General Motors of CanadaLtd, wholly owned by General Motors Corp, said it is planning a
450 mln Canadian dlr retooling and modernization of its
21-year-old Ste. Therese, Quebec, plant and has received 220
mln dlrs in interest-free government loans for the project.
    GM Canada said the Canadian and Quebec governments are each
providing a 110 mln dlr loan for the upgrading.
    The company said much of the investment will be used to
build a paint complex, which will make the plant competitive
with other GM plants in the U.S. and Canada.
    The 450-mln-dlr investment includes the cost of retooling
the plant to assemble front-wheel drive Chevrolet Celebrity
cars, which will be produced at Ste. Therese, beginning in May,
GM Canada said.
    "With the new paint complex and tooling, our plant will be
fully modernized to be world competitive," GM Canada president
George Peapples told a news conference.
    He said construction will begin this year on the modern
base coat/clear coat paint complex, which will provide enhanced
color standards and improved paint quality, he said.
    The Canadian government said the modernization will
guarantee continued long-term employment for about 3,500
assembly line workers at the Ste. Therese plant and for about
4,300 people employed in supply jobs in Ontario and Quebec.
    "Without our participation...we faced the prospect of
losing this plant," said Michel Cote, Canadian minister of
regional industrial expansion.
    Cote said he expected 3,100 new supplier jobs will be
created by the increased production in Ste. Therese.
    The project will transfer the company's front-wheel drive
"A" car production to Ste. Therese from Oshawa, Ontario and
will not increase the Ste Therese plant's capacity, GM Canada
said.
    It said it has produced 2.5 mln vehicles at the Ste.
Therese plant since 1965.
    The paint plant is expected to cost 200 to 250 mln dlrs and
begin operation in two years, Peapples told reporters after the
announcement.
    The retooling included in the project had been announced in
December but the company had not put a value on the retooling
costs, he said.
    Peapples estimated the interest-free loans could save GM
Canada about 60 mln dlrs at a 10 pct interest rate.
    He said the loans are repayable in full in 30 years if GM
keeps the plant open. If the company closes the plant in the
1990s, it will have to pay the federal and provincial
governments a total 75 mln dlrs of the loan by 1991.
    Peapples said GM Canada asked for the government loans
because, due to an expected overcapacity in the auto industry
in the 1990s, the company was not prepared to take the risks
involved in the investment by itself.
    GM Canada said the level of support offered by the
governments is consistent with aid provided to auto assemblers
in the U.S.
    Peapples said the company expects very strong demand in the
next decade for the type of mid-size, front wheel drive car
that will be produced at Ste. Therese.
    Cote added that GM Canada's 1985 sales of 18.5 billion dlrs
represented four pct of Canada's gross domestic product.
 Reuter
