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Saturday, December 20, 2008

PM and McGuinty promise $4 billion to automakers

Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty have promised today to lend General Motors and Chrysler $4 billion to help bail them out and save Canadian jobs. The money is emergency support to keep the companies out of bankruptcy and is tied to the US$17 billion CANADA-POLITICS/HARPER bailout announced yesterday by U.S. President George W. Bush.

The Canadian bailout, which represents 20 per cent of the U.S. package, will loan GM $3 billion and Chrysler $1 billion. Ford, which has been seeking a standby line of credit if necessary, is not part of today’s announcement.

As expected, there will be “strings” attached. One key condition is that 20 per cent of the auto production of these companies must stay in Canada. Other conditions include a request that the parts suppliers get the money they are owed, that the automakers accept limits on executive compensation, and that they provide the government with warrants for non-voting stock.

Mr. McGuinty warned the money will only be delivered after auto companies agree to meet the conditions set by the governments.

quote-left-red-beige-bgThose conditions include limits on executive compensations. The loans will only stay in place beyond March 31, 2009 if our governments are satisfied there are solid restructuring plans in place and underway.quote-right-red-beige-bg

It is not known, however, how many jobs are guaranteed under this deal.

Liberal MP Scott Brison accused PM Harper of sitting on his hands while elected officials in the U.S. carried out crucial negotiations to ensure the best return on their public investment.

Sun Media has Brison saying,

quote-left-red-beige-bgI want to see strong commitments to jobs and product mandate for Canada. We’re coming in very late in the game, and the chances are that Harper’s failure to have a seat at the table during the negotiations in the U.S. will mean we will be less able to protect Canadian autoworker jobs.quote-right-red-beige-bg

One day perhaps Mr. Brison will actually say something that is helpful to Canadians and not just those who hang on every word Grit leaders utter.

NDP Leader Jack Layton, of course, has doubts PM Harper’s promised cash will even see the light of day. He said,

quote-left-red-beige-bgHe’ll [Harper] make announcements from time to time, but he won’t deliver. I don’t have confidence that he will deliver this time. He didn’t deliver on the infrastructure money he keeps saying he provided. I have real worries about this, because he doesn’t really believe in this kind of thing.quote-right-red-beige-bg

What tripe. Poor Jack, he’s trying so very hard to sound relevant. He’s the forth string player standing on the bench desperately hoping that one day he too will get to play with the big boys.

Brison and Layton conveniently ignore the reality that our automakers are relatively small subsidiaries of much larger foreign corporations that are cutting their own deals with the U.S. government. The U.S. parent companies and their national government will determine the nature of any deal, not their Canadian subsidiaries.

quote-left-red-grey-bgIf the United States does all the restructuring themselves, the industry will move to the United States. That's not acceptable to the government of Canada,.

So we will work with the Americans, make sure that we get our share of a restructured industry.quote-right-red-grey-bg

– PM Stephen Harper

That eventual deal—assuming there will be one in the new year—will be whatever it is, and, sadly, there is precious little our politicians and diplomats can do to influence it. If the Americans play fair, we should come out of this with 10 to 20 per cent of North American auto production—apparently we currently have about 20 per cent.

What is not clear to me is how Mexico fits in all this. Mexico produces slightly more cars than we do. What will its share of the bail out be? Will future production continue there? If so, how will that affect the level of Canadian production?

Time will tell just how well this taxpayer give-away will be protected. My guess: not very well, and we’re not likely to see any of this loan repaid. This is a Christmas gift to the important auto sector of Ontario’s, indeed Canada’s, economy.

Merry Christmas.smleaf

2 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. It is long past the time where the CEOs of these big auto industries are removed from the "bonus" system of enriching their regular pay cheques which are obsene in the first place. Is it any wonder that in Canada we are getting screwed by auto prices compared to the cost in the USA.(and they as high enough), As one blogger recently put it. "how come Toyota made $4 billion in profits this year and Ford lost $6 billion?. Someone in government had better clean out these assholes from their 'entitlements' before throwing taxpayers money away on these blood suckers. They are making more in "bonus" cheques than an ordinary working man in his entire life. I have had 14 different vehicles in my working days from the big 3 auto makers and every one of them did not exceed 68,000 miles without major repairs or body's rusting out. They made a 'beer can' than lasts for decades and vehicles that rusted out in 4 years. I am on my 3rd Korean made Hyundai and my 4th will be a Hyundai. When these jerks in the North-american auto industry can make a vehicle as good as the imports from Asia, I will consider them once again. Until then - screw them.

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  2. I too have a Hyundai and am very pleased with it. On the other hand I had a Mercury Sable for over 10 years and had virtually no rust or major repairs, and I currently have a Cadillac which is over 10 years old. Go figure.

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