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Big auto blackmail: What's next …a minister of minivans?

By Walter Robinson
web posted April 21, 2003

For months now the business press has awaited news from auto giant DaimlerChrysler and its billion dollar investment in a flex-plant (in Windsor, Ontario, the U.S. or Mexico) that will build the M80 mid-size pickup truck and other vehicles. It's close to d-day for DaimlerChrysler as corporate plans have the new truck hitting showrooms in 2005.

DaimlerChrysler is reportedly looking for some $300 million in government (federal and provincial) "investment." Investment is an offensive term in the extreme; corporate welfare blackmail is more appropriate. Even worse, Ontario and Ottawa seem prepared to play ball in this subsidy sucking game with officials and ministers bending over backwards to meet with big auto types.

Not to be outdone, reports indicate that Ford is hinting at a minimum $200 million in taxpayer help to fix up its Oakville plant. Mitsubishi and Toyota are also wooing government officials, although no sums/ransoms have been reported/demanded.

Big auto's pitch to Canada is as follows. Auto jobs are crucial to the Canadian economy. In fact, one of six jobs in Canada's economic engine – read: Ontario – relies on the auto sector. Southern U.S. states like Alabama, Georgia, Mississippi, and even Texas are willing to offer us cash incentives. As for the Mexicans, they'll basically build an entire plant for us. And in the last decade, only one new plant out of 20 in North America has been built north of the 49th parallel.

Wolfgang Bernhard
Bernhard

Auto executives deny they're blackmailing government but let's look at their words. Wolfgang Bernhard, DaimlerChrysler COO: "When I go to Mexico, I get government support in 30 seconds. Why would I go to Canada without getting government support?" Jim Padilla, executive VP for Ford North America is even more direct: "Canada has to step up."

And big auto is supported by reams of backers from local mayors to auto industry analysts to boisterous Buzz Hargrove, big boss of the Canadian Auto Workers (CAW). Even Ontario Liberal leader Dalton McGuinty is promising a perpetual $100 million annual fund – if elected – for those poor auto giants to draw upon.

In a perfect world, Canada would be blessed with politicians who dismiss such blackmail outright. But if this were the case, the gun registry would have never happened, the national debt wouldn't exist and the Auditor General would be unemployed.

Here's why Ottawa and any province should say no to big auto. First, auto execs themselves admit their industry is very uncompetitive. This is partly because they've signed "cash for life" deals with their unions. And isn't it ironic that these same unions fight globalization and corporate power at made-for-TV trade summits but have no problem preaching the fleecing of taxpayers for corporate welfare cash when it comes to their own members' bank accounts.

Subsidies do not equal success. Last week's death of the Concorde (financed by British and French taxpayers) yields a valuable lesson in this regard. If the government sponsorship were the key to auto supremacy, we'd all have three Ladas parked in the driveway. If Ontario or Alberta can't compete with Alabama or Mississippi in the subsidies game, heaven help us if New York, Illinois or California decides to get in on the action. Our politicians need to fight harder for an end to subsidies at the international trade table … the sooner, the better.

Finally, the feds have numerous taxpayer-funded studies that claim Canada is the best place on the planet to invest due to our highly skilled workforce, superior infrastructure, generous R&D tax credits, low-cost utilities, competitive taxes, low dollar and many other factors. Our politicians need to remind big auto of these facts. As for Soviet-style subsidies and a Minister of Minivans, taxpayers have just one word for all concerned … NYET!

Walter Robinson is the Federal Director of the Canadian Taxpayers Federation.

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