It’s rare to see our politicians out-politicked and out-talked by an outspoken business tycoon. But our political classes have been outmanoeuvred by Chrysler chief Sergio Marchionne:
Keep your government subsidies, the flamboyant industrialist huffed as he announced that the carmaker would proceed with minimal upgrades for its Windsor and Brampton plants. By leaving any bigger investments up in the air, he threw everyone off balance.
Blindsided by this bombshell, our politicians are still flying blind. Despite the brave rhetoric, no one saw this coming nor knows where it’s going.
Ontario’s Tories boasted they’d saved taxpayers a “suitcase of cash” earmarked for investment incentives. Opposition Leader Tim Hudak had publicly scorned Chrysler’s demands for more than $700 million in federal-provincial “ransom money” to secure a potential $3.6-billion investment.
Premier Kathleen Wynne, in turn, blamed Hudak for imperilling highly coveted car factories that buttress the economy. Even Hudak’s federal Tory cousins in Ottawa fingered him for generating political turbulence.
And in a scathing open letter, Marchionne lashed out at those who had turned the Chrysler investment into a “political football” — a clear reference to Hudak’s rhetoric. That said, it’s hard to imagine a major multinational changing course based solely on pre-election rhetoric from a little-known provincial opposition leader. More likely, Chrysler is merely biding its time before bidding for more money.
In reality, there are no heroes or villains in this political pas de deux and monetary ménage a trois. Just people role-playing and playing politics to appease voters and shareholders.
Pundits and oppositionists, both left and right, condemned any “corporate welfare” for Chrysler — remarkably united in their ideological if not very practical perspectives. Politicians in power, whether in Ottawa or at Queen’s Park, opted for a more pragmatic approach because they will be held accountable — not just financially, but politically — for any factory expansion or closing.
That’s why the federal Tories and provincial Liberals were actively trying to secure investment commitments and job guarantees from Chrysler. Without warning, Marchionne broke off talks — and peremptorily tossed out minimal, just-in-time (and just-for-now) investments for his Windsor and Brampton plants.
(One unspoken factor at play: Canada’s impending free trade pact with South Korea, which North American carmakers strongly oppose.)
Rather than bind himself to any job guarantees, Marchionne publicly ratcheted up pressure on the autoworkers’ union ahead of contract talks in 2016. His end game became clearer: once Chrysler extracts labour concessions, it will come back for more government incentives, as all carmakers always do.
If Hudak is premier two years hence, what will he do? He’ll woo Chrysler by any means necessary.
That’s what Bill Davis did decades ago, when his Tory government pulled out all the stops to get French carmaker Renault to open the Brampton plant in the first place. And that’s what the federal Conservatives have been doing of late to keep it alive. (The AMC-Renault plant was later bought out by Chrysler.)
In Ottawa, Tory Industry Minister James Moore praised Queen’s Park and questioned Hudak’s rhetoric: “The political dynamic of the province of Ontario … caused Chrysler to make a decision and frankly we’re surprised by it. We’ve worked well with … Ontario to try to move this along.”
If incentives are so bad, why has Hudak attacked the Liberal government for trying to wind down money-losing horse-racing tracks across Ontario? Why would the Tories prop up a relic of the horse and buggy industry while talking down next-generation automobile production?
Like it or not, there is a deeply entrenched global tradition of incentives for carmakers that generate economic spinoffs. Marchionne was shamelessly trying to ratchet up those incentives, but both sides know the standard formula.
With low corporate tax rates, low health-care costs and a declining currency, Ontario remains cost-competitive. But we must also be incentive-competitive: neither too much nor too little.
No point being ideologically purer but economically poorer. At some future point, our governments will have to play the bribery game if we want a bigger and longer term investment from Chrysler.
Would a future premier Tim Hudak choke off the Brampton car plant brought to life by past premier Bill Davis? Would he abandon automakers while subsidizing horse breeders? Don’t bet on it.