EVs for Ford Oakville: How a threat of closure became ‘the art of possible’

Unifor President Jerry Dias had upcoming contract talks with the Detroit Three on his mind when he received disturbing news about Ford’s sole assembly plant in Canada.

It was June, and a U.S.-based forecasting firm was warning that the facility in Oakville, Ont., would not build the next generation Edge crossover and faced possible closure by 2023. The news was first reported by Automotive News Canada.

Dias made a flurry of phone calls to Ford executives in Canada and the United States who did not deny the report. He then called Navdeep Bains, federal economic development minister.

Dias urged Bains to “get on the phone and call all three of the Detroit Three and say that you’ve got the money to invest” in new product.

It was a critical moment in a series of unlikely events spanning months of pandemic-fueled turmoil for the auto industry, ending with Ford choosing Oakville for a $1.8-billion investment for electric-vehicle production.

The cast of key players included the federal and provincial governments, led by fierce political rivals, who forged a once-unthinkable partnership by working closely together during the pandemic, setting the stage for $590 million in combined support for the investment.

Ford Motor Co. CEO Jim Farley, named to the position over the summer, joined other top executives in Michigan and became actively involved in finding a solution for the Oakville plant.

Unifor, sensing that Canada was running out of time to secure much-needed investments in future vehicle technology, rolled the dice and pushed for EV production.

In the end, Ford would choose to invest in Oakville instead of Mexico, as was originally its plan, according to the federal and provincial governments.

“This is exactly the kind of investment we’ve been looking for for years,” said Vic Fedeli, Ontario minister of economic development, job creation and trade.

It was a major win for the Canadian auto industry which had been in decline for years. According to the International Organization of Motor Vehicle Manufacturers, Canada in 1999 was the fifth-largest automotive manufacturer in the world by production volume, with 3.06 million vehicles produced. By 2019, it produced 1.92 million vehicles, ranking it 12th globally.

In fact, news of Oakville’s potential demise might have helped to save the plant and the jobs of more than 3,000 hourly employees.

Dias said learning of Ford’s plans for the Edge months before Detroit Three contract talks were to formally begin was the union’s big “break” in negotiations. It gave labour and the federal and provincial governments ample time to seek a solution with company executives by the Sept. 21 expiration date of Unifor’s contract with Ford.

A shorter lead time “would have made it a lot more difficult, based off having a shorter runway,” Dias said.

TORONTO AUTO SHOW

The roots of the Oakville deal can be traced back to February, weeks before the COVID-19 pandemic sent the industry and the economy at large into a tailspin in the spring. It was then that Bains met with Ford Canada CEO Dean Stoneley at the Canadian International AutoShow in Toronto.

The fact that the two spoke was not unusual in and of itself. In his role as industry minister since 2015, Bains has made a point of building relationships with executives throughout the automotive industry and staying in touch with them.

The conversation was notable instead for what Bains said to Stoneley. According to a federal government official familiar with the conversation but who was unauthorized to speak on-the-record about it, Bains made it clear to Stoneley that Ottawa was willing to “go a little higher” on financial support if Ford brought “something green and substantial” to the plant. Combined federal and provincial support for assembly plant investments typically accounted for about 20 per cent of a project’s total cost.

The federal government under Prime Minister Justin Trudeau has made the adoption of zero-emission vehicles a major component of its climate agenda. The government in 2019 began offering a rebate of up to $5,000 on eligible EVs and long-range plug-in hybrids and has invested in charging infrastructure projects throughout the country.

But securing EV production at a Canadian assembly plant – and the thousands of direct and spin-off jobs that come with it – had proven elusive for the country. Toyota and Fiat Chrysler have built hybrid variants of vehicles produced in Canada, but EV production had gone elsewhere globally, including the United States and Mexico.

The Canadian government was looking to change that and was signaling to Ford that it would put its money where its mouth was. A request to interview Stoneley was denied by Ford.

“At the end of it, the government wants to be a meaningful partner – a true partner – as we talk about investment moving forward,” Bains said in an interview with Automotive News Canada.

GOVERNORS’ MEETING

Meanwhile, the Ontario government was starting discussions of its own, according to Fedeli. In February, he and Ontario Premier Doug Ford were in Washington, D.C., to attend the National Governors Association’s winter meeting.

While in the United States, Ontario officials met with Ford executives for a discussion about Ontario’s auto industry and what the government could do to help the company find new Canada-based suppliers to meet rising regional content requirements under the new United States-Mexico-Canada trade agreement, Fedeli said.

That conversation and those that followed helped to get the ball rolling with Ford, as Premier Ford and other officials would sell the automaker on the benefits of investing in Ontario, including a highly skilled labour force and the province’s recent moves to cut red tape, he said.

“The premier has always said if you’ve got a great investment in the province of Ontario, come and talk to us about it. We need to know what your plans are,” Fedeli said.

PANDEMIC STRIKES

Just a few weeks after those talks, however, the COVID-19 pandemic struck Canada and the rest of the globe. It led to an unprecedented two-month shutdown of all automotive production on the continent as automakers worked to figure out how to safely resume operations amid economic uncertainty and unknown consumer demand.

An industry that was prepared for a small drop in annual new-vehicle sales was staring at an unprecedented collapse in the market. And everything from automakers’ product plans to their investment decisions was suddenly up in the air.

For governments, the focus immediately shifted to the dual public health and economic crises. COVID-19 cases began to spike in Canada in March, leading to shutdowns and stayat-home orders nationwide in an effort to curb the spread of the virus.

During the spring, the federal and Ontario governments were in close contact with each other on their respective responses, ensuring that there were “no gaps and no duplications” in their efforts, said Fedeli. The federal and Ontario governments developed a strong working relationship, a fact that might have been impossible to imagine just a year or two earlier but would prove critical to getting the Ford Oakville deal done.

NEW ALLIANCES

Trudeau and Doug Ford, after all, sit on opposite sides of the political aisle. Trudeau made no secret of his distaste for Ford’s politics in the 2019 federal election, warning Canadian voters that a vote for the federal Conservatives would be a vote for the Ontario premier’s agenda. Ford, meanwhile, leveled attacks against the Liberal policies of Trudeau and former Ontario Premier Kathleen Wynne during the 2018 provincial election campaign.

But there has been little sign of friction between the two since the pandemic began, even as real policy differences remain. Indeed, Ford recently praised Chrystia Freeland, the deputy prime minister and federal finance minister, as “amazing” and “incredible.” She has returned the compliment, calling him a friend and likening him to a “therapist” with whom she could discuss the challenges posed by the pandemic.

That unlikely relationship between the Trudeau and Ford governments would set the stage for both parties landing on the same page when it came to securing an EV investment from Ford Motor. The development was especially noteworthy considering the premier ran on a platform calling for an end to what he called “corporate welfare.”

One of his first moves in office was to kill the province’s carbon tax, thus ending Ontario’s EV subsidy program. (Revenue from the carbon tax funded the province’s EV subsidies.)

The pandemic “created a different environment, an environment of cooperation and necessity,” Unifor’s Dias said. “It’s almost like the big, bureaucratic walls are tumbling as it relates to getting things done.

“When you’re dealing with government, a tortoise will move faster. But when it comes to this ... things are moving much quicker than they ever have.”

‘ACE IN THE HOLE’

At the beginning of the pandemic, Ottawa remained in close contact with automakers and suppliers, enlisting them to build ventilators, masks and other equipment needed to combat the pandemic. Those conversations also allowed Bains and others in the federal government to continue pitching Ontario to Ford as a place to invest in EV production.

“Minister Bains reiterated to [Stoneley] that, ‘When it comes to ‘green’, we’re here and we’re ready,” the federal official said.

“That was sort of continuing to drop the breadcrumbs, so to speak, to see what could happen.”

In June, Automotive News Canada reported that Ford would not build the next-generation Edge crossover at the Oakville plant, leaving it without a production mandate beyond 2023. That came as a surprise to Dias, who said he quickly reached out to Ford to learn more about its product plans. He said the company’s reply was that all of its products and platforms were “up for debate.”

“Coming out of 2016 bargaining, we were expecting the next-generation Edge,” said Dias. He said knowing it wouldn’t be built at Oakville beyond 2023 was Unifor’s “ace in the hole” during negotiations because it allowed the union to “pivot quickly” to a new strategy.

GAMBLING ON EVs

Unifor began to pursue EV production mandates from the Detroit Three automakers. The union in June laid out its proposals for how to rebuild the Canadian economy post-pandemic, which included a call for a national auto strategy built around EV sales and production.

Dias acknowledged the plans were a “gamble,” considering Canada had been shut out of EV investments and that the supply chain might not exist to support such a move.

But the union doubled down on it. Dias said he began to talk in the summer with Ford executives including then-CEO Jim Hackett and COO Jim Farley, who would later be named Hackett’s successor as global head of the company.

“Nobody had confirmed a [battery-electric vehicle] in the summer of 2020 or even the beginning of the fall, but things really started to fall into place when we got to the bargaining table” in September, Dias said.

The unified message from the federal and provincial governments helped, he said. After news broke that Oakville was losing the Edge, Dias said he urged Bains and his provincial counterparts to collaborate on funding to secure new investment for the plant.

Government incentives would prove to be critical to the deal. In a statement, a spokeswoman for Ford of Canada said incentives are among the “key elements” in attracting investments such as the one it plans for Oakville.

FARLEY GETS INVOLVED

Meanwhile, Bains and his office were in communication with Stoneley and Ford Canada after the news broke. But it soon became clear that they needed to go higher up the corporate ladder, according to the federal-government official with knowledge of the discussions.

The official quoted Bains as saying, “OK, it’s great that we’ve got this relationship with the Canadian CEO, and the Canadian CEO is important. But we’ve got to send this message to global because ultimately, global is going to dictate the terms of what the allocation is.”

Bains would soon have a call with Farley; it was a conversation that focused on the “art of the possible” in Oakville, said the federal official.

That’s when things “really started to accelerate. In the subsequent weeks, we started to see a change in Ford’s demeanour in that they were starting to consider pulling the [zero-emissions vehicle] mandate out of Mexico and into Oakville.”

It remains unclear what Ford’s EV plans were for Mexico, but federal and provincial officials both described the Oakville investment as one that was originally slated for the automaker’s Mexico operations.

The federal government official said that by the time Farley was named as Hackett’s successor on Aug. 4, the “stars [were] aligning” to get a deal done in Oakville. During that time, the federal and provincial governments were in communication to ensure that they were on the same page with regard to messaging, the official said.

According to Dias, Farley reached out shortly after he got the CEO nod.

“We shot the breeze and had a good conversation. In speaking with Farley and Hackett, they would not have reached out to me if they weren’t looking for a solution,” Dias said.

Requests to Ford for comment from Farley were declined.

UNIFOR TALKS

While talks informally began months earlier, negotiations between Unifor and the Detroit Three officially began on Aug. 12 in Toronto.

Between then and early September, Dias said he focused on determining which company the union would bargain with first.

He said he selected Ford on Sept. 8 because it was the first company to signal that it would invest in its Canadian operations, among other goals the union had set. According to Dias and government officials, the investment plans were beginning to fall into place by then.

According to the federal official, “This is all kind of happening behind the scenes before Unifor is ratified, but we would’ve been sending a letter to Ford just to give them some paper that said we’re supporting you guys and we’re inked for an amount that is above what we normally would do because you’re doing green, and here are some of the expectations that we would be looking for.”

According to another federal source with knowledge of the deal, Ottawa’s investment was contingent upon Ford committing to spend at least $1.8 billion and preserving jobs at the plant, which currently employs 3,400 hourly workers.

Ottawa remained in close contact with its Ontario counterparts, informing them of its commitment to contribute $295 million to the project. The Ontario government would eventually follow suit.

“Governments around the world know the benefits of winning automotive investment,” said Fedeli. “We recognize that as well.”

THE FUTURE

After about two weeks of negotiations, Unifor and Ford inked a tentative contract, which would later be overwhelmingly ratified by union members. On Oct. 8, the governments announced their financial support for the project, totaling $590 million and nearly one-third of the total cost of the project, soon after.

Much remains to be seen moving forward. It is unclear what EVs will be built in Oakville, although Dias has said at least one of the vehicles would be a crossover. It is unclear what will happen to workers while the plant is being retooled sometime after 2023 but before EV production begins in 2026. And, if 2020 is any lesson, a lot can change in the auto industry in six years’ time.

But the union and governments are confident Ford’s planned investment in Oakville will be transformative for the Canadian auto industry and set up the sector for an electrified future.

For Ford, Oakville could soon be an EV hub. For Unifor, jobs that were once in danger are now secure. For the federal government, the investment is a significant step forward in its ZEV plans. And the Ontario government sees the investment as a way to boost the province’s supply chain and to perhaps build a new battery supply chain, given its mining sector.

“Everybody knew what needed to be done,” Dias said.

— With files from Larry P. Vellequette and Greg Layson