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Canada to Provide C$4B in Loans to GM and Chrysler

Canada Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty announced that the Government of Canada and the Government of Ontario would provide up to C$4 billion (US$3.3 billion) in loans payable to General Motors of Canada Limited (up to C$3 billion) and Chrysler Canada Inc. (up to C$1 billion) through Export Development Canada (EDC).

GM will receive C$0.8 billion on closing (29 December); C$1.2 billion on 30 January 2009; and C$1.0 billion on 27 February 2009. Chrysler will receive C$0.4 billion on closing (29 December); C$0.4 billion on 30 January; and C$0.2 billion on 27 February.

Access to loans will require a lien be put on Chrysler Canada’s unencumbered Canadian assets. In the case of General Motors of Canada, access to loans will require that the governments of Canada and Ontario be granted senior status for the demand loans to the extent permitted by law under existing agreements. In exchange, the governments through EDC will receive warrants for non-voting common shares equal to 20% of the loans made to the parent companies of Chrysler and General Motors’ Canadian operations.

Earlier in December, Canada indicated that it would provide proportional funds to automakers contingent on a US package. (Earlier post.)

There will be conditions to the financing extended to automakers. The federal and provincial governments will exercise oversight over the use of taxpayer money as part of its ongoing due diligence. 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, said the statement from the government.

Today’s announcement is not a blank cheque. Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country, they expect all stakeholders will come to the table and work together toward sustainable long-term solutions, and they expect that Canada will maintain our current production share of the North American market. This is a regrettable, but necessary step to protect the Canadian economy.

—Prime Minister Harper

The Prime Minister also announced two additional steps the federal government will take to support the overall competitiveness of the auto industry. Automotive suppliers will have greater access to accounts receivable insurance through EDC coverage to compensate for the reduced availability of credit. In, addition 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 in Canada directly represents 14% of the country’s manufacturing output, 23% of manufactured exports, and directly employs more than 150,000 Canadians. It is the country’s largest industry within the manufacturing sector.

Comments

Reel$$

Another nation understanding the importance of investing in the electrification of transport. Far greater returns than on foreign adventures.

John Taylor

The Canadian Government just caved in to "big auto" once again without getting much of value in return.

The stipulation to make electric cars is simply not there in the strength it needs to be.

ToppaTom

Where do you see any mention of investing in the electrification of transport or any stipulation to make electric cars?
Did I miss something or are you guys just being cinical?

HarveyD

Copy cat!

Canadian 2008 (first 11 months) auto sales are still +0.5% higher than 2007 and the Big-3 (or is it the Big-2 ?) asked and received $4.0 B bailouts. (That is proportionally equivalent to $44 B bailouts in USA)

What will the bailouts be when sales go down -25% in mid or late 2009?

Why aren't Ford, Toyota and Honda Canada not recieving the same $4 B bailouts? They produce almost as many units as GM and Chrysler in Canada.

What is happening to Canada's demoncratic sense of justice and fairness?

Will GM & Chrysler use those $4 B in Canada are redirect most of it to their USA losing plants and overpaid workers?

ai_vin

"Why aren't Ford, Toyota and Honda Canada not recieving the same $4 B bailouts? They produce almost as many units as GM and Chrysler in Canada.

What is happening to Canada's demoncratic sense of justice and fairness?"

Ford didn't want any, said they didn't need it. Toyota and Honda are likely the same.

HarveyD

ai vin:

If the other three majors can get by without huge bailouts isn't it indicative that the Big-2 (GM & Chrysler) are so mismanaged that they should fold?

It is definately not proper to help inefficiency but not those who managed better. It should be the opposite.

Aren't we placing our bets on the wrong horses?

ai_vin

Hey man you're not going to get an argument from me on this.

However, what's at issue here is jobs, nobody wants to see these overpayed[they are blue-collar workers with white-collar incomes] joes on unemployment at this time. And if the factories close a lot of supporting businesses close too.

Is it right? No. But it is what it is.

Reel$$

Toyota posts $$1.67B operating loss. Ooops. That means all major auto makers are losing money. sigh

ai_vin

Yeah yeah Toyota has posted a loss, so?
But this is the first loss for Toyota in 70 years!! so you gotta figure its not because they were doing anything stupid. It is a recession, everybody is losing.

Reel$$

Sure they're stupid. They aren't making small, fuel efficient cars. They make things like the Tundra - a 4x4 Double Cab 5.7L SR5 Long Bed. We all know nobody needs a big truck like this. Just like they don't need big SUVs like the Sequoia, Land Cruiser, 4Runner and FJ Cruiser. Knowing this, Toyota's management led them down the primrose path to financial ruin.

Hara-Kiri seems appropriate.

ai_vin

Actually, they ARE making small, fuel efficient cars - and were making money selling them. The big trucks and SUVs are just something they *also* make because everyone else is.

OTOH the big three were making big trucks and SUVs because they had lobbied and bargained themselves into a situation where these were the only things they could sell at a profit.

Reel$$

True. Their union negotiations have given them no room for profit outside the big ticket items. One hopes that some of the guvm't loan money will be used to structure realistic sliding scales for all employee compensation.

Happy Holidays.

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