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Canada, Ontario to Give GM, Chrysler C$4 Billion Aid (Update2)
By Hugo Miller and Reg Curren
Dec. 20 (Bloomberg) -- General Motors Corp. and Chrysler LLC will get C$4 billion ($3.3 billion) in government loans from Canada and the province of Ontario, a day after the U.S. agreed to aid to keep the two automakers operating.
General Motors’ Canadian unit will receive C$3 billion while Chrysler is set to get C$1 billion, the two governments said today. Borrowers must accept limits on executive compensation and also report “material transactions in excess of C$125 million or more,†the two governments said in a joint statement.
“This is a huge problem that faces the Ontario community and the Canadian economy by extension,†Prime Minister Stephen Harper said at a press conference in downtown Toronto today.
Canada’s aid builds on the $13.4 billion in U.S. emergency loans announced by President George W. Bush. Canadian Industry Minister Tony Clement on Dec. 12 pledged to offer GM, Chrysler and Ford Motor Co.’s Canadian units federal and provincial aid “proportional†to the their contribution to North American production, which is about 20 percent.
“We will not allow catastrophic collapse†of the industry, Harper said. “But the auto companies have to change the way they do their business in a very serious way.â€
The aid package is “not a blank check†and Canadian taxpayers expect the money to be used to renew the industry and involve all stakeholders in that process, Harper said.
Ontario’s Contribution
Ontario will contribute C$1.3 billion to the package and the Canadian government C$2.7 billion, Ontario Premier Dalton McGuinty said at the same news conference.
“This is about 400,000 jobs and 400,000 families,†said McGuinty. “There’s a lot at risk.â€
The Canadian Auto Workers union lauded the package and pledged to continue working with the companies and governments to ensure the industry’s survival in Canada, Ken Lewenza, president of the union said.
“The announcement today was important for our industry, our workers and for all citizens of Canada,†said Lewenza. “There are 400,000 jobs at stake here.â€
He declined to speculate on whether his membership will have to take wage-and-benefit cuts as part of the package.
U.S. Package
The U.S. package requires companies to have pay and work rules in place by the end of 2009 that make them competitive with those of overseas automakers with plants in the U.S.
GM had 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.
GM will receive C$800 million now and on Jan. 30 another C$1.2 billion and further C$1 billion on Feb. 27. Chrysler gets C$400 million immediately with another C$400 million at the end of January and the balance in February.
The industry will have to restructure and will probably end up being smaller, said Harper.
“This will be a difficult restructuring,†said McGuinty.
Ford’s Canadian unit had asked for access to as much as C$2 billion in “standby†credit, to be used if the current economic crisis worsens. Chrysler LLC didn’t say how much it was seeking.
Canada, Ontario to Give GM, Chrysler C$4 Billion Aid (Update2)
By Hugo Miller and Reg Curren
Dec. 20 (Bloomberg) -- General Motors Corp. and Chrysler LLC will get C$4 billion ($3.3 billion) in government loans from Canada and the province of Ontario, a day after the U.S. agreed to aid to keep the two automakers operating.
General Motors’ Canadian unit will receive C$3 billion while Chrysler is set to get C$1 billion, the two governments said today. Borrowers must accept limits on executive compensation and also report “material transactions in excess of C$125 million or more,†the two governments said in a joint statement.
“This is a huge problem that faces the Ontario community and the Canadian economy by extension,†Prime Minister Stephen Harper said at a press conference in downtown Toronto today.
Canada’s aid builds on the $13.4 billion in U.S. emergency loans announced by President George W. Bush. Canadian Industry Minister Tony Clement on Dec. 12 pledged to offer GM, Chrysler and Ford Motor Co.’s Canadian units federal and provincial aid “proportional†to the their contribution to North American production, which is about 20 percent.
“We will not allow catastrophic collapse†of the industry, Harper said. “But the auto companies have to change the way they do their business in a very serious way.â€
The aid package is “not a blank check†and Canadian taxpayers expect the money to be used to renew the industry and involve all stakeholders in that process, Harper said.
Ontario’s Contribution
Ontario will contribute C$1.3 billion to the package and the Canadian government C$2.7 billion, Ontario Premier Dalton McGuinty said at the same news conference.
“This is about 400,000 jobs and 400,000 families,†said McGuinty. “There’s a lot at risk.â€
The Canadian Auto Workers union lauded the package and pledged to continue working with the companies and governments to ensure the industry’s survival in Canada, Ken Lewenza, president of the union said.
“The announcement today was important for our industry, our workers and for all citizens of Canada,†said Lewenza. “There are 400,000 jobs at stake here.â€
He declined to speculate on whether his membership will have to take wage-and-benefit cuts as part of the package.
U.S. Package
The U.S. package requires companies to have pay and work rules in place by the end of 2009 that make them competitive with those of overseas automakers with plants in the U.S.
GM had 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.
GM will receive C$800 million now and on Jan. 30 another C$1.2 billion and further C$1 billion on Feb. 27. Chrysler gets C$400 million immediately with another C$400 million at the end of January and the balance in February.
The industry will have to restructure and will probably end up being smaller, said Harper.
“This will be a difficult restructuring,†said McGuinty.
Ford’s Canadian unit had asked for access to as much as C$2 billion in “standby†credit, to be used if the current economic crisis worsens. Chrysler LLC didn’t say how much it was seeking.
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