A month has passed since Sergio Marchionne, chief executive of Fiat Chrysler, made a cameo appearance at the Canadian International Auto Show, stirring up a political hornet’s nest and sparking a long-dormant debate on auto subsidies.
Canada can’t afford to be “a guppy in shark-infested waters,” he told listeners, warning that competition among governments to lure auto assembly plants is fierce and fast-paced. “This is not a game for the faint-hearted. It takes resolve and it takes cash.”
To the carmaker’s surprise, a handful of pundits took exception to his sales pitch, urging Queen’s Park to say no. Unexpectedly, Ontario Conservative Leader Tim Hudak chimed in. “Why should we pay a nine-figure ransom to Chrysler?” he asked. “If you give money to Chrysler, then what about Ford? You give money to Cisco, then surely IBM’s going to come to the trough next.” Emboldened by these events, a few taxpayers piped up, breaking decades of public silence.
It would be an exaggeration to say Canadians are engaged in a rational discussion of the costs and benefits of subsidies to profitable carmakers. So far, the debate has been dominated by accusations, tautologies and ad hominem arguments.
But public opinion has shifted. After 40 years of mute acquiescence, voters are beginning to balk at the cost of subsidizing car plants, allowing politicians to deviate from the status quo. Marchionne, who was confident a month ago that he could make a deal with the Canadian and Ontario governments to upgrade his company’s plants in Windsor and Brampton, now says he wants nothing to do with either government. “Fiat Chrysler is no longer interested in the package,” he declared in Sterling Heights, Mich. “Chrysler is not in the business of accepting handouts. And if provincial and federal authorities in Canada think that’s the way to attract foreign investment, I think they are in for a big shock.”
For all the sturm und drang, the controversy has produced three positive developments:
• It has served notice to subsidy-seeking carmakers that they’ll have to make a better case than Marchionne did. The automatic yes they’re used to getting from Ottawa and Queen’s Park will be challenged by taxpayers who want proof there is a public benefit to subsidizing auto plants.
• It has laid bare the weak logic used by defenders of multimillion-dollar incentives to car companies:
“The policy (of supporting the auto sector) has been in place for decades.” — Premier Kathleen Wynne.
“There’s not a country in the world that has a successful auto industry where the government doesn’t play a major role. When Marchionne says, ‘I don’t want your money,’ boy that makes me nervous.” — Jerry Dias, president of Unifor, the union representing auto workers.
“If we lose our auto industry footprint, all of Ontario will suffer.” — New Democrat Brian Masse, MP for Windsor West.
“Our negotiations with Chrysler were consistent with our past level of support for major auto investments” — Eric Hoskins, Ontario minister of economic development.
• Finally, it has put the issue of corporate subsidies in the spotlight. Automotive companies aren’t the only — or the biggest — recipients of government largesse. Aerospace firms top the list. Pratt & Whitney Canada Corp. is in first place with 75 handouts worth $3.3 billion. Bombardier Inc. comes second with 48 payments worth $1.1 billion. De Havilland Inc. ranks third with 35 subsidies worth $1.08 billion. (These numbers were compiled using access to information requests by Mark Milke of the Fraser Institute.)
What is striking is that none of Canada’s top biggest job creators — Onex Corp., George Weston Ltd. and Loblaw Companies — has received a cent from taxpayers. Yet policy-makers see no need to explain which companies get public funding and why.
As Canadians look back at a deal gone bad, they still don’t know how much government money the Chrysler boss was seeking; whether he was prepared to provide job guarantees; how long he was committed to assembling vehicles in Canada; or why he pulled the plug.
This is not the conclusion Ottawa, Queen’s Park or Marchionne expected. But it is a welcome departure from the no-accountability-required auto handouts that have prevailed for too long.