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Do jobs in the Canadian auto industry rely on government support?

This week, Prime Minister Justin Trudeau was in Windsor, Ontario, my hometown, to announce that his government is giving more money to Stellantis, the automaker that owned the former Chrysler minivan plant in Windsor. Joined by Ontario Premier Doug Ford, Trudeau said the two levels of government would give the company about C$1 billion to help retool that plant as well as one in Brampton, Ont. , as they turn to making electric vehicles.

This was just one of many recent announcements from the federal government and Ontario that disclosed funding for automakers. At the end of March, Stellantis and LG, the South Korean electronics giant, received $5 billion to build an electric vehicle battery factory in Windsor, in what the government called “the biggest investment in the Canadian automotive industry”.

But that was not all. About a month ago, General Motors received $518 million for two Ontario plants, one of which is being converted to make all-electric delivery vans. And in March, the two governments donated $263 million for Honda’s two Ontario assembly lines.

“Through the agreements we have reached with automakers over the past few months, we are supporting autoworkers across the country,” said Mr. Trudeau. said Thursday on Twitter. “We are securing over 16,000 good middle class jobs.

It is not uncommon for governments around the world to heavily subsidize auto manufacturing jobs, as Ontario and the federal government have done, since auto plants can stimulate the economy, generate tax revenue and generally pay employees well.

This week, I spoke with Greig Mordue, Chair of Advanced Manufacturing Policy and Associate Professor of Engineering at McMaster University, who offered some caveats about government assistance, both both federal and provincial, has brought to the industry and the repercussions of the latest announcements.

He has experienced the grant process both as an advisor to governments and as general manager of Toyota Motor Manufacturing Canada, which operates two plants in southern Ontario.

“All the actors spend a lot of time talking about the automotive renaissance in Canada and I understand why they do it,” he told me. “But no matter how you cut it, the industry has gone backwards over the last 20 years and all of these recent announcements, while welcome, add nothing.”

For an upcoming contribution to an academic book on the North American auto industry, Mordue calculated that Ontario and the federal government have given automakers C$9.1 billion since 2000. The level of employment and production he calculated is not encouraging, he said. In 2000, auto plants in Ontario employed 54,000 people, who produced three million vehicles. In 2020, despite government investment, the factories only employed 37,000 people, manufacturing around 1.1 million vehicles.

The future of the Canadian auto industry darkened, Mr. Mordue told me, some 22 years ago when automakers realized they could produce their most expensive luxury models in Mexico with the same levels of quality as factories anywhere else in the world, including Canada. Since then, he said, “Canada has seized its source of competitive advantage.”

Mexico, on the other hand, has an overwhelming advantage when it comes to labor costs. The money donated to Honda, he estimates, will cover six months of wages and benefits for the 4,000 workers in Alliston, Ont. In contrast, it would take 6 to 10 years for a Mexican factory to rack up a similar labor bill.

He said Canada’s approach to how it subsidizes auto jobs differs greatly from the approach of US states. In the United States, he said, state governments typically offer only a one-time incentive for building factories. Canada, on the other hand, typically subsidizes factory retooling as new products arrive every five or six years.

“The American approach is: one and done,” Mordue said. “But we are: once every five years. I am not convinced that Canada needs to do this.

Nor is it necessarily obvious that Canadian factories would close without regular infusions of government money. It is much easier and less expensive to reuse an existing factory than to open a new one, a process that involves hiring and training a large number of workers and establishing a supplier base at close to the factory, Mr. Mordue said.

Mordue said it was also impossible to determine whether automakers’ investments in Canada would have been made without government money or even whether investment decisions had already been made before the automakers asked for the help from governments.

“You don’t know what the truth is, no one will ever tell you,” he said, adding that neither the Ontario government nor the federal government were willing to bet that automakers’ investments would be done without subsidies.

“That’s the bet the government has to play,” he said. “And so far, they haven’t taken any risks in Canada.

This week’s Trans Canada section was compiled by Vjosa Isai, Canada news assistant at The New York Times.

  • The American Museum of Natural History in New York reopens its oldest gallery on May 13 after a five-year renovation. Artifacts created by Indigenous groups in Canada are among the 1,000 exhibits. The exhibit was co-curated by an Indigenous leader from Vancouver Island, though he is among critics who argue that storing works from colonized societies in museums is an outdated practice.

  • Hydro-Quebec is in the running to advance plans to send renewable electricity, converted from water from the La Grande River, across the border via Maine and into Massachusetts. But the billion-dollar project that would help the state meet its climate goals has stalled, in part because of a legal battle by an unlikely coalition, writes David Gelles, climate correspondent for The Times.

  • The Stanley Cup playoffs began on May 4. Here’s what you need to know. The Pittsburgh Penguins are back in the playoffs, holding a record streak, and that’s largely thanks to Sidney Crosby.

  • Chris Snow, assistant general manager of the NHL’s Calgary Flames, was diagnosed with amyotrophic lateral sclerosis, or ALS, in 2019 and was not expected to live more than a year. Three years later, he and his family are relishing their luck, good and bad.

  • Arcade Fire, the Montreal-based band, have released a sixth album, rebooting after the lackluster release of their previous LP.

  • Four cadets about to graduate from the Royal Military College in Kingston, Ont., have died after their car plunged into the St. Lawrence River.

Originally from Windsor, Ontario, Ian Austen was educated in Toronto, lives in Ottawa and has reported on Canada for The New York Times for the past 16 years. Follow him on Twitter at @ianrausten.

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