Liberal and Conservative philosophies collide at Ford Essex engine plant

DATE: 2008.01.17


Liberal and Conservative philosophies collide at Ford Essex engine plant


TORONTO _ The future, if any, of Ford of Canada's Essex engine plant in Windsor, Ont., could depend less on manufacturing fundamentals than on a clash of economic philosophy and practical politics.

Federal Finance Minister Jim Flaherty stressed Thursday that Ottawa will not provide a subsidy seen as essential to get the factory running again.

The Essex issue _ with the provincial Liberal government promising assistance and the federal Conservatives insisting that broad tax cuts are more effective _ crystallizes a public policy question: should governments assist specific companies and, if so, by how much?

The factory had 2,000 workers at its peak and about 500 when it shut in November after almost three decades of making V-6 and V-8 engines. Reports suggest reopening it would cost $300 million and might recreate 300 jobs.

Ford has lined up a pledge of $30 million in provincial assistance and is said to have sought a similar contribution from Ottawa, which would represent a total subsidy of perhaps $200,000 per job.

``Once again we have (Premier) Dalton McGuinty running a government with the highest taxes on business investment in Canada, and taxing all businesses, as I say, at the highest rate and then selecting which businesses, which corporations, he wants to subsidize,'' Flaherty stated.

``That is certainly not our approach federally.''

The federal minister is ``rejecting further discussion based on an ideological opposition to something that virtually every government that wants automotive investment does,'' responded Ontario Finance Minister Dwight Duncan, who represents Windsor in the legislature.

``I actually worked in that plant for two summers,'' Duncan said Thursday, noting that it was built in the late 1970s with help from the provincial Conservative government of William Davis and the federal Liberal administration of Pierre Trudeau.

Now, Duncan said, ``with a relatively modest investment by both governments, it would mean probably a very quick payback in terms of taxes.''

In an angry letter to Flaherty and Prime Minister Stephen Harper, Canadian Auto Workers president Buzz Hargrove said Flaherty's contention that tax breaks are all that is required to assist the industry ``is not credible'' and that not participating is a signal that Canada is prepared to compete for new investment.

``Your government collects more than half of the tax revenue that will be generated by the new jobs and production,'' Hargrove wrote.

``The consequences of your decision, if it is not reversed, will extend far beyond Ford and Windsor. Global auto industry decision-makers expect government to be an active partner in strategic, `keystone' investments like this one.''

Lauren More, Ford Canada's vice-president of public affairs, said the automaker has not received any notification from Ottawa, and CAW economist Jim Stanford said Flaherty's rejection may not be the final word.

``It's not just Flaherty's call,'' but a closure of Ottawa's purse strings would be ``a huge step backward,'' Stanford said.

``The history of our auto industry... is absolutely clear,'' Stanford said.

``If the government doesn't play an active role, those industries don't exist in your jurisdiction.''

Ford's More said ``governments around the world recognize that auto investments drive significant economic benefits,'' adding that one in seven Canadians rely on the vehicle industry for their livelihood.

The federal Conservatives are taking ``an incredibly naive view,'' Duncan asserted in an interview, noting that all other auto manufacturing regions offer incentives.

``If they're not going to be at the table, we're not going to be competitive.''

The Essex plant had ``an enormous regional benefit,'' the provincial minister said, and for governments ``the payback on this type of investment is huge'' in taxes from the company and its workers.

``We're going to continue to work with the Ford Motor Co. and do our due diligence _ and we're going to continue to press the federal government.''

However, in the long run, regardless of government policy, auto manufacturing is moving to lower-wage locations such as Russia and China, said Joe D'Cruz, professor of management at the University of Toronto.

``What we are doing by subsidizing the reopening of old facilities... is merely postponing the inevitable _ and the inevitable is that for the U.S. and Canada, automotive manufacturing is a declining industry and there's nothing governments can do to change that,'' D'Cruz said.

In his view, governments should ``look after the workers, not the companies,'' by providing short-term income support and retraining and by easing interprovincial barriers to labour mobility.

The CAW's Stanford acknowledged that Canada's auto sector faces cost challenges but said it ``is still incredibly important to our economic base _ it is still our most important export industry.''

Said Stanford: ``Flaherty's vision, which is you just cut taxes and let the market decide what we do, will simply reinforce our regression into a resource supplier to the rest of the world.''

In addition to Duncan, Windsor is represented provincially by Economic Development Minister Sandra Pupatello and another Liberal holds the Essex riding at Queen's Park. At the federal level, the depressed southwestern Ontario city has New Democrat MPs Brian Masse and Joe Comartin.

Masse noted that the Essex issue arises while the North American International Auto Show is happening across the river in Detroit, ``and everybody is watching Canada: if this were a baseball game, we're actually striking out on an intentional walk.''

The NDP MP added that Flaherty and McGuinty ``obviously have a personal conflict that's deep-rooted,'' and Flaherty from 1995 until 2005 was on the opposite side of the provincial house from Duncan and Pupatello.

Flaherty was a former Attorney General and Finance Minister in the previous Conservative governments of Mike Harris and Ernie Eves.

Government assistance ``shouldn't be based on who you elect,'' Duncan said, noting that the province has helped General Motors in Oshawa, where the MPPs are Conservative and Flaherty is the federal member.

``The automotive industry is the most important contributor to GDP across Ontario.''