Chrysler optimistic deal with be reached with Ottawa and Ontario on expansion

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TORONTO – Chrysler isn’t yet close to a deal that will secure “significant” investment in its Ontario plants, but its chief executive said Thursday he was optimistic a a funding arrangement could be worked out with Ottawa and Ontario.

“We’re approaching this with the best of intentions, I think we can bring it to a successful conclusion,” Sergio Marchionne said after kicking off the Canadian International Auto Show in Toronto.

“We have all the makings of a potential successful transaction. You need to let the parties work diligently at carving out what is best suited for the Canadian government, the province of Ontario and Fiat-Chrysler.”

Marchionne would not confirm reports that Chrysler was looking for $700 million from the governments as part of an overall investment of $3.6 billion, but he said that if the proposal goes through, it will represent the “single largest investment made by any auto maker in this country in a number of years.”

Chrysler said last month it was considering a billion-dollar upgrade at its Ontario plant to build a new minivan, but it was in talks with the government about an incentive package that would help offset higher costs in Canada. The Chrysler assembly plant in Windsor, Ont., produces the Dodge Grand Caravan and Chrysler Town & Country minivans as well as several other vehicles.

Marchionne said on Thursday that its proposal would also involve its plant in Brampton, Ont., which builds the Dodge Charger, Challenger and Chrysler 300.

The federal government said in this week’s budget that it had set aside an additional $500 million for the Automotive Innovation Fund, but did not release details. The fund was launched in 2008 with a commitment of $250 million over five years and renewed last year for another five years.

Chrysler is about halfway to getting what it’s seeking, Marchionne said, but added that other jurisdictions — including the U.S. and Mexico — have approached the auto maker since its expansion plans became public. He cautioned that when it comes to the globally competitive industry, Canada cannot be a “guppie in shark-infested waters.”

“This is not a game for the faint-hearted,” he said. “It takes resolve and it takes cash.”

Canada has to decide whether it wants to maintain a role in the auto sector or not, he added, noting that over the past five years less than five per cent of the $42 billion invested in North America by auto makers was won by Canada.

“I am Canadian. I’ll be cheering for Canada. I’ll do a variety for things for this place that will twist me into a pretzel, but you can’t put me over a barrel,” he said. Marchionne was born in Italy but grew up in Toronto, where his mother still lives.

Ottawa and Ontario spent billions in bailouts for Chrysler and General Motors after the recession hit in 2009. The auto sector has since rebounded, but large government incentives for automakers to build plants in the U.S. and Mexico, favourable trade agreements between Mexico and other countries and higher labour costs continue to hurt Canada’s chances to win production.

Marchionne said he realizes funding of the auto sector can be a sensitive issue, but said this investment is also one that would be repaid.

“The question is not giving away money. The question is creating the conditions for the manufacturing sector to continue to be a viable ingredient of the Canadian economy,” he said.

It didn’t appear that Marchionne would face much competition for the cash from the other Big Three car makers within Canada, with both Ford and General Motors saying they weren’t expecting to make any new asks of the government at this time.

Ford said Thursday it would build its new Edge Concept at the Oakville Assembly plant near Toronto, as part of its previously announced plan to invest $700 million investment in that plant in September.

Ford Canada chief executive Dianne Craig said in an interview the company wasn’t pressing the governments for any additional investment.

“They were part of the investment in Oakville, both the provincial and the Ontario government, which is really critical,” she said.

“Just south of the border, we have the governments of Mexico, the U.S., that are really eager to attract this investment.”

Kevin Williams, president of General Motors of Canada, also said funding the company has received in the past is finding its way into production.

“Before that budget was announced we had already worked with government and secured financing in all of the facilities,” said Williams.

“I applaud the Automotive Innovation Fund being increased in size and scope, (but) we have already laid our footprint and, right now, we’re not making any additional announcement.”

The CEOs of the Big Three were in Toronto along with the heads of dozens of other car companies for the start of the auto show, which gives cars enthusiasts a chance to glimpse at the latest model offerings as well as daydream about exotic and unusual creations rarely seen cruising the streets.

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