The federal government will dole out $250-million to the auto industry over the next five years to support research and development of new green technologies, but has left in place an environmental levy that infuriated auto makers when it was introduced in the 2007 budget.
Manufacturers, auto parts makers and the Canadian Auto Workers union blasted Finance Minister Jim Flaherty for not doing more to address the crisis in manufacturing that has led to tens of thousands of job cuts.
“I think this budget is going to kill the manufacturing industry, especially automotive parts manufacturing in Canada,” said Kacee Vasudeva, chairman and chief executive officer of Maxtech Industries Inc., an auto parts maker in Waterloo, Ont.
His view was echoed by Jayson Myers, president of Canadian Manufacturers & Exporters.
“It's disappointing,” was his general assessment of the budget.
“When I read between the lines … I think the government is writing off manufacturing,” Mr. Myers said.
The new $250-million Automotive Innovation Fund won some praise as a way to help auto makers begin to meet 2020 guidelines requiring that fuel economy reach an average of 6.7 litres per 100 kilometres travelled.
“It's not a lot of money, but it's better than no money,” said Mark Nantais, president of the Canadian Vehicle Manufacturers Association, a lobby group for the Canadian units of the Detroit Three auto makers.
Auto industry officials told Ottawa earlier this month that the costs of meeting new fuel-efficiency requirements in North America will be more than $100-billion (U.S.) and Washington has indicated it will offer between $10-billion and $20-billion in financial assistance.
Nonetheless, the new federal fund will help General Motors of Canada Ltd. make the case to its parent company, General Motors Corp., to invest more than $700-million (Canadian) to assemble a more fuel-efficient rear-wheel-drive transmission at St. Catharines, Ont., and engage in a portfolio of environmentally friendly research at the company's engineering centre in Oshawa, Ont., said David Paterson, vice-president of corporate and environmental affairs for GM Canada.
“It will not go ahead unless we have some kind of partnership,” Mr. Paterson said. He also applauded the $3-million initiative to encourage more gas stations in Canada to open pumps offering E85 ethanol.
But Mr. Vasudeva said he was shocked that Ottawa provided no help to the auto parts industry, which has been battered by the soaring Canadian dollar and production cuts at the Detroit Three.
“I started with $2,000 and built a $100-million company – very profitable – and now I can see this company slipping away from me. I can see this slipping away from a lot of other entrepreneurs who built Ontario and Quebec.”
Maxtech makes parts for exhaust and brake systems at three Ontario plants, down from six a few years ago.
Ontario Finance Minister Dwight Duncan said the budget offers little help for the province's struggling manufacturing sector.
“This is a real missed opportunity for Ontario and Canada to work together to assist those parts of our economy that are challenged,” Mr. Duncan told reporters.
He criticized the federal government for providing only a small portion of the help the province has requested for the auto sector, which is feeling the brunt of the slowing economy.
Auto parts makers asked Ottawa and Ontario late last year to come up with $200-million each in emergency financial assistance to help the sector, battered by dozens of plant closings and the loss of more than 10,000 jobs. They wanted the government tax break on capital cost allowances extended to companies that are losing money, not just those that are profitable.
The troubles in auto parts were underlined yesterday when exhaust manifold manufacturer Wescast Industries Inc. of Brantford, Ont., said it was suspending its dividend “in light of the difficult automotive conditions.”
Among the issues facing Wescast are the strong dollar, rising prices for steel and other raw materials, customer demands for price cuts, and declining vehicle production at the largest of those customers, the Detroit Three.
The ecoAuto rebate program that slapped penalties on gas guzzlers and provided rebates for fuel sippers is being discontinued after the 2008 model year, but the levies on gas guzzlers appear to remain in place, auto industry officials said yesterday.
Meanwhile, the struggling forest industry got even less out of the budget than the auto sector – a paltry $10-million over two years “to promote Canada's forestry sector in international markets as a model for environmental innovation and sustainability.”
With files from Karen Howlett
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