UPDATE 1-Canada to invest C$250 mln in auto industry

OAKVILLE, Ontario, Jan 4 (Reuters) - Canada will invest C$250 million ($253.69 million) in the country's auto industry, Prime Minister Stephen Harper said on Friday, as Ottawa tries to encourage private sector investment and create manufacturing jobs.

Harper announced a five-year extension to the Automotive Innovation Fund, which was set up in 2008 to provide government support to research and development projects in Canada's automotive sector.

"Our government remains focused on creating jobs, growth and long-term prosperity and to keeping Canada's automotive manufacturing sector globally competitive and innovative," Harper said, speaking at an event at the Ford Motor Co. assembly plant in Oakville, Ontario.

Separately, Harper said the Canadian government does not intend to keep its stake in General Motors Corp over the long term, but it will not be influenced by the United States on when to sell.

"We are not bound by what the United States decides," Harper said. "We'll sell in a way that attempts to maximize the value for the Canadian taxpayer."

The announcement on the auto investment comes in the wake of General Motors' announcement in December that it will produce the next generation of its Chevrolet Camaro in Lansing, Michigan, instead of at GM's Canadian production hub in Oshawa, Ontario, where it currently produces the sports car.

Canadian Industry Minister Christian Paradis said last month that he was "concerned" about GM's decision to move the Camaro and that Ottawa would hold the Detroit automaker to the commitments it made in return for the Canadian government's investment in the company.

The Canadian government and the province of Ontario, the heartland of Canada's auto industry, pumped more than C$10 billion into GM in 2009 to bail out the struggling automaker.

In return, the Canadian governments required that GM maintain its share of production in Canada for several years moving forward.