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The Minister of Industry announced an agreement on assistance to the automotive industry

September 15, 2008


The federal Minister of Industry Tony Clement announced Friday that Canadian and Ontario governments had agreed the terms of aid of about $ 3.3 billion to the Canadian automotive industry.

Mr. Clement, the two governments have agreed to pay an amount of assistance which represents about 20 percent of the plan of U.S. $ 14 billion studied by the Bush administration in the United States, who must save General Motors, Ford and Chrysler bankruptcy. The minister said that most of the reorganization would be made in the United States, but Canada is also prepared to provide assistance to industry in trouble, which employs hundreds of thousands of people in Ontario jobs direct and indirect.

"What we show tonight, as the Canadian government that Ontario is that we want to be part of the solution and will be comparable to the production that is done here in Canada ... about 20 percent, "said Mr. Clement told reporters.

This proportion corresponds to an amount of approximately U.S. $ 2.8 billion, $ 3.3 billion with the current exchange rate.

The three Detroit automakers _ GM, Ford and Chrysler employ at this time _ more than 30,000 people in assembly plants and auto parts in Ontario. Canada's share of automobile production by about 20 per cent could therefore represent a loss of at least 6,000 direct jobs and thousands more indirect jobs.

The agreement on a bailout of Canadian governments occurs following the release Thursday night by the U.S. Senate of the bailout proposed U.S. $ 14 billion, which was seconded by President George Bush and congressional Democrats . The Bush administration, however, said Friday that it would prepare its own rescue plan for the three Detroit automakers. This should be presented next week.

Even before the White House announced its bailout, the pressure was already high on the Canadian government to announce an aid to the auto industry billions of dollars level. The president of the Union of Canadian Auto Workers has said Friday that General Motors, Ford and Chrysler could not wait very long to receive financial aid, like their Canadian branches. "The Canadian government should be proactive, announcing a conditional financial plan is the establishment of an American plan," believes Friday CAW president Ken Lewenza said in a press conference.

Mr. Lewenza, the approval of such support by the Canadian government would lead the American legislators to answer to the problem of most appropriate way. The Canadian and Ontario governments both been reluctant to offer any form of assistance without first seeing the details of a comparable American plane to be able to establish the same conditions and provide a proportional amount of funding that proposed by the Americans. The need for financial assistance is however more pressing Friday when auto North American and Japanese manufacturers have announced significant reductions in their production and the extension of temporary layoffs.

General Motors (NYSE: GM) was first announced on Friday that it would close almost all its plants in North-American production during the month of January in order to reduce its first quarter production of 250,000 vehicles. In total, temporary closures will affect 21 North-American manufacturer's facilities. 

In addition, the Japanese automaker Honda Motor has also announced that it would reduce further its North American production to adjust to slowing demand, but it does not however expect to make layoffs in Canada.

Chrysler could declare bankruptcy as to him by "a few days" if the White House does not interfere with emergency funds, and General Motors likely to imitate, has said an industry analyst. This could trigger a chain reaction that would result in thousands of layoffs in Canada, noted Joe D'Cruz, a professor at the Rotman School of Management University of Toronto.

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