Chrysler employees need to accept more wage cuts if the company is to "survive" in Canada, Industry Minister Tony Clement said Thursday.
Chrysler Canada says it needs to cut its hourly labour costs by $19 an hour to compete with Toyota and Honda.
However, the Canadian Auto Workers union is only willing to reduce labour costs by about $7 an hour.
"The CAW has to recognize that in order for Chrysler to survive in this country that Chrysler has to be competitive with the rest of the Canadian market," Clement told reporters in Toronto.
"We have to always be cognizant of competing with the world but at the very least Chrysler has to be cost competitive with the Canadian market, which includes Toyota and Honda."
Clement said his message to the CAW is the same one he's given to Chrysler management - which is that they must become "cost competitive."
Fiat, which is considering a partnership with Chrysler, recently said the CAW would have to accept hourly-wage cuts in order for the deal to go through.
Ottawa has given Chrysler until the end of April to secure a deal with the company.
"If there's no deal in place there will not be long-term funding arrangements with the government of Canada," Clement said.
Both sides will head back to the bargaining table on Monday.
Clement held the press conference Thursday to announce a $145-million auto initiative intended to jump-start the struggling industry.
He said the fund, dubbed the Automotive Partnership Canada, will be used to develop more high-tech and environmentally friendly products and secure Canada's place in the future of the auto industry.
"Our project office in Mississauga is already open and we are already working with potential applicants and partners to develop innovative projects under this program," Clement said.
The program was initially announced in the 2008 budget by the Conservative government.
Clement said the purpose is to conserve jobs and help the Canadian auto industry rebuild.
He defended the government's record on funding research and development, but said not all programs that have received grants in the past will continue to get funding.
"There are some projects that have been decided by the granting agencies to be of low value, and therefore in terms of the priorities, are not necessarily a priority for the future," Clement told reporters.
"But when you look at the totality of the investments by the government of Canada they are second to none."
With files from The Canadian Press
