(Adds additional CAW and Ontario government quotes)
By Scott Anderson
TORONTO, May 22 (Reuters) - DaimlerChrysler's decision to scrap plans for a new assembly plant in Windsor, Ontario, will be devastating to Canada's already slowing automotive industry, the head of the Canadian Auto Workers union said on Thursday.
"This is a huge blow. We're going in the wrong direction and we're seeing plants close and production reduced. We thought this would help start to reverse a trend, and this is not going to happen," CAW president Buzz Hargrove said.
"I'm just devastated. I'm angry. I'm frustrated. It's the last thing in the world I expected. Quite frankly I thought things were rolling along well on the project," Hargrove said.
The Chrysler unit of DaimlerChrysler AG said late on Wednesday it had canceled plans to build the new truck plant in Windsor, directly across the border from Detroit, citing a weakening North American auto market.
Plans for the C$1.6 billion ($1.2 billion) plant, which had depended on winning government and industry financial support, had been seen as a major victory for the CAW in last autumn's contract talks when the union had pushed for new investment to offset plant closures and layoffs.
The Windsor plant would have built a new small-sized pickup dubbed the M80, to compete in a segment dominated by models from Ford Motor Motor Co. , General Motors Corp. , and Toyota Motor Corp. .
"I do understand the emotions and, of course, we knew there would be a big disappointment," chief executive Dieter Zetsche said on Thursday.
"At the same time, I have to make it very clear that during last fall, we did not give a promise that we would build that plant. What we said, and we said it clear and loud, was that we would try to do everything possible to make that a viable business case, but that we only could proceed if there would be an economic basis for that," he said.
Zetsche added that "the door is clearly open to Canada and to Windsor" for further investment and reiterated plans to spend C$2.6 billion in Canada between 2002 and 2005.
An angry Hargrove said federal and provincial governments had not tried hard enough to win automotive investments away from Mexico and the southern U.S. regions willing to pony up attractive cash packages -- a charge Ontario dismissed.
"The government cannot artificially create demand for a product where none exists. DaimlerChrysler's decision is based on soft market conditions, well outside the influence of government," Jim Flaherty, Ontario's Minister of Enterprise, Opportunity and Innovation, said in a statement.
Independent auto analyst Dennis DesRosiers downplayed the effects of the Windsor cancellation.
"It's not devastating. It's negative that we lose upside potential, but we didn't have these jobs to begin with, so it's not as if an existing worker is losing his job," he said.
"It hurts in that we lose upside potential, not that we're losing existing jobs."
(Additional reporting by Tom Brown and Michael Ellis in Detroit)
($1=$1.37 Canadian)