Ontario and Federal Canadian government help Toyota finance new Lexus plant

Both the federal and provincial Ontario governments will contribute to the financing of a new manufacturing plant that will produce Toyota's luxury Lexus model hybrid.

A total of as much as $34 million will be advanced to help Toyota finance the production of the first hybrid car to be built in Canada. The financing will be shared by the Conservative federal government of Stephen Harper and the Liberal provincial government of Ontario.

Prime Minister Stephen Harper said at the Toyota plant in Cambridge, Ontario, that federal funds would come from the Automotive Innovation Fund. The financing is described as as a repayable contribution. Toyota will be expected to repay all or part of the amount, or the government will receive some financial return. Harper said:

"The rebound of Canada's auto sector is one of this country's biggest economic success stories of the past five years.We are here because our government is committed to creating high-quality, well-paying jobs for hard-working Canadians."

The outgoing Premier of Ontario, Dalton McGuinty, said Ontario's portion of the financing will come from the Strategic Jobs and Investment Fund.

Toyota will also invest $125 million in a new assembly line designed to increase production of Lexus luxury cars. New models include a sport utility vehicle with a hybrid gasoline-electric engine. This is expected to be in production next year. Harper said:

"Besides being the first hybrid vehicle assembled in Canada, the RX 450 hybrid has been, up until now, only, and I want to emphasize that, only, built in Japan. But that's changing. In a short time, that fuel-efficient vehicle will be assembled right here."

Toyota is increasing its auto production in Canada and employing more auto workers as a result. Toyota plans to increase production by 30,000 Lexus RX units next year to a total of 104,000 vehicles. This would include 15,000 RX450h sport-utility models. Toyota's productive capacity in Canada will be increased to about half a million vehicles per year. Toyota will hire about 400 new workers.

Harper also announced that the government is committing $250 million more to the Automotive Innovation Fund over the next five years. The fund was established in 2008 to help the Canadian automotive industry during the recession. The fund had already provided funding to four other projects. Ford received $80 million as part of its investment of up to $730 million in an engine assembly and power-train research center in Windsor Ontario. Toyota received $70.8 million to develop more fuel-efficient vehicles. Two parts companies also received financing.

Note everyone, even in the business community, supports the Automotive Innovation Fund. An article in Canadian Business points out that financing has been to huge global corporations such as Toyota and Ford. Harper's own guidelines call for helping small innovative companies to become larger. The article also notes that increasing efficiency often does not create jobs but results in job loss. The program will not result in much job creation and even those created may be expensive:

"More than 170,000 automotive jobs have disappeared in the past five years. New positions do exist in some of the plants funded by the Innovation Fund—Toyota expects to add 400 new jobs this year—but these jobs come an inflated cost. For each position either saved or created, the Institute for Research on Public Policy found, government spent as much as $212,946."