The federal and Ontario governments will provide the Canadian subsidiaries of the Detroit Three automakers with C$4 billion (US$3.29 billion) in emergency loans, Canadian Prime Minister Steven Harper said on Saturday.
The announcement follows a pledge on Friday by US President George W. Bush to offer US$17.4 billion in emergency loans to General Motors Corp and Chrysler LLC.
Harper said Canada’s bailout plan, the equivalent of 20 percent of the US aid package, will help keep the plants afloat while the automakers restructure their businesses to retain one the country’s most important economic sectors.
PHOTO: AP
“We cannot afford, in the United States or Canada, the catastrophic short-term collapse of the Big Three automakers. The US has signaled that they are not going to allow these companies to fail, and we will do our share of the North American package to see that this doesn’t happen either,” Harper said at a news conference in Toronto.
Canada’s automotive industry represents 14 percent of the country’s manufacturing output, 23 percent of manufactured exports and directly employs more than 150,000 Canadians.
LARGEST INDUSTRY
The country’s largest industry within the manufacturing sector, it has been suffering from its slowest sales in 26 years and dwindling operating cash.
Ontario has agreed to provide C$1.3 billion of the total since the province alone employs about 400,000 auto sector workers — both directly and indirectly — and the industry is the mainstay of about 12 Ontario communities.
“In Ontario, we’ve got thousands of people and their families who rely on the auto industry to be on firm ground, so they can put food on the table and keep a roof over their heads ... No state or province employs more workers, and we’re not going to give that up,” said Ontario Premier Dalton McGuinty, speaking alongside Harper on Saturday.
The Canadian plan will provide General Motors Canada with loans of up to C$3 billion and Chrysler Canada will receive up to C$1 billion.
The companies will get the money in three installments, with the first portion coming next Monday.
Ford Motor Company Canada did not ask the government for any emergency loans.
Its parent company in the US says it doesn’t need any government cash now but would be badly damaged if one or both of the other US automakers went under.
NO BLANK CHECKS
Harper and McGuinty said that the government would not be handing over blank checks, saying that all stakeholders would be expected to make adjustments to reduce structural costs.
“Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country,” Harper said.
“They expect all stakeholders to come to the table and work together towards sustainable long-term solutions to maintain our current production share of the North American market,” Harper said.
Harper’s statement was applauded by Canadian Auto Workers president Ken Lewenza, who said the union was willing to work with the automakers to protect jobs.
“This will ensure that the Canadian industry is protected and the numerous investments governments have made over the years will continue to benefit our communities. This is a very sound decision on the part of both governments,” said Lewenza, who has been lobbying the government to develop an aid package as soon as possible.
Harper also announced two additional steps the federal government would take to support the overall competitiveness of the auto industry.
Automotive suppliers will have greater access to accounts receivable insurance through Export Development Canada to compensate for the reduced availability of credit.
A new facility will also be created to support access to credit for consumers to improve the accessibility of car loans and dealer financing.
Similar to the US auto bailout package, the Canadian aid package comes with strings attached, including a request that parts suppliers get the money they are owed, that borrowers accept limits on executive compensation and that they provide the government with warrants for nonvoting stock.
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