News

Word that the federal and Ontario governments will provide the struggling auto sector with $4-billion in emergency loans was blasted by opposition critics and was lauded by industry and union spokesmen.

Liberal MP John McCallum, speaking Sunday on CTV's Question Period, agreed aid is necessary but criticized Prime Minister Stephen Harper's government for being late to the table and offering few details of the federal package announced on the weekend.

He expressed concern the deal may not do enough to maintain Canadian jobs.

The announcement Saturday by Mr. Harper and Ontario Premier Dalton McGuinty in Toronto came a day after President George W. Bush offered US$17.4-billion in emergency loans to General Motors and Chrysler. Federal Finance Minister Jim Flaherty had promised Canada would offer 20 per cent of the U.S. funding, reflecting the scale of the country's role in the North American auto industry.

Mr. McCallum said: “If we put up 20 per cent of the money, we should have a guarantee that Canada has 20 per cent of the production and the jobs.”

“There's some sort of production guarantee — I don't know if it has teeth — but my understanding is there's no guarantee whatsoever for Canadian jobs...I don't think this government has negotiated this very well.”

Thomas Mulcair, deputy NDP leader and party finance critic, told CTV he also was dismayed at a lack of precision in the weekend announcement.

“We don't know what's exactly in this deal...All this is being done on the back of an envelope at a press conference...parliamentarians who are responsible for looking at taxpayers' money haven't had a chance to look at the details of the deal.”

But Conservative backbencher Rick Dykstra, whose St. Catharines riding includes many auto workers, told Question Period the aid could be withdrawn if the auto companies don't come through with their promised strategic plans by the end of March.

He later pulled back from that assertion and indicated he doesn't expect that kind of problem to arise.

But the March deadline does mean the companies are “going to have to work very hard over the next 90 days,” said Mr. Dykstra.

GM Canada said Saturday the loan provided “a welcome financial bridge at this critical time.”

“The support announced today sends a significant signal of stability in the face of the economic and credit challenges faced by Canada's auto sector,” said Arturo Elias, president of GM's Canadian operations.

Chrysler Canada said the funds will ensure it has enough money to continue its restructuring and thanked the governments for “their understanding of the situation and their swift reaction.”

Aid for Ford of Canada wasn't announced as part of the aid package but that company never asked for a loan, just a line of credit to draw upon if required.

The company said it welcomes the government's plan to support the auto credit market because “Canadian consumers deserve access to affordable loans and leases when shopping for a new vehicle.”

Richard Gauthier, president of the Canadian Automobile Dealers' Association, welcomed the package, saying: “It is a necessary step on the part of both the provincial and federal government to stabilize the manufacturing sector in Canada because of the economic effect.”

Failure to have taken action “would be devastating” for the entire country, Mr. Gauthier said.

But he said something must be done to solve the “liquidity issue.”

He said Canada's 3,500 auto dealers are feeling the squeeze and not able to gain access to funds they need to run their businesses.

Mr. Harper's statement was applauded by Canadian Auto Workers president Ken Lewenza, who said the goal to maintain current production share in Canada was key.

He declined to speculate on how many job losses may be coming, saying only that it was clear the industry was going to do some consolidation and “there's going to be some painful decisions being made.”

“I certainly got the message from Mr. Harper and Mr. McGuinty that all stakeholders must play a significant role in terms of turning the companies around,” Mr. Lewenza said shortly after the announcement was made.

“But we would not take direct responsibility that the crisis we're in today is a direct result of our wage and benefit packages because it is not.”

Ontario NDP Leader Howard Hampton said he would like to see the government take some shares in the companies in return for the loans.

“If, worst case scenario happens and one of these companies goes under, you'll want some assets.”

The plan will provide General Motors Canada with loans of up to $3-billion and Chrysler Canada will receive up to $1-billion.

The companies will get the money in three instalments, with the first portion coming Dec. 29.

Unlike the American plan, the Canadian aid will also extend additional account-receivable insurance coverage for automotive suppliers and create a new facility support access to credit to consumers.

Mr. McGuinty said Ontario will provide $1.3-billion of the total emergency loans package to General Motors and Chrysler.

Mr. Harper warned the announcement “is not a blank cheque” for the industry, suggesting both the companies and their employees will have to make concessions.

While the government expects to recoup much of its investment, he added, “there is obviously money at risk here and there may well be more money at risk as we go forward.”

Mr. McGuinty said the funding will only be delivered after auto companies agree to meet conditions set by the governments — including a request that the parts suppliers get the money they are owed, that borrowers accept limits on executive compensation and that they provide the government with warrants for non-voting stock.