Ottawa wants to help GM build new car in Oshawa James Cowan, National Post with files from Canwest News Service and Reuters Published: Wednesday, June 04, 2008http://www.nationalpost.com/news/story.html?id=563796As hundreds of angry autoworkers protested the closure of General Motors of Canada Ltd.'s Oshawa, Ont., truck plant Wednesday, the federal government said it is interested in subsidizing the production of a new car at the facility.
Finance Minister Jim Flaherty said he was willing to use the government's $250-million Automotive Innovation Fund, designed to develop more fuel-efficient vehicles, to help start production of a third car at the plant.
"We need a third vehicle. I've already spoken with General Motors about that. We're going to stay on that as the federal government, and if we can participate in funding that innovation, then we're certainly going to be there," Mr. Flaherty told reporters in Ottawa.
"We want the auto sector to be a viable, sustainable sector in Canada. To do that, it has to be technologically innovative."
Meanwhile in Toronto, the Ontario government scrambled Wednesday to clarify the terms of its $175-million interest-free loan to the carmaker.
GM said on Tuesday it would close its plant next year and lay off 2,600 workers. The announcement caused a political headache for Ontario's Liberal government, which provided the company with a 50-year loan in 2005 aimed at bolstering the flagging automotive sector.
Opposition parties alleged the government failed to disclose the funds were a loan, not a grant. Critics also accused Sandra Pupatello, the Minister of Economic Development and Trade, of giving conflicting answers on the loan's length and the job guarantees contained within the agreement.
"They didn't know the boundaries of their own agreement," Jerry Oullette, Oshawa's Conservative MPP, said in an interview. "First they said it was a grant, then it was a loan. First it was for 30 years, then it was for 50 years.... And nobody seems to know how it was tied to jobs."
The government cannot disclose "commercially sensitive" information, Dalton McGuinty, the Premier, said. GM has admitted it will likely face close to $35-million in penalties on the loan for failing to meet agreed-upon employment targets. Under the arrangement, GM needed to maintain the equivalent of 16,000 jobs in Ontario over a 10-year period. No penalty will likely be levied until the plant closes next October and it is possible that the company could minimize the cost by hiking production at the Oshawa plant in the months leading up to the closure, sources familiar with the deal said.
While defending the government's need to remain closed-lipped about the deal's specifics, Mr. McGuinty admitted the government could have better communicated that the arrangement was a loan, not a grant. "We should have made that information available earlier," Mr. McGuinty said. "In fact, I think the loan puts us in a better light than what was categorized as a give away. There is a real cost to it ... but I think we could have managed that better."
GM announced the closure of the Oshawa plant as part of a shift toward cars and crossover-utility vehicles as high gasoline prices quell demand for trucks and SUVs. The company will also halt production at two plants in the United States and one in Mexico.
Members of the Canadian Auto Workers set up a blockade along the road leading to the GM headquarters early yesterday morning to protest what they call a blatant betrayal of a contract settlement reached two weeks ago. GM announced it would meet with the union on Friday in Detroit.
