BUSINESS

GM Canada's $850 Million Investment In R&D Meant To Meet Conditions Of 2009 Bailout

07/24/2012 03:17 EDT | Updated 09/23/2012 05:12 EDT
CP
OSHAWA, Ont. - GM Canada is investing $850 million in research and development at its complex east of Toronto, an announcement hailed by the prime minister as proof of the automaker's commitment to Canada, as it makes good on its bailout commitments, but regarded cautiously by auto workers.

The investment Tuesday came on the same day a rival automaker, Toyota, pledged $100 million to boost production and hire 400 new workers at a facility in southwestern Ontario — making for nearly $1 billion in auto sector investments in the province in a single day.

Prime Minister Stephen Harper, who attended the GM announcement in Oshawa, Ont., said the money represents "exciting future implications" with ripple effects that will be felt throughout the economy.

The federal and Ontario governments invested a total of $10.5 billion in GM Canada in 2009 as the automaker struggled to survive the economic downturn.

"We did what was necessary to support and stabilize Canada's economy," Harper said Tuesday.

"This is a good story. Hardworking people, the company and government worked together to solve an enormous problem and now here we are today, looking forward with hope."

The $850-million investment, which GM said will be made between 2009 to 2016, is aimed at meeting R&D spending commitments the automaker made under the bailout.

"Today's announcement honours that promise and it demonstrates the company's long-term commitment to value-added manufacturing in our country," Harper said.

"Over the years GM's massive knowledge investment will permeate Canadian centres of learning and industry. The ripple effects will be felt far and wide."

GM Canada president Kevin Williams said the company has taken nothing for granted, "including the tremendous sacrifices made by so many and the incredible support provided that gave us this second chance."

"Our gratitude is deep and it's driving us every day to make this a company that Canadians can be proud of again," he said.

GM says the investment in R&D at the Canadian Engineering Centre will make the facility an integral part of its global engineering and R&D networks. But the company did not give any specific announcement about whether new jobs would be created.

The money will also go toward enhancing partnerships with automotive suppliers, including "new co-development projects and greater opportunities for start-ups to access funding through GM Ventures."

GM said it would also focus on further developing technology relationships with Canadian universities, institutes, suppliers and manufacturers.

Matt Crossley, director of engineering for GM Canada, said the company has already begun to dip into the funds.

"We've already spent probably in the neighbourhood of $100-million-plus, and we will be spending at least $150 (million) a year" until 2016, he said.

While Canadian investment in R&D is "good news" it remains unknown which country would produce the vehicles that come from those efforts, said Chris Buckley, president of the Canadian Auto Workers local in Oshawa.

"I'd much prefer an announcement today that they are reinvesting in our Canadian operations as far as products that would save and create jobs," he said.

With GM closing the consolidated line in Oshawa next year, axing the jobs of some 2,000 workers currently employed there, Buckley said the Canadian government should have asked for a commitment for new vehicle assembly in Canada.

Any jobs created through the investment would most likely be white collar jobs, not CAW jobs, said Anthony Faria, director of the Office of Automotive Research at the University of Windsor.

However, the bailout package contained a stipulation that GM would maintain 16 per cent of North American assembly in Canada. While it is above that level now, that could change with the closure of the consolidated line unless GM brings a new product to Oshawa, Faria added.

He noted that there is capacity for new assembly in Oshawa, but expects that the company will wait until after contract negotiations with the CAW that begin next month to determine future plans.

"Once the GM consolidated line is closed, GM may well be building less than 500,000 vehicles in Canada, so Toyota could be the second-largest auto assembler in Ontario behind Chrysler."

Toyota's Canadian manufacturing arm said Tuesday it's investing $100 million in its Cambridge, Ont., plant — a move that will see it hire 400 workers. That follows an $80-million investment Toyota made in March at its Woodstock, Ont., assembly plant, which also created 400 jobs.

Ontario has seen traditional Detroit Three carmakers — GM, Ford and Chrysler — cut tens of thousands of jobs in the last decade as their parent companies restructured in the United States. But Toyota and Honda have expanded their operations in Ontario, Canada's manufacturing heartland.

The Oshawa GM plant builds many models — from the Impala and Camaro to the Chevrolet Equinox and Buick Regal — and employs more than 4,500 people.

Last August, the company announced a $117-million investment at the assembly plant to prepare it to build the new Cadillac XTS.

The Oshawa assembly plant has undergone major changes in the last two years, with new vehicle models and expanded production that has added two new shifts and 1,300 jobs after shutting down a truck plant in Oshawa and a transmission plant in Windsor, Ont., and cutting its workforce during the recession.

Since the restructuring, GM has eliminated all but four of its brands and has transformed itself into a much leaner, more profitable company.

GM Canada employs about 10,000 people at its Ontario-based operations. The company operates assembly plants in Oshawa and Ingersoll and parts plants in St. Catharines.