Fiat Chrysler Automobiles NV said it would drop a controversial
request that Canada's government subsidize retooling of a minivan
factory in Windsor, Ont., and upgrades for another Canadian plant,
and instead will finance the projects on its own.
The issue had become a "political football," the company said
Tuesday. The escalating controversy over its request, "apart from
being unnecessary and ill-advised, will ultimately not be to the
benefit of Chrysler."
Chief Executive Sergio Marchionne in January publicly raised the
possibility that the company could move production of its
next-generation Chrysler minivan out of Windsor if the Canadian
government didn't help make the operation more competitive. But
with the new minivan's release expected in 2016, the company had to
make a decision soon to ensure that a plant would be ready in time.
Mr. Marchionne has said the Windsor plant required an investment of
more than $2 billion.
Fiat Chrysler said it would forgo government aid for now and
proceed with plans to build the minivan at the Windsor factory,
which employs about 4,600 workers. The company also said it would
go forward with upgrades to its factory in Brampton, Ontario, where
Chrysler makes several large-car models.
The auto maker said it would continue to monitor Canada's
competitiveness against other regions, however, and that the
outcome of union-contract talks in 2016 will be a factor in the
company's decisions.
The future of Chrysler's operations in Canada had a personal
dimension for Mr. Marchionne, who grew up in the country and is a
citizen of the country, in addition to Italy. In recent weeks, the
CEO has taken pains to say that decisions about the factories had
to be weighed on a global basis, however.
"On a personal note, as a Canadian, I regret my failure in
having been unable to convey the highly competitive nature of the
markets," Mr. Marchionne said Tuesday at the Geneva International
Motor Show. "It is clear that we, at Chrysler, need to do more to
explain ourselves and our choices going forward."
Some Canadian politicians and commentators had criticized Fiat
Chrysler for seeking government aid for private-sector
investment.
Ontario's right-leaning Progressive Conservative Party has
raised the most commotion about possible aid to Chrysler, with
leader Tim Hudak likening the company's requests to "ransom"
demands.
Following Chrysler's decision Tuesday, a party official said
that to boost the economy, the provincial government should focus
on reducing household taxes and eliminating red tape, "instead of
corporate welfare handouts."
Political leaders in Canada and Ontario, which contributed to
Chrysler's bailout and bankruptcy restructuring in 2009, are under
pressure not to lose more auto jobs. Labor costs in Canada are
higher on average than in the U.S. and Mexico, which are partners
with Canada in the North American Free Trade Agreement zone.
Canadian Industry Minister James Moore said Chrysler's decision
to drop its subsidies request was a surprise, but he kept the door
open for future public support for the company.
The government had set aside 500 million Canadian dollars, or
roughly US$450 million, in this year's budget proposal to lure
automotive investment, on top of C$250 million that already was
available but hadn't been used, he told reporters. "Our support for
the auto industry is strong," he said.
Jerry Dias, the president of Unifor, Canada's main auto union,
said he was pleased by Chrysler's commitment but urged Canadian
officials to keep trying to retain auto jobs. "Our leaders need to
understand the importance of developing a long-term strategy,
including public investment," he said.
A risk for Mr. Dias is that in the absence of public subsidies,
Chrysler will put more pressure on the union to make concessions in
the 2016 contract talks.
A spokesman for the Ontario provincial government said it
welcomed Chrysler's decision to invest in its Windsor and Brampton
plants. The province, Canada's largest, had been actively engaged
with the car maker and is prepared to work with Chrysler and other
auto companies in a "fiscally responsible way," the spokesman
said.
Write to Christina Rogers at christina.rogers@wsj.com and Paul
Vieiraat paul.vieira@wsj.com
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