Ottawa, Ontario – The federal government and the government of Ontario have announced they will provide $4 billion in loans to General Motors of Canada and Chrysler Canada through Export Development Canada (EDC). The conditional financial support is intended to help the companies with their Canadian operations.
“This is a regrettable but necessary step to protect the Canadian economy,” said Prime Minister Stephen Harper. “Canadian taxpayers now expect their money will be used to restructure and renew the automotive industry in this country, and ensure that Canada maintains our current production share of the North American market.”
The two governments had earlier mentioned financial support, but said that it would depend on the U.S. government providing aid to domestic auto companies there. Last week, U.S. President George Bush announced up to US$17.4 billion in emergency bridge loans to General Motors and Chrysler. Ford has stated that it has sufficient liquidity and has only requested access to a line of credit.
The Canadian and Ontario governments said that there will be conditions to the financing and will “exercise oversight over the use of taxpayer money as part of its ongoing due diligence.” In a statement, the governments also said that “Every stakeholder in the auto industry will also be expected to do their part to reduce structural costs and ensure a viable auto industry in Canada.”
The Prime Minister also announced two additional steps the federal government will take to support overall competitiveness. Automotive suppliers will have greater access to accounts receivable insurance through EDC coverage, to compensate for the reduced availability of credit, and the Government of Canada will create a new facility to support access to credit for consumers, with particular attention paid to improve the accessibility of car loans and dealer financing.
The automotive industry is Canada’s largest industry within the manufacturing sector, representing 14 per cent of the country’s manufacturing output and 23 per cent of manufactured exports. It directly employs over 150,000 Canadians.
In a separate statement, the Canadian Auto Workers Union (CAW) commended the governments for their commitment. “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 CAW president Ken Lewenza. “This will ensure that the Canadian industry is protected and the numerous investments governments have made over the years will continue to benefit our communities. This is a very sound decision on the part of both governments.”