New Funding Unlikely For Canada’s Auto Industry

Federal government spent billions of dollars to assist struggling auto industry in 2009, so it's unlikely there will be any new money for the sector, industry players say.

TORONTO (CP) -- The federal government spent billions of dollars to assist the struggling auto industry in 2009, so it's very unlikely there will be any new money for the sector in Thursday's budget, industry players say.

"We're not expecting any significant announcements in the budget," says Steve Rodgers, president of the Automotive Parts Manufacturers' Association.

"We think there's sort of a malaise at the moment, if you will, that the automotive industry through the bailouts of GM and Chrysler has gotten its funds and now the automotive industry is recovering."

Last spring, the federal government spent approximately $9 billion to bail out General Motors and Chrysler as the two automakers filed for bankruptcy protection in the U.S. and warned they might not survive without government assistance.

In April, Ottawa also said it would spend up to $185 million to guarantee warranties on new vehicles sold by GM and Chrysler during the depths of the recession, and authorized Export Development Canada to provide an additional $700 million to insure parts manufacturers against non-payment from troubled automakers.

Since the industry has rebounded dramatically in recent months -- overall Canadian vehicle sales were up 25 per cent in February from a year earlier -- the government will likely decide that no new assistance is needed.

However, that doesn't mean industry stakeholders don't have a wish list.

Mark Nantais, president of the Canadian Vehicle Manufacturers' Association, called for "anything that creates a better environment to invest, anything that continues to add to consumer confidence, because that's really needed in terms of the economy."

Jayson Myers, president and CEO of Canadian Manufacturers and Exporters, said he'd like to see the government extend its two-year tax writeoff for manufacturing and processing technologies to 2016. He also said he would like a tax credit for workplace training to help offset the impact of higher employment insurance premiums.

Although Prime Minister Stephen Harper has promised taxes won't be raised to deal with a ballooning deficit, economists predict a large boost to government revenue will come from legislation that requires employment insurance premiums to be raised if the program runs a deficit.

Myers also called on Ottawa to increase the budget for the National Research Council's industry research program and to boost funding for the "woefully underfunded" Auto 21, a research partnership between the public and private sectors.

Canadian Auto Workers president Ken Lewenza said he would also encourage the government to invest in research and development. He said R&D spending will encourage automakers that don't currently build vehicles in Canada to open plants, and to keep those plants that do exist operating.

The government has promised to spend on research, innovation and learning to help boost the Canadian economy as it comes out of recession and stimulus spending is wound down.

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