southern United States, says Canada’s auto czar Ray Tanguay.
The federal Liberal government on Monday implemented changes to the Automotive Innovation Fund that now allows automakers, suppliers and research and development companies to draw conditional government grants that do not require repayment on an annual pool of about half a billion Canada dollars ($380 million) per year.
Under old rules of the AIF, developed by the Conservatives, the money was available as interest-free repayable loans.
“This is a government that is finally listening to many, many years of requests. In order to be competitive, we have to have an AIF that is not an interest-free loan, it has to be a grant,” Tanguay told Automotive News Canada.
Attracting new investment
Tanguay, whose official title is Automotive Advisor to the Governments of Ontario and Canada, is a former chairman and CEO of Toyota Motor Manufacturing Canada. He’s tasked, in part, with drumming up new investment in the Canadian auto industry and helping the two governments develop policy that makes the country attractive to automakers and their suppliers.
“It’s fantastic for me,” Tanguay said while smiling Tuesday at the 2017 Automotive News World Congress in Detroit. “How can I sell if I don’t have product?”
A non-repayable grant from the AIF “must be strategically significant in nature,” the federal government says.
The money must be used to:
• Leverage advanced technologies, including lightweight and other new material formulations or processing techniques; connected and autonomous technologies; and vehicle software and hardware and more.
• Invest in clean technologies, including fuel cell and fuel storage systems, vehicle electrification and other zero-emission vehicle technologies.
• Secure existing facilities into the future, which means investments necessary to secure globally significant mandates (immediately or in the future) that will serve to anchor facilities over the longer term (10 or more years).
• Grow Canada’s automotive footprint, including the establishment of greenfield or expanded manufacturing or r&d facilities that will significantly contribute to innovation, job creation and global value chain opportunities.
Tanguay said conditions of these grants “will remain behind closed doors.”
“But we’ll have a return on our investment,” he said, implying the auto industry’s footprint won’t shrink and jobs will be secure.
Companies can still choose to apply for repayable loans that don’t meet the criteria for conditional grants.
Incentives to retool
“I think our incentives for the green fields are OK compared to Mexico,” Tanguay said. “Yes, some of the United States still have very generous incentives. But I think our incentives are better.”
Some states offer huge incentives for new facilities but few offer help to automakers retool plants, Tanguay said.
“We’re helping to upgrade facilities,” Tanguay said. “Continued improvement is more valuable.”
Honda was the first manufacturer to cash in on the new terms of the AIF. On Monday, it announced a C$492 million upgrade to its Alliston, Ont., operations. The federal government will kick in C$41.8 million in the form of a conditional grant.
Unifor, Canada’s largest union in the private sector, represents more than 40,000 hourly workers in the auto industry, including 23,000 employed by the Detroit Three. It’s celebrating the changes.
The union secured C1.6 billion worth of total investment from the Detroit Three during contract negotiations last fall.
“It is good to see Ottawa…recognizing the importance of the auto industry,” Unifor National President Jerry Dias said in a statement. “All levels of government must work together to show leadership and support for the auto industry.”
Source: Automotive News