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UNCLAS SECTION 01 OF 02 TORONTO 000134 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD ELAB PGOV SENV CA
SUBJECT: Ontario Mayors Seek Federal Auto Sector Investment 
 
Ref: (A) Toronto 123 (B) Toronto 130 (C) Toronto 32 
(D) 07 Toronto 457 
 
Sensitive But Unclassified - Please Protect Accordingly. 
 
¶1. (SBU) Summary:  As Ontario's economy shows continued signs of 
slowing, mayors from Ontario's auto manufacturing jurisdictions met 
at General Motors in Oshawa, Ontario, on April 25 to discuss the 
health of the automotive sector in Ontario.  Because of the huge 
capital costs required for automotive projects, the group is calling 
for cooperation and collaboration between companies and all levels 
of government.  The mayors are also calling for the harmonization of 
government safety and other standards in North America to ensure 
that the Canadian automotive market remains affordable and 
competitive.  The group suggested the U.S. and Canada align their 
free trade agreements with Korea.  End Summary. 
 
-------------------------------- 
Ontario Economic Engine Sputters 
-------------------------------- 
 
¶2. (U) Rising energy prices, a strong Canadian dollar, and a heavy 
dependence on manufacturing is hurting Ontario's economy.  The 
province produced over 38% of the country's GDP in 2007, but this 
figure is shrinking, down from nearly 41% in 2003.  Over the same 
period, the province's population has remained steady at around 38%. 
 Ontario's unemployment rate rose 0.3 percentage points in March to 
6.4%, which is slightly above the national average of 6%.  Also in 
March, 25,000 full-time jobs were lost, though that was partially 
offset by the creation of 23,000 part-time jobs.  A report released 
by Toronto Dominion Bank on April 29 warns that by 2010 Ontario may 
become a "have-not" province (economically disadvantaged), compared 
to other Canadian provinces.  However, Ontario taxpayers would still 
be paying billions more to the federal government than they get back 
in equalization, or for health and social programs.  (Note: In 2005 
(latest available figures), Ontario taxpayers sent C$21 billion more 
to Ottawa in taxes than the federal government spent in the 
province.  End Note). 
 
¶3. (SBU) Ontario is the leading jurisdiction for automotive 
production in North America, producing over 2.5 million light-duty 
vehicles annually, slightly ahead of Michigan (ref (A)).  For each 
of the 50,000 assembly jobs in the province, there are roughly seven 
to 10 spin-off jobs (the highest ratio of any manufacturing sector). 
 The strength of the Canadian dollar and faltering demand, however, 
will make it difficult for Ontario to hold onto top spot.  Some 
Ontario auto sector analysts believe the proposed new Canadian Auto 
Workers (CAW) contract with Ford will not help (ref (B)).  One 
analyst told us, "This contract doesn't provide nearly what was 
needed to make the Canadian auto industry competitive.  C$5 per hour 
savings doesn't do it.  This contract means that costs will stay too 
high, and the costs either have to come down or the jobs will 
eventually be transferred out of Canada." 
 
------------------ 
More Layoffs at GM 
------------------ 
 
¶4. (U) On April 28, GM announced that it would cut another shift at 
its award-winning Oshawa, Ontario truck plant, laying off 
approximately 1,000 more employees by September.  Industry officials 
attribute the move to rising fuel prices and the slumping U.S. 
economy, which have suppressed demand for relatively 
fuel-inefficient pick-up trucks and sport utility vehicles.  CAW 
President Buzz Hargrove told reporters on April 29 that he would try 
to save these jobs by negotiating shorter schedules for two shifts. 
The planned layoffs come on the heels of GM's elimination of 1,200 
jobs at the plant in 2007. 
 
----------------------------------------- 
"Ontario Mayors of Automotive Investment" 
----------------------------------------- 
 
¶5. (U) On April 25, mayors from Ontario's auto manufacturing 
jurisdictions -- from Windsor to Oshawa, who call themselves the 
"Ontario Mayors of Automotive Investment" (OMAI) -- met at GM in 
Oshawa to discuss the health of the automotive sector and to develop 
a single voice for Ontario's municipal jurisdictions in order to 
attract and retain automotive investment in Ontario.  Mayors and 
representatives of over 20 Ontario communities attended the meeting. 
 Consul General Nay spoke at the event, as did Ontario MPP Monte 
Kwinter (Parliamentary Assistant, Ministry of Economic Development 
and Trade), and federal MP Colin Carrie (Parliamentary Assistant, 
 
TORONTO 00000134  002 OF 002 
 
 
Ministry of Industry). 
 
-------------------------------- 
Cooperation Needed at All Levels 
-------------------------------- 
 
¶6. (SBU) The mayors are asking the federal and provincial 
governments for "...direct, sustainable, long term continued support 
and involvement to foster a business-friendly environment in [the 
auto] industry."  Kwinter stated that cooperation and collaboration 
between companies and all levels of government is necessary to move 
big projects forward.  Kwinter noted that Ford and the Ontario 
government had collaborated on the C$130 million project to re-open 
the company's Essex Engine Plant, in Windsor Ontario, which was 
announced on March 31 (ref (A)).  The project should bring back 300 
of the more than 900 workers who had been laid-off last November. 
According to a contact at Ford, the Canadian federal government is 
still considering providing additional support to the project 
through its C$250 million Automotive Innovation Fund (ref (A)). 
 
------------------------ 
Regulatory Harmonization 
------------------------ 
 
¶7. (U) The mayors called on Canada and the U.S. to harmonize 
regulatory standards in order to "...reap the benefits of a North 
American marketplace and to ensure affordable prices and innovative 
technologies for Canadians."  Roughly 40 motor vehicle safety 
standards are different in the U.S. and Canada, making some vehicles 
produced for the U.S. market unavailable in Canada.  It is costly 
for producers to build vehicles specifically for the Canadian 
marketplace, which is a tenth the size of its U.S. counterpart. 
Transport Canada, the federal government department which regulates 
road and motor vehicle safety under the Motor Vehicle Safety Act 
(MVSA), is currently working to harmonize Canadian bumper standards 
with those in the U.S. and Europe.  The new bumper test speed 
requirement rule is expected to be published in June. 
 
¶8. (SBU) Transport Canada is also working on the country's first 
motor vehicle fuel consumption regulations, announced at the 
beginning of the year, which will enter into force as early as the 
2011 model year.  The fuel consumption regulations will reportedly 
be benchmarked against the U.S. target of 35 miles per gallon - or 
6.7 liters/ 100 kilometers - for the average fuel economy of 
vehicles sold in 2020.  Following on-going consultations with 
stakeholders, and between the GOC and the USG, the GOC expects to 
publish the draft regulations no later than the end of 2008 (though 
the deadline is dependent on the USG rule-making schedule), 
according to a Transport Canada contact. 
 
--------------------- 
Free Trade Agreements 
--------------------- 
 
¶9. (SBU) The OMAI mayors expressed concern about a possible Canada 
free trade agreement with the Republic of Korea.  The mayors, while 
acknowledging the need to enter new markets, argued that an 
agreement with the ROK must encourage equity and reciprocity, which 
includes investment in the local marketplace.  In order to build a 
competitive North American marketplace, the group also suggested the 
the 
U.S. and Canada consult to align the two countries' free trade 
agreements with Korea. 
 
¶10. (SBU) Comment:  With falling U.S. demand, and higher production 
costs in Ontario than the U.S. (ref (A)), the province's auto sector 
is likely to experience more lay-offs in the near term.  Regulatory 
harmonization will help reduce costs, but the cost of Canadian labor 
will have to become competitive with U.S. labor costs or auto sector 
jobs will move south of the border.  End Comment. 
 
NAY