Canada, Ontario agree on conditional auto aid plan

Fri Dec 12, 2008 10:52pm EST
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By John McCrank and Randall Palmer

TORONTO/OTTAWA (Reuters) - The governments of Canada and province of Ontario agreed Friday to provide aid to the struggling auto sector that could be worth C$3.5 billion ($2.8 billion) in an effort to stave off a massive loss of jobs at car plants and parts manufacturers.

The package, the amount of which is based on Canada's proportional share of North American car and truck production, is conditional on the U.S. government first providing a rescue package for the Detroit Three, federal Industry Minister Tony Clement said at a media briefing in Toronto.

He said he expects the U.S. administration to approve a package "very soon," after the Senate rejected a $14 billion proposal late Thursday, deepening uncertainty for the sector.

"Any action by the federal and provincial governments to support the auto sector as it restructures must be equally integrated with action taken by the United States," Clement said. "The federal and Ontario governments are prepared to move quickly if and when the Americans approve a support package."

On Friday, the White House said it might dip into the $700 billion U.S. bank recovery fund to stave off an auto industry collapse.

Unlike in the United States, there is little legislative resistance to a Canadian bailout of the auto industry, even though it goes against the grain of the Conservative government.

Ontario is the base of production operations for General Motors Corp, Ford Motor Co and Chrysler in Canada, and the U.S. automakers and their parts suppliers employ hundreds of thousands of workers.

In a statement late Friday, Ford of Canada said that rather than an immediate loan, it had asked the government for a stand-by line of credit to use should the financial situation worsen.   Continued...

<p>A Canadian flag flies from the window of a General Motors vehicle at a car dealership in Toronto December 12, 2008. Canada's industry minister said on Friday that the federal and Ontario governments have agreed to provide aid to automakers as soon as the U.S. government approves a rescue package. REUTERS/Mike Cassese</p>