Canada, Ontario could add $4.2B in auto aid to U.S. bailout pledge

Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty are expected to announce details of a proposed aid package for Canada's beleaguered auto sector on Saturday, a day after the "Big Three" automakers got good news from Washington.

Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty are scheduled to make a joint announcement on Saturday on details of a proposed aid package for Canada's beleaguered auto sector a day after the so-called "Big Three" automakers received good news from Washington.

On Friday, U.S. President George W. Bush announced the U.S. government is dipping into the massive financial bailout package to offer $17.4 billion US in short-term loans to the automakers after a separate auto bailout package failed to pass in the U.S. Senate.

Canada and Ontario could be on the hook for roughly $4.2 billion in aid to the automakers here based on their previous pledge to provide 20 per cent of whatever the U.S. government offered.

An aide to Harper called the White House announcement "good news," as did a spokesman for Ontario Economic Development Minister Michael Bryant.

It was unclear whether the Ottawa/Ontario aid package would include loans, cash or grants for the province's auto operations and spinoff manufacturers, or what conditions would be attached to the funds.

But McGuinty told CTV's Toronto affiliate on Friday that the U.S. aid package meant that Canada's and Ontario's own response to the automakers' appeals would happen "sooner rather than later."

Mayors optimistic after U.S. announcement

The mayors of Oshawa and Windsor — two Ontario cities heavily reliant on the auto sector — also welcomed news of help for the Big Three from Washington.

Oshawa Mayor John Gray said the bailout should help to lift some of the uncertainty the automakers are facing by getting them to a March 31 deadline to ensure their viability.

"We can, at least, get these companies through the hurdle," Gray said.

"Hopefully by then, some of the credit will start to ease up so that buyers buy vehicles," he said.

Windsor Mayor Eddie Francis said that announcement is a strong signal that the U.S. realizes how important the Big Three are to its national economy. Now, he's waiting to hear what kind of support Canadian political leaders will offer.

"There are thousands of jobs spread out through Ontario in various communities that are dependent on Chrysler," Francis said.

'Vested interest'

"Obviously, the city of Windsor has a vested interest with Chrysler, as does Brampton, as do other jurisdictions. You hope that the provincial government will recognize that importance. I am confident that they will."

Automotive analyst Dennis DesRosiers said the automakers will have to renegotiate contracts with their workers, suppliers and debt-holders.

"Major, major work needs to be redone," he said.

"And, at the end of the day, when [the car companies] do come up with that [restructuring] plan, there probably is a need for quite a bit more government money in North America."

'Incredibly painful' times ahead

Ken Lewenza, the president of the Canadian Auto Workers union, welcomed the rescue package but was critical of the burden he said it places on workers.

"The over-emphasis on workers' compensation has only succeeded in clouding the more pressing structural issue of unfair trade both in Canada and the U.S. which has eroded the domestic auto industry to its current dire state," Lewenza said during a news conference in Windsor, Ont.

Lewenza said he expects the same sort of concessions will be demanded from the CAW, but the union has yet to decide what it is willing to give up.

He acknowledged that, no matter what concessions are demanded, the next few months are going to be "shocking" and "incredibly painful" for auto workers.

With files from Canadian Press