EDC to stop insuring Chrysler receivables
TORONTO (Reuters) - Export Development Canada is no longer taking requests from autoparts makers for insurance against receivables due from Chrysler LLC, the government agency said on Monday, signaling growing fears the automaker may go bankrupt.
EDC backstops mainly small and medium-sized businesses by providing insurance covering up to 90 percent of losses if a customer refuses to pay. That includes when a customer goes bankrupt, declares insolvency or cancels a contract.
"EDC is maintaining our existing coverage on Chrysler, but we are not adding any new coverage. The change was based on credit consideration," agency spokesman Phil Taylor said.
U.S. auto companies have been hamstrung by falling demand amid a worsening economic downturn and a shift to smaller, more fuel efficient vehicles.
Detroit's Big Three -- Chrysler, Ford Motor Co and General Motors Corp -- have been lobbying for a $25 billion aid package from the U.S. government and speculation about one or more falling into bankruptcy has been growing.
Taylor said the EDC, which provides financing and risk management services to Canadian exporters and investors, continues to maintain its coverage of existing clients and that there has been very little new demand in the past few months.
"Since new demand is very low and we continue to serve our existing clients, our change should not represent any substantial change in the marketplace," he said.
It's business as usual for suppliers wanting to insure receivables with Ford and GM.
Last week, however, three big European credit insurers removed coverage from suppliers to GM and Ford, the Financial Times reported. Continued...