By Paul Vieira

OTTAWA--Canada's Industry Minister says the government intends to use defense procurement as a tool to secure commitments for new auto-assembly plants in the country.

Melanie Joly cited the examples of Germany and South Korea, as companies from both countries are vying to win a deal to supply the Canadian armed forces with up to a dozen conventional diesel submarines.

"We will use defense procurement to make sure that we're able to attract new auto investments here in Ontario, definitely, I'm having conversations with the Germans, also with the Koreans," Joly told a Toronto business audience this week. "We want to make sure that there's the most industrial benefits out of this procurement. But fundamentally, what we want also is a car plant."

South Korea's Hanwha Ocean and HD Hyundai Heavy Industries and Germany's ThyssenKrupp Marine Systems are competing for the contract, valued at about $42 billion. Neither Hanwha nor ThyssenKrupp responded to requests for comments about Joly's remarks. Hyundai Motor is South Korea's biggest car manufacturer, while Volkswagen, Mercedes-Benz and BMW Group are among Germany's leading automobile makers.

Joly was in Toronto defending the Canadian government's new defense-industrial strategy, which is seeking to create up to 125,000 jobs and increase corporate revenue by ensuring domestic firms receive priority from a sizable increase in defense spending. In cases where Canadian firms can't build needed equipment, such as submarines, then officials will pursue partnerships with multinational firms from trusted allies, and the contracts must include industrial benefits for Canada.

Joly told the audience she was headed to Germany "very soon," and expected to sign a deal with her German counterparts that contemplated more investments in Canadian manufacturing. A spokeswoman for Joly didn't elaborate on the timing of the trip and what deals might be clinched. A spokesman for the German embassy in Ottawa was not available for comment.

On Friday, the Canadian government announced South Korea's defense and foreign ministers would be in Ottawa to visit their Canadian counterparts.

Canada's bid to attract foreign car makers comes as the big Detroit auto companies scale back their presence in this country amid President Trump's 25% tariffs on foreign-assembled vehicles. Stellantis has transferred production of a Jeep Compass model from a Toronto-area plant to Illinois. General Motors temporarily stopped production at one factory, while ending a third shift at its major plant in Oshawa, Ontario.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

February 20, 2026 16:12 ET (21:12 GMT)

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