OTTAWA and TORONTO -- The federal Conservatives said they would eliminate subsidies and other "corporate welfare," a policy that could threaten lucrative investment proposals that Ottawa is discussing with General Motors of Canada Ltd. and Ford Motor Co.

With recent opinion polls suggesting that his party could form the next government, Conservative leader Stephen Harper reiterated his party's stance yesterday in Toronto, telling a business crowd that a Tory government wouldn't be able to lower corporate taxes without cutting subsidies.

"We will only reduce corporate taxes to the extent that we can reduce corporate welfare," he told the Toronto Board of Trade. "If you want lower business taxes, you must be willing at the same time to stop receiving government subsidies. I won't lower one without lowering the other."

The Conservatives' policy statement book is even more specific. Under the headline "industrial development," the document, released last month, states that the party "will end corporate welfare and redirect industrial subsidies toward lower taxes and increased research and development."

The stakes are high, with potentially thousands of jobs at risk if GM and Ford pull back from their proposals.

GM is seeking assistance from Ontario and Ottawa for an investment of up to $2-billion to revamp two assembly plants while Ford is looking for about $100-million to secure an investment of about $1-billion for a new assembly plant in Oakville, Ont.

In the auto industry, government subsidies through such things as training, research and even tax holidays have become the norm when a company is poised to make a major investment. That trend has helped Mexico and many southern U.S. states to lure plants and parts makers.

But the auto industry is by no means the only sector that would need to adjust to new federal policies. The aerospace sector, Bombardier Inc. in particular, has received plenty of government help in recent years.

Some industry officials say the Tories' platform could be bad news for the auto industry. Buzz Hargrove, president of the Canadian Auto Workers, said he's "absolutely worried sick about it."

Mr. Hargrove, an active supporter of the New Democratic Party, said he fears the impact a Conservative win on June 28 could have on the auto industry.

"I think it's bad news, not just for Ford but the industry," Mr. Hargrove said yesterday. "It sends a total wrong message to the industry. It would set the industry back by 10 to 15 years."

Others, however, say they expect Mr. Harper to change his tune if he becomes prime minister.

"I honestly don't think he'd have a choice," said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.

"If he wants automotive investment, he has to play the game."

Mark Nantais, president of the Canadian Vehicle Manufacturers Association, a lobby group for Ford, GM and DaimlerChrysler Canada Inc., said Mr. Harper is probably not familiar with the specific proposals auto makers are putting forward, so his organization would have an education job to do.

"Some of the studies that have been conducted show that we as a country are fairly competitive until such time as other jurisdictions with whom we're competing actually put money on the table," Mr. Nantais said yesterday.

James Rajotte, the Conservatives' industry critic, said his party will need to take a pragmatic approach to its dealings with the corporate sector, particularly to do with any agreements that the Liberals have already signed with a car company or anybody else. But Mr. Rajotte said there are two key problems with providing subsidies to car companies: Canada can't compete with American states and all manufacturers want government help once one of them has received it.

"I don't know how we can ever win that game," he said of Canada-U.S. subsidy wars.

Prime Minister Paul Martin said yesterday that the Conservatives' economic policies -- which also call for heavy personal income tax cuts and lower spending increases -- would lead to a "dark economic period."

Canada has been largely shut out from winning new plants in recent years but has been in recent discussions with Ford and GM about new or upgraded facilities in Ontario.

GM is in serious discussions with Ontario and Ottawa about financial help for an investment of up to $2-billion to revamp two assembly plants and significantly increase research and development activities. The plan could also include upgrades to other GM assembly and parts operations in Ontario, and even increased research operations.

Stew Low, a spokesman for GM, wouldn't comment on what effect a Tory win might have on the company's proposal for Oshawa, but said that Canada can't afford to ignore what foreign competitors are doing to attract auto facilities.

"We can't ignore the competitive realities if we want to have a competitive auto industry."

Ford is in talks about a proposal for Oakville that would employ about 4,000 workers on three shifts. It is seeking assistance of about $100-million to secure an investment of about $1-billion for a flexible assembly plant that would replace two factories in Oakville.

The auto maker gave Ottawa a deadline last month to make a decision about the company's request, but talks have continued since then. Industry Minister Lucienne Robillard sent Ford a letter a few days after the deadline expired but sources said the letter provided no financial guarantee or firm offer.

The potential threat to Oakville comes amid existing troubles at Ford's biggest vehicle manufacturing operation in Canada. The Ontario Truck Plant in Oakville will close permanently next month, while the neighbouring Oakville Assembly Plant is producing minivans that Ford is having trouble selling, even though they were redesigned for the 2004 model year.

The company has also extended its annual summer slowdown at the minivan plant.