TORONTO (Reuters) - Canadian auto parts makers warned the federal and Ontario governments on Tuesday that without a guarantee on bank funding of up to C$1 billion ($775.2 million), along with short-term loans, much of the industry will not survive the liquidity crunch.
“Assistance is required immediately if our country has any hope of salvaging a once vibrant and prosperous industry,” wrote Gerry Fedchun, president of the Automotive Parts Manufacturers Association Canada, in a letter to Canadian Finance Minister Jim Flaherty, and his Ontario counterpart Dwight Duncan.
Fedchun said that with the liquidity crisis drying up regular funding, financial institutions are only lending money the largest auto parts makers, as auto production is down and the industry is seen as a risky bet.
“Everyday it just gets worse,” he said in an interview. “People will be buying vehicles again... so we just have to get through the next year and a bit and that’s difficult without some sort of government assistance in terms of financing.”
The auto parts industry still makes up the biggest chunk of the country’s manufacturing sector, but it has been on a steady decline since 2002, when it employed 106,000 Canadians. It currently provides around 85,000 jobs.
Fedchun said the industry is seeking direct, short-term loans, but that what it really needs is that governments guarantee the funds it borrows from financial institutions.
Last Thursday, Flaherty offered a similar guarantee to banks themselves. He announced a program to insure borrowing by federally regulated banks in the short to medium term to help get liquidity flowing.
The U.S. government has offered U.S. auto makers a $25 billion package to help them reach more stringent fuel-economy standards by 2020. Fedchun said he would like to see the Canadian government match the U.S. funds proportionately.
The call for action was supported by the Canadian Vehicles Manufacturers Association, which represents Chrysler Canada Inc, Ford Motor Co. of Canada Ltd, and GM Canada.
A spokesman for Flaherty said Industry Canada, which also has a copy of the letter, is reviewing it.
Fedchun said he and Industry Minister Jim Prentice are both members of the Canadian Automotive Partnership Council and that the council’s co-chairman, Don Walker, is trying to set up an emergency meeting to discuss the industry’s problems. Walker is better known for his role as co-chief executive of Canadian auto parts manufacturing giant Magna International Inc.
Reporting by John McCrank; Editing by Peter Galloway