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Ontario GM engine plant to get $235 million investment as part of major North American investment

TORONTO - A $235-million spending initiative by GM Canada, less than a year after the country's largest carmaker came close to collapse, has reinforced hopes that the North American auto sector is getting back on track and that Canadian governments will be able to recoup their bailout money some day.

TORONTO - A $235-million spending initiative by GM Canada, less than a year after the country's largest carmaker came close to collapse, has reinforced hopes that the North American auto sector is getting back on track and that Canadian governments will be able to recoup their bailout money some day.

The investment at GM's powertrain plant in St. Catharines, Ont. will secure up to 400 jobs there, as part of the automaker's plans for a new generation of V-8 engines that it says will be more fuel-efficient.

Nearly half of the $890 million in plant improvements announced Tuesday by Detroit-based General Motors Corp. - $400 million - will be spent at an engine plant in Tonawanda, N.Y., near Buffalo, affecting 710 jobs.

Although separated by the Canada-U.S. border, the two plants are within 70 kilometres of each other - an example of how integrated the North American auto manufacturing sector has become.

"I think there's no doubt about it, the trend line is moving in the right direction," Ontario Premier Dalton McGuinty told reporters while touring GM's Canadian headquarters in Oshawa, Ont. and the company's major car assembly plant in the industrial city east of Toronto.

General Motors has already paid back all the government loans it received last year but that doesn't include the taxpayer money that was spent to buy shares in a revitalized General Motors as part of its court-surpervised restructuring in Canada and the United States last year.

The plan, from the outset, was for the company to list its shares on public stock markets again, allowing governments to sell their stake to private-sector investors once GM got rolling towards profitability again.

"We remain optimistic that we will be able to recoup our investment in GM. It's just a matter of the appropriate time," McGuinty said.

"Obviously, we're going to want to work with the federal government, with Washington as well, in terms of the best time to go ahead with a public offering and make those shares available to members of the public. But it's not the kind of thing that we want to rush into."

Federal Industry Minister Tony Clement said the GM's decision to continue investing in its Canadian operations "is yet more evidence that our government made the right decision last year to fight for Canada's automotive industry and the almost half-a-million jobs that depend on it."

Since emerging from bankruptcy in July, GM has also invested $1.5 billion at 20 U.S. and Canadian facilities and restored or created 7,500 jobs.

GM Canada president Kevin Williams said the money being spent on the St. Catharines plant is part of a strategy for improving fuel-efficiency in the company's cars through new powertrain technologies.

"The new engine allocation at St. Catharines is the latest in a series of investments in our Canadian facilities - great news for employees, the CAW, dealers, suppliers and the communities affected."

The other plants expected to receive upgrades from the initiative announced Tuesday are in Defiance, Ohio; Bedford, Ind., and Bay City, Mich.

The Defiance foundry, which makes engine blocks, will get $115 million to save up to 189 jobs, while 245 jobs at the Bedford parts plant will be secured with a $111-million investment. The Bay City parts factory will see a $32-million investment, keeping over 80 jobs.

The announcements come less than a week after GM said it had repaid US$8.1 billion in U.S. and Canadian government loans five years ahead of schedule.

The U.S. government still owns 61 per cent of GM, as a result of Washington's US$45.3-billion investment. The Canadian federal and Ontario governments own about 12 per cent of GM, after they invested a total of $8.1 billion - two-thirds from Ottawa and one-third from Queen's Park.

GM lost $88 billion between 2004, when it last turned a profit, and last year when it declared bankruptcy.

The automaker received $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments, starting in 2008. At first, the entire amount of U.S. aid was considered a loan as the government tried to keep GM from going under and further pulling down the fragile economy.

But during bankruptcy proceedings, the U.S. government reduced the loan portion to $6.7 billion and converted the rest to company stock. Canadian governments also converted part of their debt to shares, reducing its loan balance to $1.4 billion. The final instalments on those loans were repaid last Tuesday, comfortably beating a 2015 deadline.

GM Canada shed about 2,600 jobs with the closure of a truck plant in Oshawa in Ontario last year. It also announced plans to shut down a transmission plant in the southwestern Ontario city of Windsor this year, affecting more than 1,000 workers.

However, the company has announced the recall of hundreds of workers to its Canadian plants to meet strong demand for some of its products. Most recently, it announced that more than 700 laid-off workers are slated to be recalled to its assembly plant in Oshawa and its CAMI plant in Ingersoll, Ont., to produce the Chevrolet Equinox and GMC Terrain vehicles.

-With files from The Associated Press.

 
 
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