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."

Canadian and US auto sales increase in 2012

US auto sales for 2012 are predicted to rise by 13% or 14.5 million new vehicles This is the best year since 2007. Canadian sales also rose in 2012.

Many people put off buying cars during the recession and their aging vehicles need to be replaced. As credit is cheap and the economy slowly recovers, sales are increasing. In December this year the big 3 American automakers saw a 5% increase in sales, a bit better than analysts had predicted. Compared with the previous December, GM sales increased by 5%, while Ford sales increased just 2%. The winner was Chrysler with a sales increase of 10%. Toyota increased sales by 8%. For the year, Toyota had a large increase of about 27% compared to just 3.7% for GM, 4.7% for Ford, and 21% for Chrysler. Consulting firm Polk, expects sales to continue increasing in 2013 to 15.3 million vehicles or a nearly 7% increase. Jonathan Browning, who is with Volkswagen in the US, warned however:

"It would have been nice if all the open questions had been resolved in the 'fiscal cliff' discussion over the holiday, but clearly they weren't, and that does extend this period of uncertainty from a consumer point of view."

In Canada, Ford Motor Co. of Canada was the top seller for the third straight year. Chrysler, however, with many fuel-efficient cars was able to become number two, replacing GM. Even though it is number one, Ford sold only 90 more vehicles last year than the year before. In December, sales actually slipped 13 % from 2011. Chrysler reported its sales rose 8% putting it in second place. Reid Bigland, CEO, of Chrysler Canada said:

"Our investment in fuel-efficient new vehicles and power trains has propelled us to be the number two seller.".

For the year, Chrysler car sales rose 33%. The Chrysler group is controlled by Fiat of Italy. Bigland predicted another good year for Chrysler in 2013.