An auto industry expert warns that the government's budget decision to encourage a shift away from gas-guzzling vehicles could hurt the fragile auto industry here.

"This tax is specifically targeted at GM, Ford and Chrysler's large SUVs," Dennis DesRosiers told CTV Newsnet's Mike Duffy Live on Tuesday, one day after Budget 2007 was delivered.

"It sends this missile into the boardrooms of GM, Ford and Chrysler in the midst of some incredibly difficult adjustment decisions that need to be made. And it's the wrong message to be sent at the wrong time to Detroit."

In the budget, the Conservatives announced a tax of up to $4,000 on new vehicles that use a large amount of fuel, more than 13 litres per 100 kilometres. Sport utility vehicles (SUVs) are targeted by that tax. Manufacturers will pay the tax, not consumers, which has some fearing it will become hidden.

Conversely, people buying fuel-efficient new vehicles like hybrids -- which run on both electricity and gasoline -- are eligible for rebates of up to $2,000.

New cars with fuel economy of 6.5L / 100km or better, and SUVs with 8.3 L/100km, qualify. The government will pay the rebate, not the dealers.

Buzz Hargrove, president of the Canadian Autoworkers Union, described the taxes as "ill thought-out." He predicted they would cut into the sales of Canadian-made vehicles.

"People will take advantage of this over the next few months and that means a lot of sales that could've meant jobs in Canada will go offshore,'' he told reporters. "How many jobs it'll cost us, I couldn't say at this point.''

"We met with the government prior (to the budget) and this is completely contrary to every recommendation we made.''

GM and Ford have plans to produce hybrids, but production won't start for about two years.

Starting sooner to counter lost sales isn't possible because "it takes billions of dollars to retool a plant," Hargrove said.

While the auto industry is a huge employer in Ontario, Premier Dalton McGuinty said manufacturers must do their part to help curb greenhouse gas emissions.

He said he wanted to help the industry produce more environmentally-friendly vehicles.

Toyota approves

Toyota Motor Corp. -- which makes hybrids, but not in Canada -- lauded the move.

"Toyota has long believed that the global automotive industry must take real measures to make things better for the planet," Toyota Canada managing director Stephen Beatty said in a release.

"This is why we have invested so heavily in fuel-efficient engines, smaller vehicles, emission-fighting systems and advanced technology such as our industry leading gasoline-electric hybrids."

Toyota will open a new plant next year in Woodstock, Ont. to produce the RAV-4 mini SUV.

Some Toyota products, like the Sequoia SUV, will be hit with a $2,000 guzzling tax.

"The Sequoia makes up a very small percentage of our sales," Dwayne Anderson, general manager of a Toyota dealership in Halifax, told CTV Atlantic.

"Of course, we'd like it not to be on that one but I think mostly the thing with the budget that is really going to affect us is hopefully is the effect of getting older cars off the road."

DesRosiers questioned whether the program will really influence sales -- especially discouraging the purchase of high-end, gas-guzzling SUVs.

Some of the SUVs targeted -- like the Mercedes G500 -- are very expensive, costing more than $100,000.

"The gas guzzler tax in Ontario and the luxury tax in B.C. have failed miserably, and you would expect the same with this one," he said.

But DesRosiers felt the rebate program might work for those considering a fuel-efficient vehicle.

Larry Hughes, a Dalhousie University professor, said part of the problem is cars in general.

"You're still going to be driving a car. You're still going to be having an environmental impact with your vehicles. That hasn't really solved those problems with respect to the whole way we move people," he said.

Other experts have argued the way to influence matters is to boost the cost of fuel and then let consumers make their own choices.

Pierre Sadik of the David Suzuki Foundation told The Canadian Press that the green levy is precedent-setting from a policy standpoint, because it amounts to a carbon tax.

"It levies a carbon tax on large SUVs and sports cars and the more greenhouse gases they emit the higher the carbon tax goes. It's squarely within the definition of a carbon tax."

With a report from CTV Atlantic's Marc Patrone and files from The Canadian Press