Ottawa nearing $300M deal with Ford Motors as part of planned electric vehicle shift: source

The Ford Motor Company of Canada is a Subsidiary of the US owned Ford Motor Company, with head offices in Oakville Ontario. The Oakville Plant primarily produces crossover SUVs, namely the Ford Edge and its platform partner, the Lincoln Nautilus, previously the Lincoln MKX. Ford employs almost 8000 workers in Canada and roughly 18,000 across the United States. The Ford Motor company of Canada is part of an organization that strives to achieve success through innovation of new vehicles while perfecting efficiency through mass production methods.

Jerry Dias, president of Unifor National, the union that represents auto workers, has been lobbying hard for automakers to retool their facilities to produce electric vehicles and keep Canadians employed. Dias has been successful in negotiating a three-year contract extension with the Ford Motor company, which he claimed was in no small part due to the support from both Federal and Provincial Governments.

The federal government is preparing a nearly $300-million funding package for Ford in an effort to help the firm transition to electric vehicle production at its Oakville, Ontario, plant. The deal would mark the largest public investment in the Canadian auto sector in years. This deal is also being supported by the Ontario government who is set to match the federal contribution under an arrangement worth almost $600 million. The Federal Government and the Union announced on October 8, 2020 that a deal was eminent at this point. The federal and Ontario governments did not deny the details of the arrangement but cautioned that negotiations were still ongoing and that contributions were subject to change.

The funding comes after Ottawa offered the automaker up to $500 million in subsidies as a way to encourage new investments in electric vehicles, according to a report in the Toronto Star last month. On Sept. 28, Ford Canada officially announced a $1.8-billion plan to begin manufacturing electric vehicles at its Oakville plant. Another $150 million will go towards its operations in Windsor, Ont., the company says. Officials from the company expressed their commitment to the Canadian automotive sector which has served them well over the decades.

The subsidies, from the federal Government, are part of a broader effort by federal industry Minister, Navdeep Bains to spur electric vehicle production in Canada, as conventional automakers increasingly wind down their Canadian operations in favour of cheaper labour markets in offshore areas. These investments will have far reaching benefits for employees, customers, suppliers and even the government.

Ford has cast the Oakville investment plans as a new era for the company in the Canadian market. By introducing battery electric vehicle production at Oakville Assembly Complex, we are cementing our Canadian operations as a leader in advanced automotive manufacturing, Dean Stoneley, president and CEO of Ford Canada, said in a statement late last month. The company said it would shift to EV manufacturing by 2024, potentially beginning with the Ford Mustang Mach-E, its new all-electric crossover. The company mentioned the electric Mustang among several other new lines of vehicles in its latest quarterly reports, saying there is a lot more for customers to get excited about in coming years. Jerry Dias told the media that the new agreement with Ford would create five lines of electric vehicles at its facilities. But Ford has not confirmed those plans.

The funding for Ford would amount to roughly 30 per cent of the total planned investment by the company, well higher than the 10 per cent industry standard that is typically provided by government funds. But some industry insiders say immense public funding will be necessary in order to reinvigorate Canadas failing auto sector, and to reposition it for the next generation of auto manufacturing.

Before the pandemic struck, Minister Bains, along with Ontario officials, had already been in discussions with Fiat Chrysler Automobiles (FCA) over a potential funding package that would encourage the firm to shift to electric vehicle manufacturing at either its Windsor or Brampton facilities, but those plans were said to have been temporarily shelved as COVID-19 began to spread.

Unifor recently kicked off a new round of labour talks with FCA with a deadline set for Oct. 14. Observers say those discussions are likely to use the Ford model as a template. Negotiations between Unifor and FCA come amid increasingly uncertain times for the Canadian auto industry, particularly after General Motors announced in 2018 that it would be closing its Oshawa plant. Adding to those worries, last summer, Fiat Chrysler cut 1,500 jobs at its Windsor facility. The companys Brampton assembly plant, where the Chrysler 300, Dodge Challenger and Dodge Charger are built, is also facing a tightening market as consumers opt for more fuel-efficient cars and sport-utility vehicles.

Canadian auto manufacturing reached its peak in 1999 when production surpassed three million vehicles per year but has since slumped to around 2.3 million today.

Canada has lost a net of five assembly plants since that time, according to a 2019 report by the Canadian Centre for Policy Alternatives. Worries about shutdowns have accelerated in recent years, as automakers increasingly bolster their operations in foreign markets, where labour and electricity inputs are less costly. And calls for more public supports could only grow as increasingly redundant product lines face market pressure.

Adapted from:

Snyder, Jesse (2020, October 02). Ottawa nearing $300M deal with Ford Motors as part of planned electric vehicle shift: source. Retrieved from: https://nationalpost.com/news/ottawa-nearing-300m-deal-with-ford-motors-as-part-ofplanned-electric-vehicle-shift-source

Question 2 (20 marks)

1. Discuss, with evidence from the case, the Corporate Level Strategy Ford Motor

Company is using with its diversification into the Electric Vehicle Sector? (5 marks)

2. What are the benefits to Ford Motor Company of this type of corporate level strategy? Be sure to refer to details from the case in your analysis. (15 marks)