Forgive my suspicions on this new deal

September 23, 2009
By

Guelph Mercury, 09/23/09McGuinty

Happy days are here again. Yeehaw.

Government money is once again falling from the sky for one of Guelph’s favourite corporate welfare cases, Linamar Corporation. This week, the city’s largest employer celebrated another gift from taxpayers, a $54.8 million “repayable,” interest-free loan handed over by none other than Prime Minister Stephen Harper.

Linamar says the money will help it develop new engines, transmissions and powertrains that will improve vehicles’ fuel economy. And we’re all partners in this new venture. What’s not to like about that?

Uh, plenty. Forgive me for being a little bit suspicious of the return taxpayers can expect from this big bag of federal cash, but this arrangement seems vaguely familiar.

Isn’t this the same company that in 2006 accepted $44.5 million in public funds to encourage Linamar’s homegrown expansion here? Back then, they talked of a new era in Linamar’s sure-thing expansion — adding another 3,000 jobs to their payroll and developing cutting-edge technology for the auto parts sector.

At the time, Linamar even signed a deal with the province saying it would create all those new jobs by January 2010. If it didn’t, it would pay back the money. Then came the recession, and Linamar changed its tune: See, we wanted to do what we said, but the market…

And the province seems fine with that explanation. After all, it agreed to the contract that gave Linamar plenty of wiggle room to get out of any conditions surrounding jobs, plant closures and anything else that would limit the company’s ability to cut operations in Ontario.

And now, here we go again. For all its high talk this week of finding new buyers and developing new products, this is still a company that has laid off some 800 workers in Guelph alone, and about 40 per cent of its total workforce worldwide.

Yes, there has been a downturn, and many of Linamar’s customers in the automotive sector were badly hurt. Of course, Linamar’s business was going to take a hit. But what this recession really proved is that downturns mean all bets are off when it comes to government aid to corporations.

And so, here we are, three years after the 2006 deal, embarking on another publicly-funded partnership with Linamar. What guarantee do we have that this is money well spent? We have none. Because Linamar’s employment and expansion decisions have everything to do with the swings in the market, and nothing to do with the boasts of government.

Even Linda Hazenfratz, Linamar’s CEO, admits it could be “three, five or more years” before the $54.8-million ‘investment’ made Monday creates a single new job.

Including $8.97 million Linamar got in 2007 from Ottawa to develop automotive gear designs, this is the third major public donation the Guelph-based company has received in little over three years.

What do we have to show for all our investment? That doesn’t really matter – because these arrangements aren’t about serving the people who pay the bill, anyway.

In both the provincial and the federal deals, the government gets what it wants – the appearance of putting its money where its mouth is, shelling out to help an important employer in an ailing sector. Linamar gets what it wants, too – a gift, a multi-million-dollar reward for doing something it needed to do anyway.

But what do we get for all our money? The thrill of yet another gamble with public funds? Right now, that’s about the only thing you can bet on.

Greg Mercer is a Guelph-based freelance writer. His column appears Wednesdays. He can be reached at greg_mercer@hotmail.com, and past columns can be read at gregmercer.ca.

One Response to Forgive my suspicions on this new deal

  1. Joe on September 23, 2009 at 11:43 am

    Greg,

    A good article on the taxpayers’ money going to Linamar.

    In fact, the first in a Guelph newspaper that openly questions it all. And hopefully not the last.

    I had questioned Liz Sandals some time ago about the first $44M and she assured me that the funds would only be released when Linamar hit certain milestones i.e job creation numbers. But since then I guess they received all the money despite her assurance and now I have heard do not have to pay anything back.

    Now this seems to be at odds with some of what you have written hence all of it seems a bit suspect at the taxpayers expense.

    there is probably more to the entire story that isn’t being told to Joe Public. Perhaps an interview with Sandals or a Access to information Act request for the Provincial deal agreement is in order.

    And isn’t it funny that Linamar being a parts supplier is going to lead the way with green engines etc…this begs the question as to who has put the order in for these or is this just fictious speak.

    And lastly, isn’t it amazing how Linamar can play both the Conservatives and the Liberals.

    For your consideration…again, great article.

    Continue to pursue this story, there has to be more there.

    Cheers

    Joe Q Public

    Guelph, ON

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