{"id":286906,"date":"2025-11-16T14:31:07","date_gmt":"2025-11-16T14:31:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/286906\/"},"modified":"2025-11-16T14:31:07","modified_gmt":"2025-11-16T14:31:07","slug":"as-auto-companies-retreat-from-canada-do-government-subsidies-still-make-sense","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/286906\/","title":{"rendered":"As auto companies retreat from Canada, do government subsidies still make sense?"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Doug Ford, General Motors Canada outgoing President Scott Bell and Fran\u00e7ois-Philippe Champagne sit in the back of a pickup truck in Oshawa, Ont.Frank Gunn\/The Canadian Press<\/p>\n

It\u2019s the spring of 2022 and federal and Ontario government officials are standing on the floor of a General Motors GM-N<\/a> plant in Oshawa, Ont., to announce they were giving the automaker more than half a billion dollars.<\/p>\n

The Detroit-based carmaker would use the money as part of a $2-billion plan to reopen the Chevrolet Silverado truck plant in Oshawa and retool a factory in Ingersoll, Ont., to build BrightDrop electric parcel vans. <\/p>\n

Politicians took their turns at the microphone to declare the money would secure high-paying assembly jobs, reduce GM\u2019s cost of making cars in Ontario and forge Canada\u2019s future as a centre for green-vehicle manufacturing. Each government\u2019s contribution was up to $259-million. <\/p>\n

\u201cFolks, this is just another huge win for the people of Durham and all of Ontario,\u201d Ontario Premier Doug Ford told reporters. <\/p>\n

\u201cToday is proof that Canada\u2019s auto sector is here for the long term,\u201d said Fran\u00e7ois-Philippe Champagne, then Minister of Innovation, Science and Industry. <\/p>\n

Or not. <\/p>\n

Fast-forward to today and the picture is very different. The Ingersoll plant, known as CAMI, is closed, the BrightDrop scrapped and 1,150 workers are laid off. In Oshawa, the third shift of workers \u2013 including about 700 jobs \u2013 is set to be eliminated in January and truck production is declining. <\/p>\n

Meanwhile, GM has boosted production of the Silverado in Fort Wayne, Ind., and is busily retooling a plant in Orion, Mich., to make more of the pickup trucks by 2027.<\/p>\n

Open this photo in gallery:<\/a><\/p>\n

Stellantis announced in October that its plant in Brampton, Ont., will no longer produce the Jeep Compass.Tijana Martin\/The Globe and Mail<\/p>\n

The moves are spurred by U.S. President Donald Trump\u2019s 25-per-cent tariffs on Canadian-made vehicles, and poor sales of the BrightDrop. Similarly, Stellantis NV STLA-N<\/a> said in October it would move planned production of the Jeep Compass to Illinois from its plant in Brampton. That factory was also being retooled with taxpayer support. <\/p>\n

\u2018We feel betrayed\u2019: Laid off for years, Stellantis workers in Brampton confront a grim new reality<\/a><\/p>\n

\u201cGeneral Motors appreciates that support from the Canadian and Ontario governments enabled investments in CAMI and Oshawa and is committed to working closely with Unifor and our government partners as we evaluate next steps for the future of CAMI,\u201d GM spokeswoman Jennifer Wright said in an e-mail.<\/p>\n

She declined to provide details of the agreements with governments. The automaker has invested more than $2.6-billion in Canada in the past five years, she said, including $280-million in Oshawa.<\/p>\n

Even before Mr. Trump began his campaign of destroying the Canadian auto sector, parts of the industry were not in great shape. Long-term production had declined and two assembly plants were idled for retooling: Ford in Oakville and Stellantis in Brampton. But the retreat has gained pace since Mr. Trump took office. Brampton\u2019s future is now a question mark, Ingersoll is empty and Oshawa is shrinking.<\/p>\n

Opinion: Canadian leaders are naive to be shocked over Stellantis pulling Jeeps from Brampton<\/a><\/p>\n

The bad news raises questions about the wisdom of taxpayer handouts to carmakers that can walk away when times change, laying off thousands at assembly plants and the parts factories that supply them. <\/p>\n

The grants GM received from governments were to cover capital expenses of building the Oshawa and Ingersoll assembly lines and related work. Typically, governments give automakers grants worth 20 per cent of their capital budgets. <\/p>\n

Jason Clemens, executive vice-president of the Fraser Institute, calls the auto subsidies \u201ccorporate welfare\u201d and bad public policy that lead to higher taxes with no long-term economic gain.<\/p>\n

But if governments did not come up with the money in 2022, the GM plants would not have reopened and the jobs would be long gone, said one person familiar with the matter, whom The Globe and Mail is not identifying because they are not authorized to speak publicly.<\/p>\n

The same can be said for much of Ontario\u2019s broader auto sector \u2013 its presence has long relied on government aid. <\/p>\n

Without subsidies, \u201cwe would have seen a much bigger decline in our auto industry over the last generation,\u201d said Jim Stanford, economist and director at the Centre for Future Work.<\/p>\n

For decades, taxpayer aid for the Canadian auto sector has encouraged companies to keep plants running, retool and continue to provide well-paying jobs. Canada competes for these plants with the U.S. and Mexico, which also offer rich subsidies and, in some cases, lower pay and non-union shops. <\/p>\n

Government aid to GM and other automakers in Canada goes back decades and amounts to many billions of dollars. <\/p>\n

In 2009, Canada gave $13.7-billion in aid to GM Canada and Stellantis to help the companies survive the financial crisis. GM\u2019s share was $10.8-billion; taxpayers were left with a $2.8-billion loss, according to the Canadian Taxpayers Federation. <\/p>\n

In 1987, governments gave GM and partner Suzuki $112-million in grants and incentives to build the Ingersoll plant \u2013 the one now shuttered.<\/p>\n

The same year, GM received $220-million in interest-free loans from governments for its plant in Ste-Therese, Que. It left the province in 2002. <\/p>\n

Tens of billions more in government subsidies were earmarked for various EV battery makers in Canada in recent years, just ahead of a slowdown in demand for electric cars. <\/p>\n

That includes aid worth up to $15-billion for Stellantis and LG Energy for the NextStar battery plant in Windsor, Ont. That agreement was announced in 2023, when the assumed pre-eminence of electric cars was unquestioned and Mr. Trump\u2019s tariffs unforeseen. As EV sales slump, NextStar says it has shifted its focus to stationary batteries \u2013 not EVs \u2013 as production starts this month. <\/p>\n

Open this photo in gallery:<\/a><\/p>\n

After giving auto makers billions of dollars in subsidies, governments in Canada are trying to figure out how to respond to these companies leaving the country.Fred Lum\/the Globe and Mail<\/p>\n

Now, Canadian governments are figuring out how to respond to companies they\u2019ve funded now pulling back from Canada.<\/p>\n

In October, Mr. Champagne, as Finance Minister, notified GM he is \u201cdisappointed\u201d by GM\u2019s production cuts in Ontario and reduced the automaker\u2019s tariff-free import quota by 24 per cent, while also reducing Stellantis\u2019s quota.<\/p>\n

Ottawa\u2019s move to curb tariff relief for GM, Stellantis will harm country\u2019s auto sector, manufacturers say<\/a><\/p>\n

Details of the agreements governments and automakers reach are confidential. Financial aid usually takes a few forms: cash grants, tax breaks or production subsidies. Generally, there are strings attached related to employment, production and amounts spent by the companies themselves. <\/p>\n

Ontario\u2019s legal team is in touch with GM to ensure the funding agreements are respected and enforced, said Jennifer Cunliffe, a spokeswoman for Ontario\u2019s Minister of Economic Development Victor Fedeli. She did not address questions about how much of the $259-million has been granted to GM.<\/p>\n

The department of Innovation, Science and Economic Development said $236-million in federal money had been \u201cdisbursed\u201d to GM by the end of fiscal year 2023-2024 but declined to say what job guarantees accompanied the funding. <\/p>\n

\u201cThe government is actively engaging with General Motors to ensure all outstanding conditions under the … agreement are fulfilled,\u201d the department said in a statement, describing the funding as \u201cpartially repayable.\u201d <\/p>\n

The U.S.-imposed tariffs and the slowing growth in demand for battery-electric vehicles upended recent government subsidy policies, said Saibal Ray, a professor at McGill University. <\/p>\n

\u201cBefore Trump, you can make a case these were necessary and were perhaps effective, but today it\u2019s not clear because there is no guarantee that things will work as they are meant to work,\u201d Prof. Ray said. <\/p>\n

Peter Frise, a professor at the University of Windsor, said carmakers are good at forecasting how production plans and consumer demand will let them fulfill financial covenants with governments. But the Trump era turned that on its head. <\/p>\n

\u201cThey have a very deep insight into what\u2019s going [to] happen next and how far they can go and what promises they can make,\u201d Prof. Frise said. \u201cBut what has happened this time is they\u2019ve been completely whipsawed by events in the United States around the tariffs and the dropping of the battery EV rebates.\u201d <\/p>\n

He added, \u201cI really don\u2019t ascribe bad faith to the companies right now. I\u2019m not happy with what they\u2019ve done. But I\u2019m not sure what options they had. I think they feel they have to throw the White House a bone.\u201d<\/p>\n

Still, the Fraser Institute\u2019s Mr. Clemens said the GM and Stellantis cuts highlight governments\u2019 poor track records of selecting winners. The money would be better spent reducing taxes and creating conditions for all businesses to succeed, he said. <\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Doug Ford, General Motors Canada outgoing President Scott Bell and Fran\u00e7ois-Philippe Champagne sit…\n","protected":false},"author":2,"featured_media":286907,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[22323,130119,51759,45,49,130122,48,5577,130120,109647,130121,34215],"class_list":{"0":"post-286906","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-auto-industry","9":"tag-auto-makers","10":"tag-brampton","11":"tag-business","12":"tag-ca","13":"tag-cami","14":"tag-canada","15":"tag-general-motors","16":"tag-government-subsidies","17":"tag-ingersoll","18":"tag-oshawa","19":"tag-stellantis"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/286906","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=286906"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/286906\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/286907"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=286906"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=286906"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=286906"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}