Canada signals may help Chrysler on Ontario plant investment

OTTAWA/TORONTO Wed Feb 12, 2014 12:27pm EST

OTTAWA/TORONTO Feb 12 (Reuters) - Finance Minister Jim Flaherty, freshly armed with C$500 million ($455 million) to subsidize Canada's auto sector, signaled on Wednesday the federal government might offer substantial cash to keep Chrysler Group from closing an Ontario minivan plant.

Fiat SpA Chief Executive Sergio Marchionne said last month that Chrysler could scrap an upgrade of the Windsor, Ontario, plant and move production and jobs elsewhere if government fails to come through with financial incentives.

Canada's Conservative Party government sharply increased money available for its Automotive Innovation Fund in its annual budget on Tuesday as it seeks to arrest the decline in the country's share of North American car manufacturing.

Flaherty said not all of the new money was designed to meet what he called Chrysler's "substantial" demands. He added that he was not saying automobile plant subsidies should be seen as automatic.

But he did tell reporters: "I am saying that we need to give it a long, hard look and make sure that we are careful in what we do before we let one of the large auto manufacturers leave Ontario."

The Globe and Mail, citing unidentified sources, reported on Tuesday that Chrysler was seeking a contribution of at least C$700 million from the Canadian and Ontario governments.

Chrysler representatives declined to comment on the report. Marchionne will be speaking at the opening ceremonies of the 2014 Canadian International AutoShow in Toronto on Thursday.

Ontario officials could not immediately be reached for comment.

The car industry is economically critical, as the largest manufacturing sector of Canada's most populous province, Ontario, which happens to be Flaherty's home province.

"This is not to be treated lightly. It's not so much the thousands of people that work in the assembly plants, it's all the people that depend on the plants, that work around the plant, the suppliers, the restaurant owners, the truck drivers," Flaherty said.

"There are lots of people who depend on these large industries, so I'm very slow to let them go, and I'm probably in terms of my colleagues the most adamant in support of auto manufacturing as a hub."

Since 2008 the Conservative government had been making available C$50 million a year in subsidies through the Automotive Innovation Fund. Tuesday's budget said it would be adding C$250 million a year in the next two fiscal years.