Canada's federal and Ontario governments will provide the Canadian subsidiaries of General Motors and Chrysler with $4 billion Canadian ($3.29 billion U.S.) in emergency loans, the prime minister said Saturday.
TORONTO — Canada’s federal and Ontario governments will provide the Canadian subsidiaries of General Motors and Chrysler with $4 billion Canadian ($3.29 billion U.S.) in emergency loans, the prime minister said Saturday.
The announcement follows a pledge Friday by President Bush to offer $17.4 billion in emergency loans to GM and Chrysler.
Prime Minister Stephen Harper said Canada’s bailout plan, the equivalent of nearly 20 percent of the U.S. aid package, will help keep the plants afloat while the automakers restructure to retain one the country’s most important economic sectors.
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“The U.S. 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,” said Harper 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.
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 $1.3 billion Canadian ($1.07 billion U.S.) of the total since the province alone employs about 400,000 auto-sector workers — 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 … No state or province employs more workers, and we’re not going to give that up,” said Premier Dalton McGuinty at the news conference.
The Canadian plan will provide GM Canada with loans of up to $3 billion Canadian ($2.47 billion) and Chrysler Canada will receive up to $1 billion Canadian ($823 million U.S.). The companies will get the money in three installments, with the first portion coming Dec. 29.
“The support announced today sends a significant signal of stability in the face of the economic and credit challenges faced by Canada’s auto sector,” said Arturo Elias, president of GM Canada.
Chrysler Canada thanked the governments for their understanding and swift reaction.
Ford Motor Canada did not ask for any emergency loans, just a line of credit to draw upon if required. Its parent company in the United Staes said it doesn’t need any government cash now but would be damaged if one or both of the other U.S. automakers went under.
Harper and McGuinty stressed that the government will not be handing over blank checks, saying all stakeholders will be expected to make adjustments to reduce structural costs.
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.
Harper also announced two additional steps the federal government will 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 also will be created to support access to credit for consumers to improve the accessibility of car loans and dealer financing.
Ford Canada said Saturday that it welcomes the government’s plan to support the auto-credit market because “Canadian consumers deserve access to affordable loans and leases when shopping for a new vehicle.”
Similar to the U.S. 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.
McGuinty warned that the money will only be delivered after auto companies agree to meet conditions set by the federal and Ontario governments.
“Those conditions include limits on executive compensations. The loans will only stay in place beyond March 31, 2009 if our governments are satisfied there are solid restructuring plans in place and under way,” McGuinty said.