The Canadian province of Ontario has unveiled a new $C500 million (£208 million) automotive investment strategy designed to strengthen the industry's competitiveness and train skilled workers.

The government is supporting vehicle assemblers and tier-one parts suppliers that can prove a need for the investment of taxpayers' money. Over the next five years there will be support for automotive manufacturing projects worth more than $300 million or that create or retain more than 300 jobs.

"This commitment has the potential to leverage and drive a very significant return on investment for Ontario — large auto projects have one of the greatest multiplier effects for job creation, technology development, supplier development and more," said Michael Grimaldi, co-chair of the Canadian Automotive Partnership Council (CAPC) and president of General Motors of Canada Ltd.

In its 2004 Competitive Alternatives study, KPMG found Ontario's business costs to be 9% lower than the United States on average, while the province's combined provincial and federal corporate income tax rate for manufacturing is 4% below the US average.

The government claims Canada offers one of the most generous tax incentive programmes in the world, saying that the real cost of $100 of research and development spending can be reduced to less than $42 after tax credits.

Ontario is already home to more than 400 automotive parts manufacturing companies, 14 light vehicle and two heavy truck assembly plants andis second only to Michigan in output, in North America.

In 2002, Ontario's automotive parts industry reported sales of $US21 billion with assemblers producing 2.6 million vehicles. The province's automotive industry is concentrated in the southwest, said to be within a day's drive of half the entire US market.