Canada bails out carmakers, says they could fail

Mon Mar 30, 2009 6:06pm EDT
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By John McCrank and Randall Palmer

TORONTO/OTTAWA (Reuters) - Canada joined the tough talk of the Obama administration about the auto industry on Monday, saying no car maker is too big to fail, but it nonetheless offered billions of dollars in bridge financing to the Canadian units of General Motors and Chrysler.

Industry Minister Tony Clement said the plans set out by GM Canada and Chrysler thus far fall short of making them viable and called for further concessions all around.

"The old rule book is thrown out the window. I don't think anything is too big to fail, but we're going to give it our best shot at having a restructured auto sector and this is all part of it," Clement told CBC television.

He made the statement after announcing C$4 billion ($3.2 billion) in loans to tide the two automakers over while they come up with new restructuring plans.

The governments of Canada and the province of Ontario will provide Chrysler with C$1 billion, advancing C$250 million right away. They will distribute another C$500 million in early April and the remainder as of May 1.

"Very clearly, if the money had not been forwarded today, (Chrysler) would not have been able to meet payroll today or tomorrow," Clement told a news conference in Ottawa.

"So we were faced with this choice of a disorderly bankruptcy ... We felt now was the time to announce this."

GM is eligible for up to C$3 billion in bridge loans and the government said it hoped to close that deal "very soon".   Continued...

<p>A General Motors logo is seen at a car dealership in Toronto December 12, 2008. REUTERS/Mike Cassese</p>