Chrysler, a unit of Fiat Chrysler Automobiles <FIA.MI>, said its
appeal for cash from the governments of Canada and Ontario had
become a "political football," showing the country's short-sighted
view of industrial development.
Pressure began building around the issue in January, after Fiat
Chief Executive Officer Sergio Marchionne said that Canadian
governments needed to step up with financial incentives in order to
secure Chrysler's investment plans. Back in 2009, the two levels of
government had contributed about $2.9 billion toward Chrysler's
"As a Canadian, I regret my failure in having been unable to convey
the highly competitive nature of markets that offer manufacturing
opportunities to carmakers that operate on a global scale," said
Marchionne in a statement. Marchionne has dual citizenship in Canada
"Some of the shots across the bow following our initial approaches
to the federal and provincial governments reveal, apart from
political convenience, a somewhat restricted view of Canada as an
industrial player in what has become a borderless economy."
Marchionne also said he hoped all stakeholders would preserve the
country's and province's competitiveness, but reserved the right to
reassess Chrysler's position if conditions changed. Some analysts
and industry experts said that Marchionne was angling for a better
position in negotiations by raising questions about the automaker's
commitment to Canada.
Chrysler, which had reportedly sought $700 million in support toward
a $3.6 billion investment, said it will still go ahead with plans to
develop and produce its next-generation minivan at its Windsor,
Ontario, plant, which employs more than 4,600 workers.
It will also produce revamped models of its Chrysler 300, Dodge
Challenger and Dodge Charger at a Brampton, Ontario, facility, which
has nearly 3,250 employees.
The company did not detail the scope or duration of that production
work, nor did it discuss spending plans. It was unknown whether
Chrysler would now invest less than originally planned.
Now that Chrysler has decided to invest in Canada, it is unlikely to
change its mind unless forced by market conditions, said a source
familiar with the company's plans, who was not authorized to speak
on the record.
EYE ON UNION TALKS
Richard Hilgert, an analyst with Morningstar who covers Fiat, said
that Marchionne's latest move was "definitely brinkmanship."
"It means that if the Canadians are not willing to play ball with
him, he will go play in another country when it comes time to make
new investments beyond what Chrysler already has in motion," he
"Canada still has an open door to come back to the table and if
there is a political will to reopen negotiations with Chrysler, I'm
sure Mr. Marchionne would be more than willing."
Minister of Industry James Moore said that Chrysler's decision was a
"surprise" and that the Canadian government has been having good
conversations with the company about their future in Canada.
"(Chrysler has) made a decision to push away from the table for now,
principally because of concerns with the political dynamic in the
province of Ontario," he said.
Canada has been a generous supporter of the sector, he said,
pointing to last month's announcement of C$500 million ($450.07
million) in new subsidies for an auto innovation fund.
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A spokesman for Ontario Minister of Economic Development, Trade and
Employment, Eric Hoskins, said the province would continue working
"positively and proactively" with Chrysler in a "fiscally
Chrysler said that it would continuously monitor its capital
spending plan to measure Canada's competitiveness against countries
around the world. It said contract talks in 2016 with workers
represented by Canadian union Unifor would be particularly
"Knowing what he's got ahead, negotiating with Unifor, (Marchionne)
probably determined this is not the right time to pressure the
Canadian government in talks for this money," said Sean McAlinden,
chief economist at the Center for Automotive Research in Ann Arbor,
"If you lock up renewing these plants ahead of the new labor
agreement, you have nothing to pressure the union with."
Historically, the union has lobbied the Canadian and Ontario
governments to subsidize plants, which helps to offset Canada's
higher labor costs.
Jerry Dias, national president of Unifor, a union representing more
than 39,000 workers in the country's auto sector, said that comments
by the leader of Ontario's opposition Conservative Party had
Tim Hudak, leader of the Conservative Party in Ontario, said last
month that government should reject the company's request for a
"billion-dollar taxpayer handout" and instead lower taxes to create
Dias said that Chrysler's decision to pull its appeal for funds was
regrettable and demonstrates the need for a long-term government
auto strategy that includes public investment.
"Countries that don't understand the importance of the industry
generally don't have an industry in the long term," Dias said.
"That's clearly his (Marchionne's) message."
COMPETITION FOR VAN PLANT
Marchionne, who attended university in Windsor, said earlier on
Tuesday that the process of deciding what to do in Canada was slowed
by politics, which he called an "ideological albatross."
While Windsor is Chrysler's only minivan assembly operation,
Marchionne recently said that representatives from countries
including the United States and Mexico had approached the automaker
in hopes of luring away the production.
The Windsor assembly plant, built in 1928, was home to the world's
first minivan in 1983.
The Globe and Mail has reported that upgrades to the Windsor plant
will cost $2.6 billion with another $1 billion spent at Brampton.
The newspaper also reported that Chrysler told governments in Canada
it wanted $700 million before proceeding.
($1 = 1.1110 Canadian dollars)
(Additional reporting by Agnieszka Flak
in Geneva, Solarina Ho in Toronto and Louise Egan in Ottawa; editing
by Toni Reinhold, Jeffrey Hodgson and Matthew Lewis)
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