Canada, Ontario announce $4B auto aid package

The federal and Ontario governments pledged $4 billion in emergency loans Saturday to support the Canadian subsidiaries of U.S. automakers Chrysler and General Motors.

Harper says plan 'not a blank cheque' for industry

The federal and Ontario governments pledged $4 billion in emergency loans Saturday to support the Canadian subsidiaries of U.S. automakers Chrysler and General Motors.

Prime Minister Stephen Harper speaks while Ontario Premier Dalton McGuinty looks on as they announce a $4-billion bailout package for Canadian subsidiaries of the Big Three Detroit-based automakers. ((Jim Ross/Canadian Press))

The aid package, announced by Prime Minister Stephen Harper and Premier Dalton McGuinty in Toronto, came a day after the White House unveiled a $17.4-billion US plan to shore up the U.S. auto sector.

Harper said Canadian auto parts suppliers will also get improved insurance while vehicle buyers will get more access to credit.

The financial help for Canada's troubled auto sector amounts to 20 per cent of the U.S. aid package.

In the U.S., General Motors Corp. and Chrysler LLC have said they could be facing bankruptcy soon without government help. 

The Canadian plan will provide GM Canada with loans of up to $3 billion and Chrysler Canada will receive up to $1 billion — a total based on the U.S. aid and proportional to their Canadian production. The money will be paid out in instalments over the next two months, with the first payment to be issued on Dec. 29.

Under the deal, GM and Chrysler are required to fulfil the following conditions:

  • accept limits on executive compensation.
  • pay money owed to Canadian parts suppliers.
  • provide weekly reports on their finances.
  •  report any business transaction worth more than $125 million.

Ford Motor Co. said it doesn't need U.S. federal cash now, but would be badly damaged if one or both of the other two went under.

The prime minister said his government is going beyond what automakers were offered in the U.S. with two additional measures.

"We will extend additional account-receivable insurance coverage for automotive suppliers through the Export Development Corp. And we will create a new facility to support access to credit for consumers," he said.

"Taken together, these measures demonstrate that Canada is taking a holistic approach along the supply chain — manufacturers, suppliers and consumers," he said.

400,000 jobs 'worth fighting for': McGuinty

McGuinty said his province will provide $1.3 billion, with the rest provided by Ottawa.

"Here in Ontario we have 400,000 people and their families who rely on the auto industry so that they can put food on the table and keep a roof over their heads," the premier said. 

"What the prime minister and I are saying today is that those people and their jobs are worth fighting for."

Harper said the announcement "is not a blank cheque" for the industry,  suggesting both the companies and their employees will have to make concessions.

"Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country," the prime minister said.

Companies hail 'very, very important lifeline'

CAW president Ken Lewenza speaks to reporters on Saturday after the Canadian and Ontario governments announced the auto bailout package. ((CBC))
North American automakers are suffering from their slowest sales in 26 years and dwindling operating cash.

The automakers immediately welcomed the announcement.

Chrysler Canada said in a statement it's "very pleased" that it will have sufficient funds to continue a restructuring "during this unprecedented downturn caused by the global financial crisis."

GM Canada spokesman David Paterson said his company owes a "huge debt of gratitude" to both governments and will continue the path it started three years ago to "dramatically restructure" its operations.

"We completely get it that we really need to earn the trust, not just of our customers, but all Canadians to this kind of support and we've been extremely focused on transforming and making our business very sustainable for the future here," Paterson told CBC News following the announcement.

He said all stakeholders must continue to "make changes" to ensure the company is "better than competitive," adding that includes further talks on workers' benefits and wages.

"All those are going to have to be on the table and we're talking about those actively right now," he said.

Canadian Auto Workers union president Ken Lewenza praised the package as a "sound decision" and pledged to continue working with the companies and the government to ensure the industry's survival in Canada.

"One of the most important components of this aid is that companies will have to maintain their current production share here in    Canada  on a proportionate level to the rest of the North American auto industry," said Lewenza.

He added the package is not a gift, but part of both governments' responsibility to react in tough economic times.

"None of that is a result of workers," he said of the current economic troubles.

"The facts of the matter are that Canadian workers are the most productive in the world. … For the Canadian government and provincial government to recognize the 400,000 families associated with the auto industry, I want to thank them."

Lewenza also declined to speculate on whether his membership will have to accept wage or benefit concessions as part of the package.

With files from the Canadian Press