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Canadian taxpayers lose $3.5-billion on 2009 bailout of auto firms

The Harper government says it has unloaded its remaining multibillion-dollar stake in General Motors. The federal Finance Department says the government sold nearly 73.4 million shares Monday in an unregistered block trade to Goldman, Sachs & Co. A sign stands outside Oshawa's General Motors car assembly plant in Oshawa, Canada.

Michelle Siu/THE CANADIAN PRESS

Canadian taxpayers will fall about $3.5-billion short of breaking even on the money the federal and Ontario governments invested in the bailouts of Chrysler Group LLC and General Motors Co. in 2009.

The federal government's sale of the remaining 73.389 million common shares it held in GM will close the book on the investment and the auto maker's period of being derided as "Government Motors."

Ottawa will raise about $3.2-billion from the sale, based on a report from Bloomberg Tuesday that the stake it sold to Goldman Sachs & Co. was priced at $35.90 (U.S.) a share.

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A report on the auto rescue done by the Auditor-General last year said the two governments had received $5.4-billion (Canadian) of the $13.7-billion they contributed to the bailouts of the two auto giants.

Since then, GM bought back about $400-million (U.S.) in preferred shares and the Ontario government sold its remaining shares for $1.1-billion (Canadian), before the final sale by the federal government this week. That brings the total proceeds to the governments to around $10.2-billion.

The share sale by Ottawa will help federal Finance Minister Joe Oliver balance the federal budget.

But Jerry Dias, president of Unifor, which represents workers at GM plants in Oshawa, Ont., St. Catharines, Ont., and Ingersoll, Ont., said the government should have kept its shares and used the ownership as leverage to force GM to re-invest in Oshawa and St. Catharines.

"It is remarkably short-sighted of the federal government to sell off its shares in GM at a time when there has been widespread agreement that securing GM's future in Canada is critical," Mr. Dias said in a statement.

Unifor has been meeting with GM officials both in Detroit and the Canadian head office in Oshawa to lobby for new investment in St. Catharines and Oshawa. General Motors of Canada Ltd. announced earlier this year that the auto maker and suppliers will invest about $540-million at the plant in Ingersoll to make the next generation of the Chevrolet Equinox crossover utility vehicle.

"The federal government is selling off its shares for short-term political gain, as it prepares its last budget before the next federal election. We need leaders with more vision, strategy and savvy than this," Mr. Dias said. "At some point very soon, the federal and provincial governments are going to have to take decisive action to secure the future of GM."

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Federal and provincial cabinet ministers have also met with senior GM officials to urge the company to find new vehicles for two Oshawa assembly plants and invest in St. Catharines, where the auto maker operates an engine and transmission plant.

One of the two Oshawa factories is scheduled to close next year, while the plant known as the flex plant has no new products allocated to it. Production of the Chevrolet Camaro will be shifted out of the flex plant to a factory in Lansing, Mich., later this year.

GM Canada president Stephen Carlisle has said that no decisions on new vehicles for the Oshawa plants will be made before 2016 and negotiations with Unifor on a new contract.

Unifor issued an economic impact study on the Oshawa plants last week that showed the two governments stand to lose $1-billion in tax revenue if they are permanently closed.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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