Ford Oakville: From possible closure to Canada’s first EV plant

Shortly before contract talks were to begin with Ford Motor Co. this year, Unifor President Jerry Dias got some disturbing news: The automaker's last Canadian assembly plant reportedly would not build a third generation of the Edge crossover and could close by 2023.

Dias made a flurry of phone calls to Ford executives in Canada and the U.S. who did not deny the reports in Automotive News and other outlets. He then called Canada's economic development minister, Navdeep Bains.

"Get on the phone and call all three of the Detroit 3 and say that you've got the money to invest" in new product, Dias told Bains.

It was a critical moment in a series of unlikely events spanning months of pandemic-fueled turmoil for the auto industry, ending with Ford committing $1.4 billion to turn its Oakville, Ontario, plant into Canada's first electric vehicle assembly site.

Ford, in a reversal that occurred after new CEO Jim Farley got involved, elected to make the EV investment in Oakville instead of Mexico, as it had planned, according to the Canadian and Ontario governments. The decision represented a major win for the auto industry in Canada, which has deteriorated from the world's fifth-largest automaking nation in 1999 to 12th last year.

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

Oddly enough, the saving grace for Oakville and the jobs of more than 3,000 hourly employees might have been word leaking about the plant's potential demise. It gave Unifor and government officials time to seek a solution with company executives by the Sept. 21 expiration of the union's contract with Ford.

Less advance warning "would've made it a lot more difficult, based off having a shorter runway," Dias said. 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.

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. Bains met with Ford Canada CEO Dean Stoneley at the Canadian International AutoShow in Toronto.

Bains made it clear to Stoneley that Canada was willing to "go a little higher" than its typical incentives for assembly plant investments if Ford brought "something green and substantial" to the plant, according to a government official familiar with the conversation but who spoke with Automotive News Canada without authorization to discuss the matter publicly.

Canada's government under Prime Minister Justin Trudeau has made adoption of zero-emission vehicles a major component of its climate agenda. It began offering a rebate of up to $3,800 on eligible EVs and long-range plug-in hybrids in 2019 and has invested in charging infrastructure projects throughout the country.

But securing EV production at a Canadian plant — and the thousands of direct and spinoff jobs that come with it — proved elusive. Toyota Motor Corp. and Fiat Chrysler Automobiles have built hybrid variants of vehicles produced in Canada, but EV production had gone elsewhere globally, including the U.S. and Mexico.

The Canadian government was looking to change that and signaled to Ford that it would put its money where its mouth is.

"At the end of it, the government wants to be a meaningful partner — a true partner — as we talk about investment," Bains told Automotive News Canada.

Meanwhile, the Ontario government was starting discussions of its own, according to Fedeli. He and Ontario Premier Doug Ford went to Washington for the National Governors Association's winter meeting in February.

While in the U.S., Ontario officials met with Ford executives to discuss how the government could help the company find more Canada-based suppliers to meet rising regional content requirements under the new North American trade pact, Fedeli said.

But just a few weeks later, the coronavirus pandemic struck North America. 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. Everything, from automakers' product plans to investment decisions, was up in the air.

Trudeau and Doug Ford sit on opposite sides of the political aisle, but an unusually cooperative relationship since the pandemic began set the stage for both parties to land on the same page when it came to securing an EV investment from Ford Motor. That's especially noteworthy considering that Doug Ford ran on a platform calling for an end to "corporate welfare," and one of his first moves in office was to kill Ontario's carbon tax, which ended the EV subsidy program it funded.

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."

As Canada's government enlisted automakers and suppliers to build ventilators, masks and other equipment to combat the pandemic, Bains and other officials continued pitching Ontario to Ford Motor as a place to invest for EV production.

"When it comes to green, we're here, and we're ready," Bains told Stoneley, according to the federal government official who spoke with Automotive News Canada. "That was sort of continuing to drop the breadcrumbs, so to speak, to see what could happen."

Ford Canada declined to make Stoneley available for an interview and said it "worked collaboratively" with Unifor and both levels of government to secure the Oakville investment, though it did not respond to specific questions about how the deal happened.

"There are three key elements required to attract automotive investments: competitive labor costs, fair trade agreements and government incentives," the company said.

The news in June that Ford wasn't planning to build the next-generation Edge in Oakville, which would then have no products assigned beyond 2023, created urgency. Dias was among those caught by surprise, and when he contacted Ford, he was told simply that all of its products and platforms were "up for debate."

As devastating as Oakville's closure would be if it came to pass, having the information ahead of the talks became Unifor's "ace in the hole" during negotiations, Dias said, because it allowed the union to "pivot quickly" to a new strategy.

Unifor began to pursue EV production mandates from the Detroit 3. It called for a national auto strategy built around EV sales and production as part of a road map it laid out in June proposing ways to rebuild the Canadian economy after the pandemic.

Dias acknowledged the plans were a "gamble," as Canada had been shut out of EV investments, and the supply chain to support such a move was uncertain. But the union doubled down on it. Dias said he began to talk in the summer with Ford executives, including Farley and then-CEO Jim Hackett.

"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.

It soon became clear to the government officials hoping to persuade Ford to invest in Oakville that they needed to go higher up the automaker's corporate ladder.

Bains soon had a call with then-COO Farley — a conversation that focused on the "art of the possible" in Oakville, the federal official with knowledge of the discussions said.

That's when "things really started to accelerate," the official said. "In the subsequent weeks, we started to see a change in Ford's demeanor in that they were starting to consider pulling the [zero-emission vehicle] out of Mexico and into Oakville."

Federal and provincial officials both described the investment that the company ultimately agreed to make in Oakville as one originally slated for Mexico, although it's not clear what Ford's original plan was. Production of the Mustang Mach-E crossover at the former Fiesta plant in Cuautitlan started last month and is not affected.

By the time Farley was named Hackett's successor Aug. 4, the "stars [were] aligning" to get a deal done in Oakville," the federal official said. Ford declined requests for comment from Farley.

Dias said Farley reached out to him shortly after Ford anointed him as Hackett's successor, effective Oct. 1. "We shot the breeze and had a good conversation," Dias said. "In speaking with Farley and Hackett, they would not have reached out to me if they weren't looking for a solution."

Negotiations between Unifor and the Detroit 3 officially opened Aug. 12 in Toronto, though informal talks had been ongoing for months.

In early September, Dias selected Ford to go first because it was the first of the three companies to signal that it would invest in its Canadian operations, among other goals the union had set. By then, the incentive plans were beginning to fall into place, and government officials told Ford they could provide more than the customary amount in exchange for the automaker building greener vehicles in Oakville.

The federal government's offer was contingent upon Ford committing to spend at least $1.4 billion and preserving jobs at the plant, which employs 3,400 hourly workers, according to another federal source with knowledge of the deal.

Federal officials remained in close contact with their Ontario counterparts, informing them of their commitment to contribute $227 million to the project. The Ontario government eventually matched that amount.

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

After about two weeks of negotiations, Unifor and Ford inked a tentative contract that was overwhelmingly ratified by union members. The governments soon announced their financial support worth a combined $454 million — nearly one-third of the project's total cost vs. a more typical 20 percent for past automotive investments.

It is unclear what EVs Ford plans to build in Oakville, though Dias has said at least one of the vehicles would be a crossover. It's also not known yet what will happen to workers while the plant is being retooled sometime after 2023 but before EV production begins in 2026. If 2020 is any lesson, a lot can change in the 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.

The Ontario government sees the investment as a way to boost the province's supply chain and perhaps to create a battery supply chain, given its mining sector.

"Everybody knew what needed to be done," Dias said.