07/06/2011 07:43 EDT | Updated 09/05/2011 05:12 EDT

Ontario Toyota Plants To Get $545-Million Green Makeover

AP File

THE CANADIAN PRESS -- Two Toyota plants in Ontario will receive a $545-million injection from the Japanese automaker and Canadian governments to give the facilities a green makeover and ensure the survival of thousands of jobs in the province.

The Ontario government will provide a $70.8 million grant and the federal government will provide repayable loan for the same amount to Toyota Motor Manufacturing Canada Inc. for plant upgrades in Cambridge and Woodstock.

The round of upgrades will support the production of more fuel-efficient vehicles. The automaker will use part of the money to upgrade the paint shop at its Cambridge North plant, where it plans to convert its base-coat paints from a solvent-based system to a water-based system to reduce emissions.

Toyota will also make other plant upgrades, including new machinery and equipment, employee training, and projects to increase efficiency and reduce waste.

"(This money) is very important because it allows us to give these initiatives priority and helps to secure our production footprint in Canada," said Ray Tanguay, chairman of Toyota Motor Manufacturing Canada.

The province said the plan dubbed "Project Green Light" will help secure 6,500 jobs at the two plants. The federal government said the upgrades will create jobs, though it did not specify how many.

The investment will be the biggest provincial handout to the auto sector since it helped to bail out two of the world's largest automakers -- General Motors and Chrysler -- from bankruptcy in the depths of the 2009 recession.

Since then, the industry has seen a turnaround that has helped to support some 400,000 jobs across Ontario. But the Canadian automotive sector still faces headwinds such as the impact of the rising loonie on export-oriented businesses.

The heads of some large U.S. automakers have hinted that it could be difficult to keep jobs and production in Canada without government assistance as the loonie inflates labour costs.

Ontario finance minister Dwight Duncan said it was important to pour nearly $71 million of taxpayer money into Toyota's operation in Ontario because the province has to fight aggressively to keep auto jobs.

"Taxpayers are doing it everywhere else in the world. And if we don't do it, we're going to lose," Duncan said.

Duncan noted that the province doesn't have the hidden subsidies found in many U.S. states, nor the low wages paid in countries like Mexico.

"So it is important and every jurisdiction does this. They compete not only for the initial investment, but these plants have to compete for new product mandates as mandates expire. So this is our way of participating in that," he said.

The announcement was made at the company's plant in Cambridge by Gary Goodyear, federal minister of state for science and technology.

"The presence of Toyota Motor Manufacturing Canada has been a tremendous boost to not only the local economies of Cambridge and Woodstock but also to Ontario and Canada," Goodyear said in a statement.

He was joined by John Milloy, Ontario's minister of training, colleges and universities.

"I was really heartened to hear Ray Tanguay say his priority is creating jobs," Milloy said in an interview after the announcement.

"The auto sector is such a huge part of our economy ... we've got to make sure we keep our winners like Toyota."

Ken Lewenza, national president of the Canadian Auto Workers union said Toyota's commitment to upgrades in Ontario is an example of why government support is important to the auto industry.

"It's a great day for the automotive industry in Ontario," he said.

However, Lewenza was skeptical that the investment would create new jobs because upgrades to equipment and infrastructure produce efficiencies, requiring less labour. He said the investment should be enough to ensure that all of the current employees keep their jobs.

Duncan said he wasn't "necessarily" concerned that the investment meant the government would be on the hook to help out other automakers operating in the province.

"(But) we certainly have in the past, depending on what the proposal is; whether it's creating new jobs, protecting existing jobs. There would be a thorough analysis done ..."

The plant in Cambridge assembles the Toyota Corolla and the Lexus RX350 crossover utility vehicle, while the nearby plant in Woodstock assembles the RAV4 crossover.

In 2009, Toyota announced it would hire 800 more people at its newly opened Woodstock plant, bringing the company's total Canadian employees to 6,500. The Cambridge plant had 600 when it started up in 1988.

Toyota's Cambridge South plant recently earned the 2011 J.D. Power and Associates Platinum Plant Quality Award, deeming it the highest ranked global automotive manufacturing facility.

The funding announcement comes as Toyota struggles to get its plants -- including the two in Ontario -- back to full production following supply chain disruptions caused by Japan's earthquake and tsunami in March.

Toyota Canada's June sales fell nearly 28 per cent, largely due to the fallout from Japan's disaster, which crippled auto production and has resulted in shortages of some models.