December 19, 2008 / 3:28 PM / 9 years ago

Canada auto plan expected to be unveiled Saturday

<p>Auto mechanic Paul Cook works on a customer's Ford Escape SUV in the service department of a Ford car dealership in Warren, Michigan December 18, 2008. REUTERS/Rebecca Cook</p>

TORONTO (Reuters) - Prime Minister Stephen Harper will unveil an aid package for Canada’s auto industry on Saturday, responding to Washington’s move to provide U.S.-based automakers with $17.4 billion in emergency funding.

The Canadian package could amount to several billion dollars. The governments of Canada and the province of Ontario have said they would provide an amount proportionate to the automakers’ footprint in Canada, estimated at about 20 percent of North American production capacity.

Harper views the U.S. aid package as “a very positive development,” his spokesman said on Friday.

The spokesman declined to give more details of what Harper would announce on Saturday. The prime minister will appear with Ontario Premier Dalton McGuinty.

Eddie Francis, mayor of Windsor, Ontario, across the border from Detroit, said he spoke to Harper last Friday about the crisis in the auto industry.

“He left me with the impression that they were on top of it and I walked away very reassured that they understood the significance of this industry to the economy,” he said.

About 45,000 jobs in Windsor are tied directly to the auto industry.

“Our lifeline is extended today -- we are not out of the woods yet -- but what it means is that this industry has bought 90 days and our communities have bought 90 days,” he said.

U.S. President George W. Bush said on Friday his government would provide the beleaguered automakers with emergency loans while they implement plans to restructure. The aim is to prevent an industry collapse that could send the economy into a deeper and longer recession, leading to massive unemployment.

The Detroit Three -- General Motors Corp, Ford Motor Co and Chrysler -- have been hit hard by the sharp slowdown in U.S. consumer and business spending.

GM and Chrysler have asked for bridge loans and credit guarantees to keep them alive while restructuring. Ford has asked for a line of credit to be tapped if its finances worsen more than expected.

The companies have until the end of March to present viable restructuring plans or the loans will be called back.

“It provides a wonderful framework for the Canadian government to mimic the terms of the deal,” said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. “It also allows the Canadian (and Ontario) governments an avenue to also demand that the unions in Canada play.”

He said that since the U.S. deal forces the companies to quickly become more viable, the Canadian arms of the Detroit Three will have to follow suit, or future investments in Canada would be questionable.

The Canadian Auto Workers union has said it would be part of the solution, but has resisted wage and benefit cuts.

The CAW is set to hold a news conference early Friday afternoon to give its view on the auto aid package.

“We don’t know what GM or Chrysler has put on the table in terms of Canadian operations,” said Richard Cooper, executive director of Canadian operations at J.D. Power & Associates.

“They are going to have to make a lot of changes, and we don’t know what those changes are going to look like and how they will impact the Canadian operations.”

Rob Wildeboer, executive chairman of Vaughan, Ontario-based auto parts maker Martinrea International, which relies on the Detroit Three for about 80 percent of its business, said he is encouraged by the plan and believes Canadian lawmakers will be able to move forward quickly on their own package.

“This also allows them to look at the broader perspective of the automotive industry in Ontario and Canada and how to protect the interests of the suppliers and tool and dye makers and this allows us to move forward,” he said.

Officials at GM, Ford and Chrysler were not immediately available for comment on what the U.S. package would mean for Canada.

($1=$1.21 Canadian)

Reporting by John McCrank in Toronto; Additional reporting by David Ljunggren; editing by Peter Galloway

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