Canada Unveils C$4bn Auto Bailout Plan

GM takes C$3bn, Chrysler takes rest; Ford uninterested

By Zack Newmark
December 22, 2008 1:26 PM
Filed Under: American, Chrysler, Corporate/Financial, General Motors

Canada's splintered government has decided to back a set of C$4billion in bailout loans to General Motors and Chrysler. The loans will go to parts suppliers, dealers, and part manufacturers affiliated with the two companies. GM will take C$3 billion, with the remainder going to Chrysler.

The government in Ottawa, led by conservative Prime Minister Stephen Harper, made the weekend decision to give more access to credit insurance by opening the doors to the Export Development Corporation, a state agency. Canada will also increase availability of consumer credit for new car financing.

Suppliers for the Big 3 based in Canada have not been able to receive credit insurance recently because of the lack of liquidity at the automakers. No liquidity means no cash to pay the suppliers' bills. Like in America, dealers in Canada were also refusing willing customers because the customers could not get auto loans.

Canada's bailout has a similar termsheet as the White House's US$17.4 billion bailout granted by US President Bush last week. Ottawa gets the option to take non-voting stock in the two automakers worth roughly 20 percent of the loans. The loans are secured by a lien on many Canadian assets. Canada is also capable of blocking any deal valued over C$125 million, and has also demanded weekly updates on liquidity and profit. The companies also have to provide continuously updated financial projections once every ten days.

Ford, considered by analysts to be in better shape than it's American competitors, is apparently turning down the loans in Canada. They also refused US bailout loans.

Roughly 20 per-cent of all Big Three production in North America comes from Canada, with much of the work happening just across the boarder from Detroit in Windsor. The automotive industry is the largest segment of Canadian manufacturing.

“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,” said Prime Minister Harper.

Source: Financial Times

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Comments

porschekrazii

December 22, 2008 2:11 PM

throwing good money after bad money is money soon gone .. is it that hard to comprehend ..?

dmanero

December 22, 2008 3:01 PM

How cheap can Canada get, you would thing they could at least give half of what the States is given. Canada play as much of role in the industry as the States does. Shamed to have to live in Canada.

DeuceCoop

December 22, 2008 4:50 PM

Keep in mind that Canada is a much smaller country than the United States, less than 10% of America's population. That also means our economy and federal tax revenue is miniscule in comparison to the US. Four billion dollars is a lot of money if your consider all the issues.

Andres2007

December 22, 2008 7:24 PM

I agree with dmanero. It's a good sum of money. DeuceCoop, the article says that 20%, not 50%, of the Big Three's production comes from Canada. I can't see why the Canadian government should give more than 20% of what the US has given.

Andres2007

December 22, 2008 7:25 PM

I'm sorry. I meant to say I agree with DeuceCoop and my comment was directed to dmanero.

porschekrazii

December 23, 2008 1:29 AM

dmanero, you're a shame to us Canadians .. GM deserves it, if it has to file for Chapter 11 .. and I'll keep my short positions in GM until their shares are worthless .. there i've said it!

and one more point .. if you pull up to my place in a private jet, asking me for bailout money to save your failing company, you'd be lucky for i gave you a dollar .. much less 4 billions worth

dmanero

December 23, 2008 2:15 AM

give me a break, they don't deserve the money, 1. they over spend, 2. the employees get paid more than they deserve and 3. GM or chrysler can not build a car that reliable.

so tell me again why they deserve it. If it was up to me I'd dismantle the diffrent names and sell them to private owners. and drop the salary for the workers the same as non union workers and you don't get any pay if you get laid off. who ever heard of such a waste. You get laid off and you still get paid.

dmanero

December 22, 2008 6:01 PM

DeuceCoop - I understand that Canada is smaller, Canada could have at least given half, Least they could do, Ontario has a number of factories and suppliers. and 4 billion is not much for the indutsry, and after distrubuting the maoney to the various places and suppliers it probably will only last a month or so and then we will be back at sqaure one. At least if canada could have done and place some strict rules and conditions with the money.

LP560_4

December 22, 2008 7:00 PM

You guys gave them 14 billion. We gave them 4. search up your guys GDP. search up ours.

Canada — GDP: $1.178 trillion (2006 est.) (purchasing power parity) United States — GDP: $13.13 trillion (2006 est.) (purchasing power parity)

google's stats are kinda older, but i'm sure their not that much changed. 13x more than us. if Canada can wiggle out 4 billion, why can't you guys wiggle out 52 billion? So we have 10% of your guys population. but we can give the Big 3 close to 25% of what you guys gave them. so don't call canada cheap.

dmanero

December 22, 2008 8:22 PM

Cheap and weak. there I said it, no one has the balls to say it. lol

MrBritish

December 22, 2008 9:56 PM

dmanero,

I totally disagree with your views. I also disagree with the government giving my money to a private company. A company that should realistically be able to support itself.

This is how I see it, I buy their products with my money. They need a bail out, so they do it also using my money. Does that make sense to anyone?

Then again, the above statement doesn't really apply to me as I drive a Civic. It's cheap on gas and is reliable. Now if an American company could offer the same quality, I might consider buying thier products.

dmanero

December 22, 2008 10:31 PM

you got to ask you self one question is all this trouble really worth it. Most of the cars they they produce are on recall are American. On top of that they have too many models for each class and they spend far too much resources on developing concepts that never make it to the production even though the public like it, instead produce second grade cars with minor facelift and expect the people to buy them.

So ask me again if I think they deserve the money no. Plus 14 billion for a couple of months. Ok so they give a million here and there. wheres the rest of it going, oh wait that for the executives and their $4000 lunchs.

need4speed

December 22, 2008 11:19 PM

god bless canada. my home and native land.

chizz

December 23, 2008 1:40 PM

I'm Canadian, and I'm not here to argue; however, do enlighten me: it's like dominoes - one big company falls, their employees could all be gone. Those attached to this company like the parts suppliers and car dealerships could all go down too. The loan I see now is that government is trying to prevent more job losses and anymore negative growth in economy. Or am I wrong?

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