Canada to Aid Carmakers If U.S. Provides Its Own Support

By Hugo Miller and Alexandre Deslongchamps

Dec. 13 (Bloomberg) -- General Motors Corp., Chrysler LLC and Ford Motor Co. will get aid from Canada and the province of Ontario if the U.S. government provides its own support for the struggling carmakers, Industry Minister Tony Clement said.

“The federal and Ontario governments are ready to move quickly if and when the Americans approve a support package,” Clement told reporters in Toronto late yesterday.

Clement declined to say how much aid Canada will provide, saying it will be “proportional” to the size of the industry’s domestic operations relative to North America. Canada accounts for about 20 percent of production, he said.

The U.S. Senate on Dec. 11 rejected a $14 billion bailout, though the Treasury Department said it might step in to help “until Congress reconvenes.” If Canada were to provide support equal to a fifth of that package, it would amount to about $2.8 billion.

The Bush administration dropped its opposition to using a $700 billion bank bailout to provide financing for U.S. automakers in order to “prevent an imminent failure,” according to a statement.

GM has asked for C$800 million ($641 million) in aid from Canada by month’s end and an additional C$1.6 billion line of credit through the second quarter. Ford’s Canadian unit has asked for access to as much as C$2 billion in “stand-by” credit, to be used if the current economic crisis worsens. Chrysler LLC hasn’t said how much it’s seeking.

Leadership

“This is a great move of leadership and is hugely appreciated,” David Paterson, vice president of corporate and environmental affairs for GM’s Canadian unit, said in an interview after the announcement. “Now we need to see what Washington will do.”

“This is a great step forward in helping the Canadian automotive industry to weather this unprecedented downturn brought on by the global financial crisis,” Reid Bigland, president of Chrysler Canada, said in an e-mailed statement. “These funds will also help to solidify Canada’s significant automotive footprint.”

Clement said any aid from Canada would come with “conditions and expectations that the U.S. is part of the solution.” Calling the current crisis “an existential moment” for the auto industry, Clement said he expects aid to be announced by the U.S. government “very soon.”

Auto Towns

Bankruptcy for any of the Detroit Three would exacerbate Ontario’s economic slowdown in carmaking towns such as Oshawa, east of Toronto, and Windsor, across the Detroit River from Michigan. Ontario, Canada’s most populous province, produced more cars last year than the U.S. state of Michigan.

“We’re satisfied they sent out a signal that they’re ready to intervene,” said Ken Lewenza, president of the Canadian Auto Workers union, which represents 27,800 Chrysler, Ford and GM employees in Canada.

“What we’re looking for now from the companies is a sign that the aid will secure our facilities here and that our jobs will not go to the U.S. if they offer more money,” he said.

The number of people claiming unemployment benefits in Oshawa almost doubled in September from a year earlier, according to Statistics Canada. Jobless claims in Windsor climbed 30 percent in the same month.

Job losses are spreading beyond Ontario’s auto factories to parts suppliers, cutting the industry’s total employment to 181,000 people last year, down 18 percent from 2002, according to the Conference Board of Canada.

GM has 12,574 active workers in Canada, Chrysler 7,865 and Ford 7,402. Those figures exclude laid-off union employees who have recall rights.

To contact the reporter on this story: Hugo Miller in Toronto on hugomiller@bloomberg.net; Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.