Ford deal to build electric cars in Oakville comes amid $500M government cash to upgrade plant

The federal government and Ontario have pledged to spend up to $500 million to make the Ford plant in Oakville, Ont., able to build electric vehicles.

The future of the plant has been a key question for Canada's automotive industry ever since the Unifor union startednegotiating with the automaker for a new three-year pact to cover the company's Canadian workforce.

The two sides struck a deal a few hours after a midnight strike deadline on Tuesday morning, one that will see the company commit $1.98 billionto build five new electric vehiclesand an engine contract that could yield new jobs in Windsor, Ont.

Ford has previously committed to spending $11 billion US to develop and manufacture electric vehicles, but so far all of that money was earmarked for Ford plants in Mexico and the company's home state of Michigan.

"With Oakville gaining such a substantial portion of Ford's planned investment, the assembly plant and its workers are better set for employment going forward," said Sam Fiorani, vice-president of global forecasting at AutoForecastSolutions.

Currently, the plant builds the Ford Edge and Lincoln Nautilus, but concerns over the plant's future emerged earlier this year when a report suggested Ford was contemplating scrapping the Edge altogether. The new vehicles will come as welcome news for the plant, even as Fiorani says he worries that demand for the electric vehicles (EV) has so far not lived up to the hype.

"The EV market is coming, and Ford looks to be preparing for it. However, the demand is just not growing in line with the proposed investment from all vehicle manufacturers," he said.

Plant needs upgrade first

Andthe plant can't simply flip a switch and start building an entirely new type of vehicle. Itwill require a major retooling, and that will require time and cash to happen, which is where government cash comes in.

As first reported by the Toronto Star, the two branches of government have committed to spent up to $500 million combined to upgrade the plant so that it can build electric vehicles.

"The retooling will begin in 2024 with vehicles rolling off the line in 2025," Unifor president Jerry Dias said. "So we know this is a decades-long commitment."

It's not clear what portion of the cash will come from what branch of government, but CBC News has previously reported that Wednesday's throne speech is expected to contain a number of policies aimed at beefing up Canada's electric vehicle industry, both on the consumer sideand for businesses that build them.

Ontario's minister of economic development and trade welcomedthe news of a tentative deal on Tuesdayand confirmed that Queen's Park legislators stand ready to do their part.

"Our government will always work with our federal colleagues, workersand the auto sector to ensure the right conditions are in place for the industry to remain stable today and seize the new opportunities of tomorrow," a spokesperson for Vic Fedeli told CBC News in an emailed statement Tuesday.