UPDATE 2-Canada, Ontario invest to re-tool Toyota Lexus plant

Wed Jan 23, 2013 5:17pm EST

* Funds to top up Toyota expansion announced last July

* Lexus hybrid will be first hybrid built in Canada

* Expanded output, hybrid manufacture set for 2014

* Ottawa funds to come from Automotive Innovation Fund

Jan 23 (Reuters) - The Canadian and Ontario governments will invest up to C$34 million ($34 million) to help re-tool a Toyota Motor Corp plant in Cambridge, Ontario, to help it expand output and produce a hybrid version of the Lexus sport utility vehicle.

It will be the first hybrid to be built in Canada, Prime Minister Stephen Harper said in announcing the investment at the southern Ontario plant on Wednesday, along with Ontario Premier Dalton McGuinty.

The federal and provincial governments will each provide up to C$16.9 million.

"Our government is committed to helping Canada's automotive sector remain globally competitive and prosperous," Harper said.

Toyota announced last July that it will invest more than C$100 million to expand Lexus production in Canada. The government funds will add to this investment.

The expansion will increase Lexus manufacturing capacity by 30,000 vehicles to 104,000 units annually, including 15,000 Lexus RX450h hybrid electric vehicles, and create 400 new jobs at the Cambridge plant.

Expanded output is expected to kick off in early 2014.

The Cambridge factory is the only Toyota factory outside of Japan that makes Lexus models.

The funds provided by Ottawa will come from its Automotive Innovation Fund, which was set up in 2008 with an initial C$250 million of government money for research and development projects in Canada's auto industry. The government earlier this month injected another C$250 million into the fund and extended it for five years.

Toyota will need to repay the federal government's portion of the funds, but not the portion from the Ontario government, said Toyota spokesman Greig Mordue.

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