Automaker withdraws request for government help, citing 'political football'

Chrysler says it will keep minivan production in Canada

Automaker withdraws request for government help, citing 'political football'

Marchionne: Wants a "level playing field."
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DETROIT -- Chrysler Group will keep minivan production in Windsor, Ontario, and has withdrawn a request for government help, but warned today that Canada must become a cheaper place to do business to be considered for future products.

The company said today that it will shoulder the costs of renovations needed to build next-generation vehicles in Windsor and at its large-car factory in Brampton, Ontario, without federal or provincial aid.

But the announcement contained a clear warning to the government and labor unions. A company statement said the outcome of 2016 negotiations with UNIFOR, which represents Canadian auto workers, would be "of particular importance."

"It is clear to us that our projects are now being used as a political football, a process that, in our view, apart from being unnecessary and ill-advised, will ultimately not be to the benefit of Chrysler," the company said in a written statement.

"As a result, Chrysler will deal in an unfettered fashion with its strategic alternatives regarding product development and allocation and will fund out of its own resources."

The company said it remained committed to build the replacements for the Chrysler Town & Country and Dodge Grand Caravan in Windsor and the next-generation Dodge Charger and Challenger and Chrysler 300 in Brampton. Those vehicles accounted for 20 percent of the 1.8 million vehicles that the automaker sold in the United States last year.

Monitor 'competitiveness'

In its announcement withdrawing its request for what was reportedly over $630 million in government support, Chrysler said it would monitor the "competitiveness" of Canada both in North America and globally, and specifically cited the 2016 union talks.

UNIFOR President Jerry Dias said he was pleased that Chrysler chose to invest in Windsor and Brampton but expressed concern at the company's decision to withdraw its request for government help.

"The bottom line is that the people of Ontario and our leaders need to understand the importance of developing a long-term strategy, including public investment, if we want to have a strong, competitive advanced manufacturing sector," Dias said in a statement.

"We are deeply concerned, however, that in the long-term we are going to lose an incredible opportunity to secure Ontario's manufacturing industry well into the future."

Political issue

Chrysler's request for Canadian government help had become a political issue in the country, with some lawmakers accusing the automaker of holding the country hostage for the sake of good-paying manufacturing jobs.

Prior to the company's announcement, speaking to reporters in Geneva, Fiat Chrysler CEO Sergio Marchionne, who grew up in Canada, said executives of multinational companies cannot be bound by national loyalties.

He said that the completion of the January merger between Fiat and Chrysler into Fiat Chrysler Automotive "flattened the world out completely."

In Chrysler's written statement, Marchionne said Chrysler's commitment to Canada, where it has done business for almost 90 years, "remains strong." But he said he hoped "that all stakeholders involved commit to do what they can to preserve the competitiveness of the country, and in particular of the province of Ontario."

'I regret my failure'

Marchionne added, "On a personal note, 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."

Marchionne told reporters in Geneva that he was not looking for subsidies, but wants a "level playing field" in terms of costs of production.

"If a country is undertaking any sort of commitment to an industrial policy, I think it needs to recognize that those choices come with an obligation to match and effectively equal what the competition is offering," Marchionne said.

Reid Bigland, who heads Chrysler's operations in Canada as well as serving as head of U.S. and Canadian sales, said his fellow Canadians should be happy that the company will invest in its Canadian factories.

But, Bigland said, they should also be concerned that the country is not competitive with other jurisdictions.

"In the last five years, there has been $42 billion in automotive investments in North America -- $2 billion in Canada, and the rest in the U.S. and Mexico," Bigland said. "As a Canadian, that's a bit of a concern. The jurisdiction has to be more competitive."

Bigland said infrastructure, taxes, trade policies, currency, energy costs and labor are all "pretty key variables" for automakers making investment decisions. "A government that's deficient in four or five of those things, the ultimate trump card they have is a government loan or financing that can mask a huge amount of those variables."

Dave Guilford contributed to this report.

You can reach Larry P. Vellequette at lvellequette@crain.com.


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