Canada Unveils $3.3 Billion Rescue Plan for Auto Sector

Dec. 22, 2008
Plan also extends insurance coverage for suppliers and creates a new service to support credit access for consumers.

Canadian Prime Minister Stephen Harper announced on Dec. 20 a $3.3 billion rescue package for U.S. automakers based in Ontario, saying it was "regrettable but necessary."

The bailout loans three billion Canadian dollars (US$2.5 billion) to General Motors (GM) and one billion Canadian dollars (US$824.4 million) to Chrysler, Harper said in Toronto at a joint press conference with Ontario Premier Dalton McGuinty.

"Today's announcement is not a blank check,"Harper said. "These are extraordinary circumstances that require extraordinary measures," he added.

GM Canada President Arturo Elias welcomed the plan. "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," he said.

Ford, which has not requested government loans but rather a line of credit, applauded "the swift and coordinated" action and welcomed new Canadian measures to facilitate access to affordable loans and leases for customers. But, "there is still much that needs to be done," the company warned, adding it would work with officials to "provide long-term, sustainable growth for Canada's auto industry."

Canada's plan corresponds to 20% of the U.S. support package, representing the country's part in the North American automobile industry, Harper said. "We have an intention of seeing a restructured industry and we'll do what is necessary to make sure that all stakeholders play ball with that agenda," said Harper, adding that automakers should adjust their market prices and products.

The Canadian plan also goes beyond the U.S. measures by extending insurance coverage for suppliers and creating a new service to support credit access for consumers. These two steps target Japanese carmakers in Canada, such as Toyota and Honda.

"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 Canadian Auto Workers union president Ken Lewenza

A whopping 582,000 direct and indirect jobs would be lost in Canada over the next five years if Detroit's ailing Big Three -- Chrysler, Ford and GM -- shut down their Ontario operations, a study found last week.

The auto sector and parts industry employ roughly 219,000 Canadians nationwide. The Big Three directly employ about 34,000 workers while overseas car makers employ just under half that number, according to the report by the Ontario Manufacturing Council.

The country's largest manufacturing industry, the auto sector directly represents 14 %of the country's manufacturing output and 23% of manufactured exports, according to the prime minister's office.

The province of Ontario is the biggest car-producing region in North America, ahead of the Michigan.

Copyright Agence France-Presse, 2008

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