By Kristine Owram, The Canadian Press
TORONTO - Canada plans to announce an auto sector bailout package almost immediately after the U.S. concludes its deal with Detroit's Big Three, according to a senior government official.
Ottawa was prepared to announce a rescue package as early as Friday, but was stalled when the U.S. Senate rejected a US$14 billion rescue bill endorsed by President George Bush and congressional Democrats.
The official, speaking on background, said Canada has no choice but to proportionally match the U.S. bailout package when it comes, but that it would make no sense to help the industry alone if the U.S. government does not act.
Meanwhile, the president of the Canadian Auto Workers union said the aid can't come quickly enough and he urged Canada to announced a financing deal ahead of the United States.
"The Canadian government should be proactive, announcing a Canadian financing package conditional on a U.S. package coming together," CAW president Ken Lewenza told a news conference Friday.
"We think if Canada was to move and move swiftly, then that would put pressure on the U.S. to respond more appropriately."
The Canadian auto industry nervously awaited aid Friday as domestic and Japanese automakers announced they will cut production and extend temporary layoffs and an analyst predicted Chrysler could declare bankruptcy in "a few days" if it doesn't receive immediate aid.
General Motors (NYSE:GM) said Friday it will shut down virtually all of its North American plants for January, cutting another 250,000 vehicles from its first-quarter production schedule by temporarily closing 21 factories.
Some production, however, will continue at GM's plants in Ontario, said Stew Low, spokesman for General Motors of Canada.
"There's a lot of plants that are running at that time," Low said in an interview.
The Oshawa, Ont., truck plant will be down during the first week of January but has no more scheduled down time until the middle of March, Low said, after a Canadian Auto Workers Union official said all GM operations in North America would be down for the month.
"It's certainly a lot of down time. I don't want to understate that. But it's certainly not that every plant is down for the whole month of January, that's not correct," Low said.
Meanwhile, Japanese automaker Honda Motor Co. said it is cutting more production in North America as it adjusts to lower demand but does not plan any layoffs in Canada.
Lewenza insisted that wage cuts for autoworkers won't solve the financial problems of the Detroit Three, but said he's willing to work with the automakers to develop a solution to their woes.
"We said from day one that we're going to be part of the solution," Lewenza said.
CAW economist Jim Stanford said Canadian and U.S. governments should try to ease the credit crunch that has made it difficult for carmakers to finance sales of new vehicles.
"Because of the credit freeze, the financing arms of the automakers cannot issue the paper that allows them to offer leases or low-interest loans to their buyers," Stanford said.
"So there are actually people out there, despite the pessimistic headlines, who would like buy a car but can't get the financing to do it. That's making the collapse in auto sales all the worse."
Earlier Friday, Finance Minister Jim Flaherty said the Canadian federal government will continue to hold talks on aid to the Canadian subsidiaries of GM, Ford (NYSE:F) and Chrysler despite the defeat in Congress of the US$14-billion U.S. aid package late Thursday.
"This is an ongoing issue," Flaherty said after a speech in Saint John, N.B. "This is an important sector clearly in the Canadian economy, not only the Detroit Three, but also the very important parts sector in Canada."
The Detroit Three automakers are still seeking a total of $6.8 billion in loans and credit lines from Ottawa and Ontario, saying they need some of that money before the end of the year as they struggle with a worsening economy.
The automakers have said that without a bailout, they will soon run out of cash and could collapse.
Chrysler could file for bankruptcy protection within "a few days" if the White House fails to intervene and provide automakers with emergency funds, and GM will likely follow suit, according to one industry analyst.
This would set off a chain reaction that would put thousands of Canadians out of work, Joe D'Cruz, a professor at the University of Toronto's Rotman School of Management, said in an interview.
"It's going to be a very turbulent environment," D'Cruz said.
"It is going to trigger a really wide-scale set of changes in the Canadian automotive industry."
Flaherty said Industry Minister Tony Clement "has been having discussions with the industry and has been working on a made-in-Canada plan and our government is open to helping the industry."
After a speech in Brampton, Ont. on Friday morning, Clement said Canada will take an independent approach to the auto sector, although it would be difficult to solve the current problems of the North American industry without a bailout in the United States as well.
"It's important that we continue research here," he said. "What the U.S. Congress is proposing is an immediate rescue, then coming back in March 2009 on a long-term plan. We're having that discussion now."
But D'Cruz said an aid package for the Detroit Three's Canadian subsidiaries is pointless if the U.S. refuses to bail out their parent companies.
"If the parent companies are going bankrupt, there's not much point in the Canadian governments shovelling money into the Canadian subsidiaries," he said. "They can't save the parent."
D'Cruz added that the U.S. government will have to act immediately if it wants to prevent Chrysler and GM from filing for bankruptcy protection. There's been speculation that Barack Obama will move immediately to pass an aid package once he takes office in January, but D'Cruz said Chrysler won't last that long.
And if Chrysler files for bankruptcy protection, "it'll create intense pressure on GM and it'll create pressure on the directors of GM" to do the same, D'Cruz said
I cant believe the U.S. actually would not pass a bailout but Canada already has one in waiting as soon as the U.S. does...
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