As government assistance appears to lose appeal in attracting new auto manufacturing investments, the industry and politicians in North America must rethink how they cooperate.
For a second time, Chrysler Group has halted an effort to seek government assistance, withdrawing an application to Canada for help with a reported $2.3 billion investment in plants in Windsor and Brampton, Ontario.
As in an earlier withdrawal of a $3.5 billion loan request to the U.S. government for green car research, Chrysler CEO Sergio Marchionne said the process had become overly political.
Clearly, he was frustrated by the highly political and public process Canada had imposed to receive assistance. No automaker wants a politician casting it as an ally of an opposing party, potentially alienating many customers.
Coming from the CEO of a company rescued by government intervention, Marchionne's stance is remarkable. But it shows how polarized politics in Canada and the United States is affecting public policy toward the auto industry.
Tim Hudak, leader of Ontario's opposition Progressive Conservative party, called Chrysler's request "corporate welfare."
U.S. political wrangling over the auto industry rescue has been intense since the brief period of cooperation in late 2008 and early 2009. That bailout and this year's UAW organizing vote at Volkswagen's Chattanooga plant have split the U.S. auto industry into ideological proxies for opposing parties, generally Democrats in Northern states with unionized plants against Republicans in mostly nonunionized Southern states.
Automakers sift through enormous variables in deciding where to build or expand factories: labor costs, transportation, utility rates, taxes, regulations and government assistance. But over time, some factors prevail. Large markets attract manufacturing. Growing markets attract capital.
Canada is a mature auto market. So is the United States, but its population is shifting into the Sun Belt. Mexico is growing rapidly in population, personal income and automotive demand. It's natural for auto production to follow the population, but IHS Automotive sees a seismic North-South change. By year end, it says, more North American auto production capacity will be south of Ohio than in the Midwest and Canada.
The changing landscape requires adjustments.
Automakers need to focus even more on long-term fundamentals in making manufacturing site decisions and more closely examine government incentives. Local politicos always beam at groundbreaking ceremonies. But will they later cite a project as proof of an opponent's failed policy?
Politicians can bash each other all they want, but they should avoid denigrating automakers to make political hay. It unfairly risks the livelihoods of too many innocent people.