Finance Minister Jim Flaherty says the issue of whether or not the government should bail out struggling auto manufacturers is controversial, and people in his own Ontario riding — the Canadian home of General Motors — are telling him not to do it.

"There are many people saying we should do something with respect to the auto sector," Flaherty said Wednesday at a conference of economists in Toronto.

"But I can tell you even in my own riding, where I was yesterday, in Whitby-Oshawa … there are lots of people who say, 'Don't do anything. Don't use my tax money to bail out an enterprise that may not survive."'

"These are not highfalutin rich people that are saying this to me, these are people on the street."

Automakers have said they need more than $1 billion in loan guarantees to help tide over the sector until demand recovers for North American-produced vehicles in the U.S.

On Friday, GM reported a $2.5-billion loss in the third quarter and warned that its cash levels could fall below what's needed to run its business by the end of the year if the U.S. economy doesn't turn around and it doesn't get government aid.

The federal Conservatives have long rejected direct intervention in the auto sector.

Flaherty suggested for the first time Sunday that Ottawa may be willing to help, but with the proviso that aid is targeted at auto plants with viable prospects.

Aid hinges on 'sustainability' of plants

On Wednesday, he confirmed that discussions with Canada's Detroit Three auto manufacturers are in progress, and reiterated that there is money to be spent under certain conditions.

"We have been having discussions with the Detroit Three here in Canada," he said.

"We have money available for innovation — transformational money, if I may call it that. Because at the end of the day, we need car makers who are making cars people want to buy."

Flaherty stressed that the government must ensure any bailout would be tied to the "sustainability," of the sector, or he said the government risks a taxpayer backlash.

"We need to find a way, if we are going to be able to do something, find a way to ensure sustainability, survivability," he said.

"That has to be the goal, otherwise — as has happened in other places in the world, not the auto sector, but in some of the other European countries — there's a backlash to governments using taxpayers' money in what is perceived to be a bailout of a failing business."

Auto union leader urges immediate aid for manufacturers

Chris Buckley, president of CAW Local 222 in Oshawa, said it's "absolutely disgusting" that Flaherty says he's only monitoring the situation when immediate action is required.

In a phone interview, Buckley said Canada can't wait for the United States and president-elect Barack Obama to take office in January, saying he's worried GM in Canada could be gone by then.

"We're asking Flaherty and Harper to react immediately and not wait for the U.S to take some kind of action," Buckley said.

"This is not just about autoworkers, this is about good-paying Canadian jobs and, as they evaporate, what it does to our community."

He said it would "be absolutely devastating" if the Harper Conservatives decide against financial help for automakers.

Federal Industry Minister Tony Clement said the government does have a plan for the auto sector, but he didn't say whether the industry has made a formal request for financial aid.

"Certainly they've given me a real good sense on the ground as to what they're facing," Clement said. "We're examining our options."

While the government has avoided direct help for the auto sector, it again came to the aid of Canadian banks Wednesday, announcing it will buy another $50 billion in residential mortgages to ease the credit crunch, tripling the amount of insured mortgages Ottawa can buy from banks by the end of the fiscal year.