In a move matching the White House, Canada's government has decided to grant generous loans to GM and Chrysler in order to save the largest industrial segment in that country. Ford has refused the offer, thinking they can do better without the oversight.
Canada's splintered government has decided to back a set of C$4billion in bailout loans to General Motors and Chrysler. The loans will go to parts suppliers, dealers, and part manufacturers affiliated with the two companies. GM will take C$3 billion, with the remainder going to Chrysler.
The government in Ottawa, led by conservative Prime Minister Stephen Harper, made the weekend decision to give more access to credit insurance by opening the doors to the Export Development Corporation, a state agency. Canada will also increase availability of consumer credit for new car financing.
Suppliers for the Big 3 based in Canada have not been able to receive credit insurance recently because of the lack of liquidity at the automakers. No liquidity means no cash to pay the suppliers' bills. Like in America, dealers in Canada were also refusing willing customers because the customers could not get auto loans.
Canada's bailout has a similar termsheet as the White House's US$17.4 billion bailout granted by US President Bush last week. Ottawa gets the option to take non-voting stock in the two automakers worth roughly 20 percent of the loans. The loans are secured by a lien on many Canadian assets. Canada is also capable of blocking any deal valued over C$125 million, and has also demanded weekly updates on liquidity and profit. The companies also have to provide continuously updated financial projections once every ten days.
Ford, considered by analysts to be in better shape than it's American competitors, is apparently turning down the loans in Canada. They also refused US bailout loans.
Roughly 20 per-cent of all Big Three production in North America comes from Canada, with much of the work happening just across the boarder from Detroit in Windsor. The automotive industry is the largest segment of Canadian manufacturing.
“Canadian taxpayers now expect their money will be used to restructure and renew the automotive industry in this country and ensure that Canada maintains our current production share of the North American market,” said Prime Minister Harper.