Harper to renew $250M auto innovation fund

Prime Minister Stephen Harper is at the Ford Motor Co. plant in Oakville, Ont. today to announce the renewal of a fund to stimulate research and innovation in Canada's automotive industry.

The fund was first established in 2008 as part of efforts to bail out Canada's struggling automotive industry early in the last recession.

The five-year Automotive Innovation Fund required manufacturers to put up some of their own money before applying for funding targeted at specific research and development projects. The subsidy program was touted as an incentive for automakers to keep their Canadian plants open and protect jobs here.

The government says its original investment stimulated some $1.6 billion in innovative projects across the industry, and resulted in half a million spin-off jobs. The announcement Friday is expected to commit another $250 million to the fund over five more years.

Despite the government's embrace of austerity and deficit reduction in its spring budget, the renewal of the fund signals the government is still willing to commit to the automotive industry.

In 2009, the government made a huge investment in the car business by bailing out the recession-battered General Motors to the tune of $9.5 billion. Since then, GM has repaid the loan part of the deal, but the government is now a part owner of the vehicle company.

Ford, where Harper is making its announcement, has said recently that it would be starting a third line at its body, paint and pre-trim sector in Oakville, creating 300 jobs which are promised first to laid-off GM workers. Ford said that the third shift was necessary due to a high demand for its products.

According to auto industry analyst Dennis Desrosiers, the new vehicle market in Canada is rapidly recovering. On his website, Desrosiers notes that light vehicle sales in November were 125,000, the second best number on record. In October, Canada saw the highest number of vehicle sales ever.

Desrosiers has predicted that by the middle of this decades, automotive sales in North America will be back to record numbers.

While this is good news for the Canadian market, Canada faces competition from Mexico and from some U.S. states that benefit from generous government subsidies.

A sore point with the government is that GM announced in late December that it will move production of the Chevrolet Camaro from Oshawa to a plant in Michigan in 2015.

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