Canada cautiously cracks open door to auto aid

Fri Nov 7, 2008 4:02pm EST
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By Randall Palmer and John McCrank

OTTAWA/TORONTO (Reuters) - Ottawa would consider granting further aid to Canada's auto industry, but only if it amounted to more than a short-term fix and was affordable, Prime Minister Stephen Harper's office said on Friday.

The Canadian Vehicle Manufacturers' Association, representing the Canadian arms of General Motors Corp, Ford Motor Co, and Chrysler, made another appeal for help to the federal and Ontario governments on Wednesday.

"With the global financial liquidity crisis and the collapse in the U.S. consumer market, Ontario's auto industry, which exports 85 to 90 percent of its finished product into the U.S. market, is struggling for survival," the association said in a letter.

The U.S. auto industry is also seeking urgent help from the U.S. government, and President-elect Barack Obama urged the Bush administration on Friday to accelerate $25 billion in advanced technology loans to the industry.

The Canadian government reacted coolly to a request made in late October by the autoparts industry, but it has since opened the door a crack to possible assistance in a number of different sectors.

"We're not closing the door absolutely on a number of these questions, but I think one has to recognize the fiscal situation that we're in as well," said an aide to Harper, speaking to reporters on condition he not be identified.

He said the government would ask itself: "Is it fiscally responsible? Is this actually a long-term solution or is it a Band-Aid that won't actually ultimately change the outcome of the events that are happening in the economy?"

Ottawa also has to balance competing demands from a number of industries. It is in the consulting phase now and has not made specific decisions, the aide said.   Continued...

<p>Canadian Prime Minister Stephen Harper speaks to journalists after meeting with members of the C.D. Howe Institute Monetary Policy Council Toronto, November 6, 2008. REUTERS/Mark Blinch</p>